Arlington, Virginia

Wednesday, February 13, 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 Michael Reyna, chairman of the board and chief executive officer of the Farm Credit Administration.

Good morning, Michael.

Mr. Reyna: Good morning, Paul.

Mr. Lawrence: And joining us in our conversation is another PWC partner, Debra Cammer.

Good morning, Debra.

Ms. Cammer: Good morning, Paul.

Mr. Lawrence: Michael, let's start out by finding more about the Farm Credit Administration.Could you describe its mission and activities for our listeners?

Mr. Reyna: The Farm Credit Administration is an independent Executive Branch agency that's responsible for ensuring a dependable source of credit for agriculture in rural America.And by that what I mean is, we are an agency that's responsible for overseeing the safety and soundness of the farm credit system, a nationwide network of cooperative lending institutions that was created by Congress upwards of 80 years ago. It's the nation's oldest government-sponsored enterprise.And that is our mission, and that is what we do.

Mr. Lawrence: So in many ways you regulate the banks that lend to the rural part of our country; is that the correct way to think about it?

Mr. Reyna: It is.It's a very narrow segment of lending institutions.They don't take deposits like a traditional bank might.But they do lend money, and they're owned and operated by the customers much like a credit union in format. But they are cooperatives in nature, and so they are organized as cooperatives, they function as cooperatives, the patronage, and they are single-purpose in the sense that they are lending to agriculture and related types of activities.

Mr. Lawrence: Is there a special reason why this type of lending institution grew up around agriculture?

Mr. Reyna: In fact, there is.In the turn of the century, around 1911 or so, farmers were having a very, very difficult time getting loans for mortgages, long-term loans.Banks at the time were financing mortgages for a term of about 5 years, and that just wasn't working for farmers.

And Congress responded -- actually the president at the time, Woodrow Wilson, responded -- by creating the system through executive order.It was later, in 1933, when Congress embodied the statute in the system that we know today.But it was really to address a shortage of credit in rural areas and, in particular, to the agriculture sector.

Mr. Lawrence: How many people work at the FCA and what types of skills do they have?

Mr. Reyna: Well, FCA, in terms of government agencies, is a relatively small agency.We have upwards of 300 employees, about half of which are located in McLean, Virginia.And we've got field offices in Sacramento, Denver, Dallas, Bloomington, and actually have a colocated field office here in McLean as well.Just about 160 or 170 of our employees are here in McLean. And obviously the support -- that's our headquarters, so we've got most of our support activities there, like our administrative shop, our information technology unit.We also have a team of attorneys that help advise the board on policy matters in the development of regulations as well.We've got our chief examiner and his staff located there, and they coordinate all of the examinations throughout the country from that office.And we really have got, in the field, mostly financial examiners.Our offices in the field range from 25 to 30 employees, and they are on the road, much like you would find a financial examiner from the OCC or the OTS or National Credit Union Administration, actually out looking at the financial transactions of the institutions.

Ms. Cammer: Michael, we know you were appointed to the board in 1998.Could you tell us who else is on the board with you?

Mr. Reyna: Sure.I'm joined on the board currently by board member Ann Jorgensen, who comes to us from Iowa.Our board structure is a three-member board, and we currently have one vacancy, and we're hopeful that that vacancy will be filled in the next several months.The boards, as you and your listeners know, function best with a diversity of experiences and backgrounds.So we've got a good set now and we're hopefully going to add to that here soon.

Ms. Cammer: Your title is CEO and chairman of the board.How do you divide the responsibilities amongst the members and yourself?

Mr. Reyna: We've got a very active board.My colleague, Ann Jorgensen, brings to the board experience in agriculture and cooperatives, and so she has helped us on a wide variety of projects that we've undertaken.She has also traveled internationally and brings that focus to the board as well.We live in a global environment, and while the system does not lend globally, it does help finance exports. And so she has helped us in that area.She's also helped us in the eCommerce area as well; that's an interest of hers.So it really depends on the board members interest as to what they get involved in, and she's been actively involved.

With regard to my role as chairman, I set the agenda for our policy meetings or board meetings on a monthly basis.And that really goes hand in hand with the CEO responsibilities, because I have to make sure that the items are being teed up on a timely basis, that they're well thought out and are ready for deliberation by the board.

Mr. Lawrence: Let's spend some time on your career.Could you tell us about the things you did before you got here?

Mr. Reyna: Well, I was born and raised in Texas and grew up there and went to the University of Texas and the LBJ School of Public Affairs; that was a graduate degree. I immediately left Texas because it was in the early '80s and there was a downturn in the economy and not many jobs. Like a lot of folks starting a career, I had a wife and a child at the time, and I needed a job.So I took the advice of "Go west, young man," and I went directly out to California, and had an opportunity to work with the California legislature at that time in a variety of different positions, whether it was with the budget committees or -- I had an opportunity to work with the elections and reapportionment and the constitutional amendments committee in a wide variety of subject areas, including housing and local government finance.That was what I did during the day.

