Robert E. Wenzel interview

Monday, November 29th, 1999 - 20:00
Robert E. Wenzel
Radio show date: 
Wed, 04/26/2000
Intro text: 
Missions and Programs...
Missions and Programs
Magazine profile: 
Complete transcript: 

Arlington, Virginia

Friday, April 26, 2000

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

The Business of Government Hour focuses on outstanding government executives who are changing the way government does business. Our special guest tonight is Bob Wenzel, deputy commissioner of operations for the IRS. Welcome, Bob.

Mr. Wenzel: Good evening, Paul.

Mr. Lawrence: Joining us in our conversation is Jim Cook, a consultant at PricewaterhouseCoopers. Hi, Jim.

Mr. Cook: Good evening, Paul.

Mr. Lawrence: Well, Bob, in this first segment let's talk about your career, but first I want to talk about the IRS. Around tax time everybody thinks about the IRS and they're aware of tax collections, but that's not all they do. Perhaps you could tell us more about the IRS and some of its major functions.

Mr. Wenzel: Well, Paul, you're certainly right about our being on everyone's mind about this time of year. Many people think that the IRS is all about April 15th. This year it was April 17th. But you're right on point when you talk about and note that the IRS responsibilities extend far beyond its tax-collection role.

We are responsible for implementing a great number of new tax laws and provisions each and every year. We're responsible for educating taxpayers about their responsibilities, and for helping individuals and corporate taxpayers in many, many different ways.

We have education, assistance, and outreach programs to individual taxpayers, to small businesses, business liaison groups, and corporate taxpayers. We also interact with and assist, as you might expect, other government agencies such as the Social Security Administration and the Small Business Administration, just to name two.

We have a very active international tax organization and assist other countries, both in emerging and established countries, in administrating their programs and setting up or enhancing their tax-administration programs.

Our criminal investigation function, another example of a part of the IRS that a lot of folks might now know about, is in the forefront of battling crimes involving illegal drugs, financial crimes, tax evasion, and money laundering.

I could really tell you that the IRS is recognized as the worldwide leader in tax administration. I can also admit that we really needed to change, upgrade, and move with the times to provide even better service to taxpayers here in our country and to American citizens working overseas.

The IRS Restructuring and Reform Act of 1998, that many individuals are familiar with, gave us the mandate and provided the tools to accomplish this, while the leadership of Commissioner Charles Rossotti has established the direction and shape of the future of the Internal Revenue Service.

Mr. Cook: Bob, you've been with the IRS for over 30 years, and as such you're now the highest-ranking career official at the IRS. Over that time you've held a number of positions and you've had a number of accomplishments. You've been instrumental in some of the changes that have taken place. Can you describe for us a little bit about your history?

Mr. Wenzel: Jim, it's actually soon to be 37 years. Two years of that is with service in the United States Army, but the other 35 years has all been with the Internal Revenue Service. I mean this when I say it seems like a short period of time because it's gone by so quickly.

During this time, I have been fortunate I have worked for an organization like the Internal Revenue Service, working with employees who work for the Service because there is real pride in doing a good job and a really sincere commitment in helping taxpayers.

We've seen many, many changes over that period of time occurring throughout the world. That is, in the private sector and in government. And although I think the IRS has always been concerned with doing the job well, I think the focus of our job has changed. Offering quality service to our customer is not so much a "nice to have," but an integral part of doing our job correctly and well.

I started with the IRS as a revenue officer, a GS-5, right out of college in Chicago, and worked in both our Chicago and Detroit offices before being selected for our executive selection and development program. While I was working in Detroit for seven years in the '70s, I was observing what was happening to the U.S. auto industry. That taught me an extremely important lesson about how important it is, not just in the private sector, but also in public service, to offer good customer service and high quality. That is, providing the best products in public service and providing the best customer service that we possibly can offer. That experience also taught me what happens to business or government when these elements are lacking or considered not the most important way of delivering products or services.