I will tell you that I wanted to get involved locally, and I had an opportunity through my local activities to be appointed to a couple of different local commissions.So after hours, on an unpaid, volunteer basis, I served on a very interesting and challenging commission that was created -- it was a joint commission -- by the City and County of Sacramento, and it was created to address a fiscal crisis that was being faced at that time throughout California.Local government finances were tight and services were being cut, and one of the options was, why don't we merge the City and County of Sacramento?

So for 2-1/2 years on Thursday nights, I got to sit in and take public testimony from folks as we tried to redesign the structure of city and county government. We did that, took it to the voters, it failed.The wisdom of the voters at the time.Fortunately, the economy turned around.

But I also served on the Planning Commission in Sacramento, again, Thursday nights there, and was able to see, really, government at its best, I think, when it was wrestling with issues that people care deeply about, which is, where is that fence going to go, and what is my community going to look like, and what do you mean, you're going to build a 26-story building in my backyard? And so that was a lot of fun.

And that led me to take another step and actually help form a nonprofit corporation in the community that I lived in. It was racked with a lot of economic and social problems, and it really grated on me, and I wanted to make a difference, and so I banded together with some of my neighbors and we formed this group, and it actually is still in existence today.And so that really -- the volunteer time at the local community level, working at the state level, actually running for city counsel in Sacramento and losing, but making a good run of it -- thrust me into a position where I was tapped by the Clinton administration in early '93 to head up the Farmers Home Administration in California and help lead the effort to -- at the time, USDA was being reinvented and agencies were being pulled apart and then reassembled and put back together.And I was the last director of the Farmers Home Administration, because it was then split programmatically into the USDA rural development, which is what I led for the next several years, and the Farm Service Agency took over the farm lending aspects of what Farmers Home used to do. So I worked at the Federal level in the field and now find myself here in Washington.After being asked by the administration to consider this position, I joined the board here as a regulator.

One of the things I did, actually, when I was with the legislature in California was advise them on financial regulations.So I had that as part of my background, though I served mostly as a policy advisor and a lender in California.So it all comes together.It's not linear at all.So I bring a diverse set of experiences to my current position.

Mr. Lawrence: Great, it's a good stopping point. Rejoin us in a few minutes as we continue our conversation with Michael Reyna of the Farm Credit Administration. When we come back, we'll ask him how they use technology to benefit their customers and employees.This is The Business of Government Hour. (Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour.I'm Paul Lawrence, a partner at PricewaterhouseCoopers, and today's conversation is with Michael Reyna, chairman of the board and chief executive officer of the Farm Credit Administration.Joining us in our conversation is another PWC partner, Debra Cammer.

Well, Michael, in the last segment you ended up describing your career, but I was curious: What drew you to public service?

Mr. Reyna: Well, actually that's a good question. I think, like a lot of people, I wanted to make a difference, and not just for myself, but for the people in the community around me.And I can recall that probably my earliest recollection was the debates between Kennedy and Nixon, and just as a child, I was mesmerized by those, and then the election, cliffhanger at the time that it was.That really, I think, planted a seed at the earliest age, and I actually went about not really thinking much about public service, quite frankly, until I got out of college with my business degree, and I realized that it really did not give me the type of background or skills that would lead me directly into where I wanted to be, which I realized at that time, which was in the public service, making a difference, improving the quality of life for people.

And that's what led me into my graduate program, so that I could again refine my skills -- qualitative skills, analytical skills, policy skills -- and put me in a position where I can function at the highest levels.And so it was really a commitment to community and a commitment to want to make a difference in the world.

Ms. Cammer: Could you tell us about the customers that the Farm Credit Administration serves?

Mr. Reyna: Actually, we have a variety, Debra. We have a variety of customers. And our own employees are our customers, clearly, and the institutions that we regulate are our customers. Congress, clearly, and the White House are customers as well.But probably the most important customer is the just general public.

So a wide variety of customers, and with regard to eCommerce, our employees, we have shifted over the last 3 years so that every employee has got a laptop computer now that's portable.And we have put an emphasis on telecommuting, so upwards of 30 percent of our staff telecommute on a regular basis, and it's all part of an effort that we've got to build a better workplace, a more family-friendly workplace at FCA.So technology is helping us do that.

With regard to the system that we regulate, we have attempted to minimize the challenges that we have and that they have. Nobody likes somebody sitting in their office looking over their shoulders while they're doing their work. And so our examiners are able to, through technology, download a lot of the financial data that enables them to do a lot of the preparatory work before the financial examination begins.So they don't actually have to sit on site like they once did to collect that kind of information.

We also have instituted a system that's an Internet-based system that enables our customers, the system institutions, to dial in and access peer reports so that they can see their performance benchmarked against similar-sized institutions.And so they say, "Well, geez, our expense is too high," or "Our loan ratios," you know, bad debts are in line with institutions of our size.

And I think with regard to our other customers or stakeholders, clearly Congress and the president are critical in that regard.

Another major function that we undertake at the agency is, we adopt regulations.And Congress is particularly keen on the regulations that we adopt; obviously that system is set up to review those appropriately, and we'd like to, to the best of our ability, try to fit our regulatory approach with that of the president's.And so we send those packages over electronically.It made our whole way of doing business, I think, much more efficient, much more effective.And the general public can access our website and keep track of what issues we've got on our agenda.They can submit FOIA requests directly to us via the Internet.They can send us questions.They can do a wide variety of things.So it really has, I think, made our agency and what we do more accessible to the public generally.

Mr. Lawrence: You've introduce a lot of technology.What management challenges have those presented.For example, has telecommuting been embraced and without problems, or what's come up in that experience?

Mr. Reyna: We've had really only minor problems, and not with the technology per se at all.It's really the people problems that come with management.And the key to a successful telecommuting program is, the employee and the manager-supervisors have got to have a clear understanding of what actually can be done offsite and what can't be done. I've actually been bold enough to suggest that maybe we need to create offices without walls to encourage our examiners -- we're on the road a lot anyway -- again, part of this family-friendly workplace -- to simply work out of their house, and certainly technology would enable them to do that.The challenge there really is, there is a synergy that occurs when staff is together, and so I don't know that we can completely eliminate our field offices, but we can reduce the square footage that we have to rent and then just work smartly so that they really only have to come in before an exam, after an exam, and then they can write their reports pretty much on the kitchen table if they wanted to.

So it's thinking outside the box and realizing and focusing on the results. You know that you need to get an examination report done in a certain time frame.Who cares where you write the report, just as long you've got a good quality report that's timely. Where it's done really shouldn't be the focus or create any real challenge.

Ms. Cammer: I'm wondering, Michael, have you noticed a change, too, in the way the member banks have implemented technology or used eCommerce in reaching out to the farmers?

Mr. Reyna: Actually, we have some very interesting success stories that are going on out in the farm credit system itself, consistent with what I have proposed for our own staff.We've got institutions that have moved much more rapidly because they're businesses and they're not government and they can do that. But they put their loan officers in cars with the laptops, and they've put them out in the field so that they only check in when they have to.So it's really brought the services closer to the customer.And lending is a relationship business, so you really have to know your customers, and I think that that was -- SES of America is the institution that does that. It has been a challenge because, quite frankly, customers like to know that they can just go down to a particular corner in their rural community and talk to a loan officer, pay their bill.And so when that office closes, there's a fear that the service might go away.But what they're finding is, in fact, they got better service.

And so while it's just beginning, I think it's going to really revolutionize the way that service is delivered to the customers.

Mr. Lawrence: What's the health of the system? How has it changed over the last 5 years?

Mr. Reyna: The system has continued to accumulate capital, which is a line of defense against financial problems. The system did have financial problems in the late '80s, but quite frankly, a lot of lending institutions had problems in the late '80s.But they've grown out of that, I think, with a lot of hard work on their part, a lot of hard work on our part.

Congress really empowered our agency in the late '80s to take a much more active, regulatory role and gave us enforcement powers.And in the late '80s and early '90s, we used those powers to compel compliance with good, sound business practices.And it's a difficult transition, but I've got to tell you, the system has responded remarkably, and it is approaching a hundred billion dollars in assets nationwide. The capital is at all-time levels, and the system's never been more secure and more safe.

That's not to say there aren't risks, because the system is a single-sector lender, and that presents challenges.But challenges can be overcome.One of the themes that I continue to promote when I go out and speak to system institutions is to encourage them to diversify their loan portfolios and just follow the adage, "You don't want to carry all you eggs in one basket": Diversify, diversify, diversify. And that is challenging for them, because they've got specific territories that they operate in, and so those territories, if you've got a flood, if you get a hurricane or other natural disaster, can really dramatically affect the agriculture in that area.So if they've only lent to borrowers in that area, that's a problem.

But we've done things at the board level to encourage participation between system lenders and nonsystem lenders, predominately community commercial banks, to allow them to buy and sell participations in loans, and in that way we've been able to encourage the diversification of their portfolios and make them, I think, safer and sounder.

Mr. Lawrence: That's a good stopping point. Come back with us as we continue our conversation with Michael Reyna of the Farm Credit Administration.

Did you ever wonder how a CEO works with a board to set policy?We'll ask Michael how he does this when The Business of Government Hour returns. (Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour.I'm Paul Lawrence, a partner at PricewaterhouseCoopers, and today's conversation is with Michael Reyna, chairman of the board and chief executive officer of the Farm Credit Administration.Joining us in our conversation is Debra Cammer, another PWC partner.

Ms. Cammer: Michael, earlier you described your stakeholders.I'm wondering if you could describe for us how you balance the diverse interests that all of them must have.

Mr. Reyna: Very simply in two words: "very carefully."I think that's a very, very good question, because there are a number of diverse interests.There's not uniform agreement on what direction we should take as an agency or what direction the system should be headed in either.

And I think it boils down to a couple of things, and it's really how we do our business.We have monthly board meetings, we publish our agendas and invite comment through the Federal Register process. That ensures that we are operating in a transparent way with the public so that there's a high degree of confidence that there's no gamesmanship that's going on, and that people understand and know that when they make a comment on a rule that's pending before our board, that we're going to take that into consideration, that it will not be discounted or ignored in our process.