After Detroit, and having a number of management positions both in Chicago and Detroit, I spent a significant portion of my time as an executive. Other than at Washington at our national headquarters, I also served at our National Computing Center in Martinsburg, West Virginia, as the director there, and also as director in our two service enters, one in Ogden, Utah, and the other in Fresno, California, and I thoroughly enjoyed and appreciated my time as director in those three offices and locations.

It gave me a real good understanding and a hearty appreciation for the challenges facing the processing activity within the Internal Revenue Service.

I've been the deputy commissioner for the Internal Revenue Service since 1998, and I have to say this is the greatest challenge and most important assignment, obviously, of my entire government career. It comes at a time when the IRS is changing and modernizing itself during the most critical rebuilding phase the Service has really faced since 1952, the last time when we significantly reorganized ourselves.

By the way, I wasn't there at the time. I can only share with you what I've read and learned about it. But I will say that we're in a period of time right now when we are changing the way we do business with a renewed focus upon meeting our taxpayer needs and delivering quality customer service. I'm just really appreciative of the fact that I have the opportunity to be a part of this major change that's underway within our organization.

Mr. Lawrence: Well, 37 years certainly is a long time. What is it about public service that drew you to it?

Mr. Wenzel: When I think back to 1963, Paul, when I graduated college, I had several career choices. There were a number of corporations that came to the college campus and interviewed for positions there and I was offered several opportunities to go into the private sector � by the way, at a starting salary that was about twice of what I finally accepted with the Internal Revenue Service.

But in 1963 a lot of the young people like myself back in those days thought of government service as the right thing to do for their country. Personally speaking, I am a first-generation American. My parents immigrated to the United States, and their formal education stopped at the age of 14 in the country that they came from.

But they learned about the constitution of the United States early on and set as their goal when they were young to come to the United States for a better way of life. So, being raised in that environment, my father and mother encouraged me to always remember what a great country this is given the opportunity, and that we all have a responsibility to give back to our country.

The Internal Revenue Service was on the college campus along with other corporations, and I interviewed for the Internal Revenue Service. I was an accounting major, and I said if I really had a sincere interest to go into public service then the Internal Revenue Service was the right fit for me � and I made that my career choice.

As I mentioned earlier, I started as a GS-5 and really enjoyed the training that I received initially and stayed with the Internal Revenue Service all these years.

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

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers, and tonight's conversation is with Bob Wenzel, deputy commissioner of operations for the IRS. Joining me is Jim Cook, a consultant with PricewaterhouseCoopers.

Well, Bob, in the first segment you touched on a very interesting point, which is even as far back as 1963 the private sector was offering higher salaries than the public sector was, and that's something that comes up a lot today. So, I'd like to follow-up and ask about the IRS's ability to attract young or junior people into the service.

Mr. Wenzel: Paul that�s really an excellent question. Let me respond by answering it this way, that, first of all, I really believe that the Internal Revenue Service is the only game in town when it comes to learning about tax administration. Whether an individual wants to acquire a strong background within the public sector and move on to something else, or whether an individual wants a career in public service from the beginning, we've always been recognized for the excellent training we offer.

So, there's somebody coming in and working with us for a number of years, and hopefully they'll stay with us. But if there's another option, there is another option for those individuals to go into the private sector.

Second, there are still many, many individuals who feel, I believe, a sense of commitment and a need to give back to their nation in some very, very meaningful way, and I can't think of a better way than going into public service. If you visit our headquarters office right on 12th and Constitution Avenue, right above our main entrance there's an inscription there by Oliver Wendell Holmes. I think it really describes our purpose very, very well, saying simply that taxes are the price we pay for a civilized society.

It is the belief of so many IRS employees, the 100,000 folks that work for us past and present that the ultimate function of the IRS is to support and to finance our democracy, and Oliver Wendell Holmes' statement is so very, very appropriate. Our current commissioner, Commissioner Rossotti, and all of our past commissioners are prime examples of this maxim, as are our recently recruited new executives and many, many of our rank and file employees.