We had a very contentious issue recently that came before our board, nominally known as national charters.It was a way to expand the -- or bring down the territorial barriers that exist with the charter territories.And there was a lot of, I think, based on the comments that we received while that rule was pending before the board -- I think there was a lot of disbelief or mistrust on the part of some of the commenters that we wouldn't really seriously consider their comments.And notwithstanding the fact that we had a proposal before the board, and I never had made -- I did not make up my mind until it was time to do that before the board.

And so I think keeping an open mind, making sure that the public knows that we want their comments, that we analyze and evaluate their comments, and that it all feeds into the decision-making process -- that's really what we do at our board meetings, is we make decisions.And the way we make good decisions is that we get lots of good diverse opinions that come to us.

Ms. Cammer: You mentioned frequently the process. I'm wondering if you could describe from beginning to end how you set the policy agenda for the board.

Mr. Reyna: Well, it's a collaborative process with the board members themselves.And, again, we have a variety of ways of doing that, including planning sessions, offset planning sessions, that give us an opportunity to hear from experts about what's going on.We then take that information that's gleaned from our own staff and from outside experts and we try to have a good list of folks come in and talk to us on a regular basis so that it's an ongoing process.But then we take that information, we go away, and we discuss it, and we establish what our priorities are as a board. We have a strategic plan that leads to the development of our performance plan, and we use those opportunities to paint the big picture, and then we work with our staff closely to paint a more refined picture to set the actual agenda that comes to our board.

And all of that drives all of the work that we do on a regulatory front. It's quite amazing that it all gets done, quite frankly, because it's quite a daunting task.

Mr. Lawrence: There's inevitably more projects and more items on the agenda than there's time.How do you resolve conflict and figure out what gets deferred or accelerated?

Mr. Reyna: A lot of that, we rely heavily on the judgements that the staff bring to us when they are working on projects. We've got a really interesting -- we talked about it in the last segment, about technology -- we've got a very sophisticated time-tracking system that allows the board to have a high degree of confidence that its priorities are being worked on by the staff. The staff uses the system, manager/supervisors use the system, to really take a look at -- say, for example, one regulation is viewed as a project, so they can budget the amount of time that their staff is going to work on that project, and then they feed back to us on a regular basis whether they're on track or behind or ahead of schedule.And a lot of that depends on the complexity of the issues that they're dealing with.A lot of the work that we do is in the regulatory area, is cutting-edge in some cases, and so there is legal issues that come up that have to be looked at and resolved.There are major policy issues, and sometimes information has to be gleaned or gathered from other sources, so that, again, when it is presented to the board, we've got the best information available at the time to make great decisions.

Mr. Lawrence: Well, tell us more about how the FCA is managed.Let's begin with just the geographic dispersion.You earlier told us you're headquartered in McLean, but you have offices throughout the country.

How do you simply manage a group that's not all in one building?

Mr. Reyna: Well, fortunately, we've got a very talented and dedicated staff, and so they know their job and they do it well. And so actually from a manager-supervisor role, it's actually easier than some of the other organizations I've ever worked in.So we're blessed in that sense.

But you still have the distance to overcome, and we do that, again, with technology.We have instituted in the last couple of years videoconferencing units within each of our offices, and that has dramatically resulted in improvements in the way that we manage and supervise.We're able to do all sorts of training using that equipment.We've got lots of requirements, like other government agencies do, in terms of providing ethics training and other human resource types of training, EEO training, and the like.And so we're able to provide that high-quality training at a very low cost, because otherwise people have to jump on a plane and come into McLean, our headquarters, where we would have the resources to provide that training.

So I'm excited about that, and it really, again, goes hand in hand with having a great staff and then having the technology for them to use and for us to use in empowering them and assisting them to do their jobs.

Mr. Lawrence: How did you get such a great staff? Is there something special about the way you hire or the mission that attracts?

Mr. Reyna: Well, actually, I'll share a little secret with you.Financial regulatory agencies are outside the GS pay system.And by that, I mean that we have been allowed by Congress to pay over and above what people get paid in the GS system. So we were able to attract folks because we can pay better than what normally the Federal Government can pay, and that's helped.

But I also think that we have tried to create a very positive work environment, too.And we have done that in a variety of ways, again, trying to stay competitive, because we actually have a statutory requirement to maintain comparability in terms of pay and compensation with the other financial regulators.So we have benchmarked our work life programs, our benefit programs, and our compensation against our peer group. And my goal is to create a work environment that is second to none.And I think the employees know that.So our attrition rate, I think, is probably a little bit lower than what you might find at a regular Federal agency.

And in recruiting, it really helps, because I can say and we can say to potential hirees that we've got a great organization. And we've introduced here recently, in the last couple of years, what we call a peer award system that really focuses on the values and the virtues that the employees feel are important to them, and it has really had an opportunity -- I mean, it has resulted in changing the culture of the agency.We have a ways to go, but it has made remarkable change.In a regulatory environment where you deal with lots of rules, there's a rule for everything, and actually, at our agency -- and I'm going to make sure that the rule goes away -- at our agency, we've got a rule on what size note cards can be used on our bulletin boards.You cannot write enough rules to address every single issue that is out there, whether it's the rules that we write for the farm credit system or it's the rules we write for our own employees.

And so my emphasis has really been to work with the employees to create a system that can serve as a compass for them when there is no rule.I ask employees to submit values and virtues that they believe are important.We then ask employees to vote on those that they feel are most important, and we came up with 12: Things like honesty and responsibility and the list goes on. Integrity.And we then invited nominations: Nominate one of your peers that you believe their behavior, their activity, has embodied that value or that virtue.And we removed the names of the nominees, and we put before all employees the behavior, the actions, and we ask them in the different categories to vote on what action best defines that value or virtue.In fact, when the winners were announced, people said, "That really does reflect that person."And so it took the personality contest out of the awards program, and what it has done is, it's encouraged employees to focus on the values and virtues that they find are important that can guide them when there is no rule on the books.

And so we've had dramatic success in changing the culture of the organization.

Mr. Lawrence: It's time for a break.Rejoin us in a few minutes as we continue our conversation with Michael Reyna of the Farm Credit Administration.This is The Business of Government Hour. (Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour.I'm Paul Lawrence, a partner at PricewaterhouseCoopers, and today's conversation is with Michael Reyna, chairman of the board and chief executive officer of the Farm Credit Administration.Joining us in our conversation is another PWC partner, Debra Cammer.

Well, Michael, earlier in our conversation, you described what FCA does in its organization structure.But I'm sure some are confused between FCA and maybe parts of the Department of Agriculture.Could you level the field for us and talk about the relationships between these organizations?

Mr. Reyna: Sure.We work with the Department of Agriculture, but we're not part of the Department of Agriculture.Many, many years ago -- actually, when the system was structured differently -- it did fall organizationally under the Department of Agriculture. But as it became more of a regulator, it was moved out and gained its separate, independent executive branch authority, so it doesn't fall under any cabinet-level agencies.

The Department of Agriculture has other program areas like the Farm Service Agency, which, again, is a lending agency, and the Farm Credit Administration is the regulator of the farm credit system -- again, a system of lenders out there.So we really benefit dramatically from the research that USDA does, and the other partnerships that we've got, relationships that we've got with USDA staff and program areas.We actually conduct some regulatory examinations of lending institutions that fall under the rural business program at USDA. So we take our experience in regulating the farm credit system banks and we lend that experience basically to USDA to regulate some of their nonbank lenders that they've got.

Mr. Lawrence: What lessons could you pass on to other leaders about working together with organizations in forming successful partnerships?

Mr. Reyna: Well, the first and foremost thing is that whether you're the head of the organization or you're the head of a program area, if you've really been involved for any length of time, you realize that you cannot accomplish your objective by yourself.The way to enhance your effectiveness and your influence is to leverage your knowledge and your resources with others.And so that is absolutely -- if you're interested in being successful, being effective, being influential, you have to develop those relationships and those partnerships with your colleagues at work and organizationally with other institutions.

For example, we're not a member of, but we participate with the Federal Examinations Institutions Council, where the other Federal regulators get together to discuss common issues.And our examiners bring those topics to the board and we debate those issues in terms of how we might change our examination process.And so really, the key to success is forming partnerships and developing solid relationships, working relationships with others.

Ms. Cammer: The current administration has talked a lot about the importance of accountability in government today.I'm wondering if you could talk about the role of the Farm Credit Administration in regulating the farm credit system, and how you ensure accountability.

Mr. Reyna: Well, I think the key to accountability is having a clear set of expectations.So I would laud the administration for its emphasis in this area. But it all boils down to whether it's at the -- people focus on it at the organizational level, but I would argue that it's really at the individual level that you have to focus on, and that's just to harken back to our discussion on the peer awards: You really have to have a set of values that serve as a compass for you, and you do need clear expectations.But the expectations -- by that I mean rules and regulations, right, what is an appropriate standard and what standard has to be met.

But I can tell you, no matter whether we work 24 hours a day for 360 days a year and more, we cannot write enough rules to govern every aspect of every institution's activities.And so we want to have rules that are flexible, that don't stifle innovation and creativity, because the marketplace that they operate in is ever-evolving. It's a dynamic marketplace. And so the rules -- we need to be careful not to try to be overly prescriptive in the regulations that we put out, and that we really focus on what we are trying to accomplish.

One of the things that I found as a decision maker is that the most common mistake is that there's not enough time spent up front defining what the problem is. What is it that you're trying to solve? If you get a good, clear definition of the problem, the solutions then also become a little more clear.

So I've really tried to challenge the staff in a constructive way to frame the questions and the problem that they're trying to solve with a particular regulation.And I do not believe -- and I don't think our staff believes either -- that we should be promulgating regulations just to promulgate regulations.They really need to serve some larger purpose, including the aspect of accountability.

Ms. Cammer: You mentioned earlier that your primary mission is regulating these farm credit institutions.I'm wondering, though, that's a challenge in terms of setting goals that can be measured.How do you go about doing that?

Mr. Reyna: Well, again, that's a very, very good question.The tendency, I think, by some Federal agencies is to try to establish those goals. I like to think that what we do at Farm Credit Administration that's a little bit different is that we encourage the institutions to set their goals.The best decisions are made in their board rooms, not in our board room. And it's our job to make sure that they have thought about certain issues, that they've developed goals, and that they're reaching to serve all eligible and creditworthy borrowers, as the statute directs them to do.But it's not our job to say you have to make X number of loans to a particular type of process or producer out there.But we need to make sure that they are serving their customers and that our rules are facilitating that and not getting in the way of that.

One example, again, in the eCommerce area is just something as simple as allowing for electronic signatures that will help facilitate in doing business with customers.So we have to be very, very careful not to be overly prescriptive in what we're doing and be absolutely clear about what problem or issue we're trying to address.

Mr. Lawrence: As leader of the organization, what type of performance data do you look for to see how well you're doing?

Mr. Reyna: Well, again, how well we're doing and how well the system is doing are two different questions.But we basically examine every institution on an ongoing basis, and more if needed if there is a particular issue or concern that arises. So we need to make sure that we're covering the bases.So we do do that.We have a requirement -- well, not a requirement, it was a self-imposed requirement -- to review our internal policies and procedures on a regular basis, again, to make sure that they are still relevant in today's marketplace and in what we're doing.And we also try, on an ongoing basis, to do a regulatory burden relief review.And we solicit from our customers, what regulations do you believe are hindering your ability to serve your customers?

And we do all of that, and I think the judge, really, of whether we've been effective or not is first and foremost the overall financial safety and soundness of the system, but then whether we are able to knock out a few burdens that are out there.And I think we've got a good working relationship with our customers and they tell us, quite frankly -- they're the best feedback that we can get -- they tell us when we're doing a good job.They have annual meetings, they invite us out, and they're not shy.They tell us when we're maybe not addressing something quickly enough or the like.

Mr. Lawrence: What's your vision for the FCA over the next 10 years?

Mr. Reyna: Well, that's actually -- it's a very good question.I have two horizons.My term ends May 21st of 2004, so that's about 2-1/2 years away, so I don't have 10-year horizon personally.But my hope is, certainly in the next 2-1/2 years while I'm there, that we are able to continue to create an organization that is second to none in terms of its ability to do its job; that we've given employees the tools that they need; that we've created, with their help, a working environment that is family-friendly and conducive to some of the best work.So I hope those initiatives that I've helped start will continue.

I think that in the longer time frame, I believe that we really need to examine technology and how we can use it more effectively.We've now got devices -- I carry one with me -- that is a phone and a Palm Pilot and a two-way pager, and I can stay in -- and I am in -- constant contact, much to the chagrin of my staff, with folks at the agency.

And so I think we need to do some big-picture thinking and question some of our assumptions about where we do our business and how we do our business. And technology is going to drive that.

Mr. Lawrence: I'm afraid we're out of time, Michael.I want to thank you for joining us today.

Mr. Reyna: Paul, Debra, thank you very much.

Mr. Lawrence: And is there a website that people who are interested in the FCA could go to to learn more?

Mr. Reyna: There certainly is. It's www.fca.gov.

Mr. Lawrence: Thank you very much. This has been The Business of Government Hour, featuring a conversation with Michael Reyna, chairman of the board and chief executive officer of the Farm Credit Administration.

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 very interesting conversation.Again, that's Endowment.pwcglobal.com.This is Paul Lawrence.See you next week.

Arlington, Virginia

Thursday, May 10, 2001

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

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

Mr. Wagner: Good to be here.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

And then, I think, one that may seem a little silly, but it's nice to be aligned with the forces of history. I mean, what FirstGov is is an Internet portal, it's customer-centric, it ties the government as a whole to the people as a whole. And that's a lot of what the whole Internet is about. The Internet is turning a lot of companies inside out. It's changing the way we do business.

And by moving and using what this technology was doing, and moving in the direction of commercial off-the-shelf products stitched together to solve a problem, worked pretty well. And frankly, FirstGov is a model for a lot of the other things we're doing as well.

Mr. Lawrence: What I found interesting about your answer in terms of the lessons was none of them describe the technology; none of them involve technology. They were all management lessons about people, for the most part.

Mr. Wagner: I think that's true. I thought about that, and I thought I might be even overdoing not mentioning technology.

You tend to be in trouble when you're driven by technology, as opposed to technology being a catalyst to enable you to do something else. But you really do have to understand the technology. And when I talked about that middle-management cadre of people who understood stuff, it was really important to have people who understood what the web could do, what it couldn't do, who could weigh the different clouds as the vendors make their offerings and say what you're doing. So technology matters, but it doesn't matter as much as what you're trying to do.

Mr. Seike: What are the plans for the future of FirstGov?

Mr. Wagner: The biggie is, I think, it's less so much a FirstGov set of plans. The FirstGov plans really boil around we've got the search engine substantially improved now over the way it was in the beginning. We're improving the taxonomies. We're working more and more closely with the states on how to tie that in because in fact the states have many of the same issues we have. For example, the U.S. government has 30 million documents online, the states have about 14 million documents online. There's a lot of working through making it better.

But the really important, I think, ties back to the various other cross-agency efforts and, frankly, agency-specific web

portal efforts.

How do you get feedback to be better? We're starting to deliver services over the web. You want to run that closed loop, not open loop. By that I mean you listen to what's happening, and then you adjust accordingly.

So I think we need to do a lot more work with the feedback side and better links back into the other cross-agency portals, like students.gov, or seniors.gov, or disability.gov. I mean, there are various of these websites all built around presenting the problem from this outside-in perspective rather than the inside-out perspective, as well as all those really important agency-specific websites to which we are handing off traffic coming via FirstGov.

Mr. Lawrence: Let me continue this discussion about management by talking about another interesting topic, which is the balanced scorecard. We understand that you're using the balanced scorecard to manage the operations of the ten units under you. Could you tell us about this?

Mr. Wagner: Okay. Balanced scorecard is a pretty interesting approach. What has historically happened with many organizations is the focus on things like the bottom line misses a lot of other things that are important. And what balanced scorecard fundamentally tries to do is discipline yourself to look at more than just a few things.

And in fact, in our case, I think we're nontraditional. I think there are supposed to be four perspectives, but we have five perspectives. But when you look at the things you're going to measure your performance on, you don't just look at the one thing, like customer satisfaction. That's important, but you want more than that perspective.

So what are our perspectives? Well, first is what do we measure from a stakeholder perspective? Our stakeholders are all the folks who are interested in management across the government as a whole. So there are measures from that perspective. There are also the measures from a customer's perspective. We have customers too. If they're happy or unhappy, that matters a lot. We also have internal business processes. Are those processes working well or badly? Very much -- that's another balance scorecard. Budget, keeping track of the money � fairly important to do. And finally, something that I think tends to have been neglected and is going to matter more and more, is the learning and growth perspective. Do your employees know what they need to know? Do they have the tools that they need to know? Are they the right tools for the right job?

So, what are the measures? How do you make sure that you aren't so caught up in making customers happy that you don't deal with longer-run issues like making sure that people will be able to make them happy in the future.

Anyway, we're managing using those five measures. It's, I think, more difficult for a policy organization than an operational entity because a lot of our measures tend to be how do you measure the effectiveness of a policy. It's a somewhat trickier question than, you know, cost per item produced or something like that. But we're finding it a useful way of looking at it.

I will give a suggestion to those looking at it. This is a really good way to look at your programs, but don't get carried away with it. It should be a simple way to look -- it should be a simpler tool for looking at what you do. And this is one way of looking at things, and it's a way of keeping balance. You know, find things that work and be prepared to change. Because what we also find is what we were sure was the right way to do things a year ago, turns out to have been wrong. And that's not bad. It just means you adjust and start working as you evolve towards a better way of managing.

Mr. Lawrence: Let me follow up quickly. When you say use the scorecard to manage, and you describe the different areas, how actually do you use it to manage? Is it the scores or the results in those five areas or is it driven down to a personal level?

Mr. Wagner: We're not as far along as that, to drive it all the way down to every individual in the organization. But basically, you have five perspectives and you look at -- you find things to measure in those five perspectives.

They should be things that encourage the behavior you want. If you want a behavior that you want customers to be satisfied, find a customer satisfaction measure of some sort or another to measure, and that's one of the things doing. If you want your folks to be educated on what they need to be educated on, find something to measure that leads you in that direction.

Mr. Lawrence: Well, great. It's time for a break. We'll be back with more of The Business of Government Hour in just a few minutes. (Intermission)

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

Well, Marty, let me double back on some of the management issues we were talking about in the last segment. Could you tell us about the linking budget to performance program?

Mr. Wagner: I guess I'll begin, since you're talking budget to performance -- I think I'm quoting Mitch Daniels, the new director of OMB, who said something along the lines of, "If you're not keeping score, you're just practicing." And I think some of the stuff we talked about on balanced scorecard earlier is if you -- things you measure, you'll get more of. And I think that's the first important point -- trying to measure something, and then move in that direction; understand those measures as step one.

Now, there's been a lot of, I think, discussion that gets almost religious about things called outcome measures and output measures and things like that. I think there's something about outcome measures that may bring out the worst in some people. But this is my take on the way we have to go.

First, an outcome is something that you really want to achieve. It's not necessarily what you produce but it's some measure of programmatic effectiveness that is as far away from the nitty-gritty outputs -- it's the higher-level things.

I think what we ought to do is figure out what are the outcomes we want, and then try to measure them. Then we also will be going -- we'll have programs that are moving in the direction to get those outcomes that we want. Those would be outputs that we do measure. Frankly, outputs is things we've done a pretty good job of measuring across a lot of it. We can count what we spend to do X or to do Y, or how many of them that we built, whether they be regulations or sizes or things like that. You can do your outputs. The problem is linking the outputs to the outcomes. And what I would suggest there is, rather than get into trying to quantify it too exactly, tell the story, that people can either believe or not believe, of why the things you as an agency are producing help achieve the outcomes you want to achieve. In my case, the outputs I would have might be things like regulations or accounting best practices or number of visits to a website or something like that. The outcomes I might want, or that I do want, are better management at an agency level. Well, I can't prove that because some best practice came out or that we developed performance measures that they're really making a big difference. But I think I can make a case of why the regulations or the guidance or the performance measures then being used by an agency has led to better behavior.

And the important question is, people can listen to that case, and they can believe it or not believe it and make their judgments. And that's better than being in this well, I can't measure anything or any measure that I have has to be so purely perfect that I can never achieve that. So that's kind of my take on that.

Mr. Lawrence: Marty, let's turn now and focus a little bit on the future. We're hearing this a great deal about the upcoming federal government retirement wave and the impact that that's having on agencies. How big an issue is that for GSA and the Office of Governmentwide Policy? And are you doing some planning and working on some solutions around that?

Mr. Wagner: It's probably the strategic issue for GSA and, I suspect, for most agencies. We have this building retirement wave coming in. I think we've got 90 employees that are currently eligible to retire or will be eligible to retire in the very near future, a significant percentage of the work force. And it's going to continue for a while. It's not so much Armageddon, but it's this rising issue that we're going to have to deal with. So how do you deal with it? Well, one thing is you try to retain people. And there are some financial incentives that you can use in that direction. There are also, frankly, some quality of life, quality of work things that you can offer.

A lot of what we have to offer in the government, frankly, is not salary. We actually can offer scope and opportunity to do things that are really significant. When I was working at EPA, which by now is probably 15, 20 years ago, I was, I guess, down the hall from someone, a GS-11 maybe, GS-12, a key guy working on billion-dollar standards, air quality standards. And he was the person doing all the modeling work. He had a major impact on a multibillion-dollar decision that the government made. Now, that's EPA. I was recently talking to a fellow who worked in GSA's Public Buildings Service, who told me about a job interview when he was a couple years in government and was thinking maybe he'd go into real estate for a company. And the companies that he was interviewing didn't believe what he told them he was doing, because nobody that junior, that lowly paid, would be in charge of projects that big. That's what we've got to offer. We have really good opportunities to make a difference. In addition, I think we've got, you know, good salaries and benefits. And we can have discussions about which areas -- information technology would clearly have some areas of being able to recruit the folks we need and that's going to cut into more than just those areas.

Mr. Seike: Well, speaking of young people, what kind of advice would you give to a young person who's interested in a career in public service?

Mr. Wagner: Pursue things that interest you that you think matter. I think that what public service offers you is a chance to do a wide range of things. And my basic advice was if you're interested in the environment, you ought to be talking to EPA. If you're interested in energy, you know, you've got the Department of Energy. If you're interested in the Treasury Department. There's just a wide range of things that you can do. So the first thing is find something that interests you. Second is move around. Don't stay in just one agency or one office. You move around, you may find that you like government a lot and want to stay, and you may find that you want to go work for PricewaterhouseCoopers, I suppose. I mean, those are opportunities too. You know, but there are your opportunities to do interesting things. And you should care about what you achieve. At the end of the day, if all you do is you're putting in time, you're just doing the job and getting paid, life's too short to focus on that. You ought to be happy that you're achieving something, whatever that thing could be.

Mr.Seike: Would you recommend the development of any certain special set of skills?

Mr. Wagner: Well, I think the � whatever skills that you like. I mean, some people want to be accountants; some, economists; some, engineers; some, marketeers. I mean, there's sort of -- you'll have the skills of the things that interest you. So I'd begin with that. The thing that you may not have thought of, though, is you need to stay current. You need to have the skill to learn a new skill. Half the things I do today I had no -- I knew nothing about only a couple of years ago. And that just keeps happening. So the key skill to learn is the ability to learn new skills and adjust.

Mr. Lawrence: Marty, let's turn now to another really hot topic, and that's the one of Internet privacy. How much involvement do you think that GSA will have in regulating privacy issues in the government going forward?

Mr. Wagner: Well, we're certainly not going to be a regulator of privacy issues, but we're certainly going to be a participant in working through the privacy issues. Privacy is one of those issues that tends to be often mixed in with security, and they are different. When we move to a more and more electronic government, we need to guarantee that we protect the privacy of our citizens.

Frankly, there are some probably larger issues in how the Internet is evolving, when you look at some of the privacy issues there. Simple one; you have a right to be anonymized, unless there's some reason that you need to identify yourself. If you go and pull down a tax form, no one's going to collect anything about you if you're downloading a tax form because that's our duty, is to make sure that that's private. If you are, however, let's say interacting directly with a government agency through the Internet, we have to guarantee that it is in fact you that we're talking to because that's private information.

We're going to be working through a lot of how you actually make that work. We haven't worked out all the answers, but since we have a collaborative model, we've got OMB and all the other agencies that we'll be working together with on solving that over the next few years.

Mr. Lawrence: Marty, I'm afraid we're out of time. Steve and I want to thank you very much for the conversation today. It's been very interesting.

Mr. Seike: Thanks, Marty.

Mr. Wagner: Thank you. Appreciate it.

Mr. Lawrence: This has been The Business of Government Hour, featuring a conversation with Marty Wagner, associate administrator for Office of Governmentwide Policy at the General Services Administration. To learn more about our programs and research into new approaches to improving government effectiveness, visit us on the web at endowment@pwcglobal.com. See you next week.