Mr. Cook: Bob, as a follow-on to that, you've talked about the challenge and your thoughts on recruiting junior folks to the IRS. Let's talk a little bit about leadership. The IRS is traditionally a career agency, and with the exception of the commissioner, the senior leaders really came from within the IRS. But, in recent years, Commissioner Rossotti has started to recruit some outstanding individuals from other areas of the public sector and private sector. I guess I'm interested in finding out a little bit more about your thoughts on the appropriate mix between senior career executives and recruiting senior leaders directly into the IRS.

Mr. Wenzel: Right, Jim. You're absolutely right. Up until the Restructuring and Reform Act of 1998 there were two political appointments with IRS and the rest of us were all career civil servants. That is, the commissioner, as you pointed out, and our chief counsel.

But the Restructuring and Reform Act of 1998 allowed the commissioner to bring in up to 40 additional individuals from the private sector, and although we haven't reached that number yet, 17 new executives have joined our organization from the private sector.

What we've discovered from that very positive experience is that there's real value in both sources for recruitment of IRS leadership inside and outside. During the past year or two we've put in place teams of experienced and highly qualified executives from, as I said, both inside and outside the IRS. All of them have became leaders because they saw an opportunity to improve the Internal Revenue Service, and all of them were chosen as leaders because they bring a unique ability to implement change at this critical point in time in our history.

We all work together and value one another in terms of what we each bring to the table. The key we found is to continue to do what we do well in the traditional ways and to keep an open mind, embrace change and progress, and readily accept new ideas of achieving our new mission and goals. We know we must be prepared to make changes and implement innovations, and I really believe that our new mix of people, their backgrounds, their experiences and ideas, allows us to even do better than what we've ever, ever done before.

Mr. Lawrence: We know as you've been talking about that the IRS has been moving towards becoming a more customer-centric organization, performance based, and focusing on world-class service to the taxpayers. Sounds like a tremendous transition. I was wondering if you could tell us about the steps that the IRS is taking as it moves towards these goals.

Mr. Wenzel: I think the principal changes that we've implemented in this new approach is that we've included as many of our people as possible in the changes within our organization. In the past we did that to a limited extent, but not to the point that we've done it since the last almost 3 years. As we started to implement the changes the Restructuring and Reform Act in itself required � a new mission statement, new goals, a new organizational structure, new performance measures, and it's a whole list of requirements � we engaged our entire work force as much as we possibly could. Now we have 100,000 employees as I mentioned.

Mr. Lawrence: I was going to ask how you do that with 100,000 employees?

Mr. Wenzel: They're scattered all over the United States, and even in some of our embassies around the world. So, how do you do that? Well, first of all, we've opened up the internal communications as much as you can possibly imagine in terms of trying to get input. For example, Commissioner Rossotti has welcomed e-mail messages, voice mail messages, and he receives scores and scores of direct contact in the form of ideas, thoughts, and recommendations from employees from all over the United States.

But one of the principal things that we've done is we've started to implement the changes. We have brought numbers of employees from around the country. As we sit here this evening for example, there are 600 employees in Washington, D.C. that are modernizing the IRS task groups and being an integral part of developing the changes and improvements.

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

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers, and tonight's conversation is with Bob Wenzel, deputy commissioner of operations for the IRS. Joining me is Jim Cook, also with PricewaterhouseCoopers. Jim?

Mr. Cook: Thank you, Paul. Bob, in the last segment you talked a little bit about some of the things that you're doing, in particular with the employees and involving the employees in the modernization effort. I'd like to talk a little bit about managing that effort itself.

Some have characterized the IRS's modernization effort as changing the IRS's focus to assistance of taxpayers, rather than managing compliance. We've all heard in particular over the last 6 to 8 months about managing the balance between those two. I'd like you to get you to talk a little bit about how you manage and maintain this balance, and how you manage in particular the expectations of your employees, the taxpayers, and Congress on this critical issue.

Mr. Wenzel: Jim, that's certainly a fair question, and let me respond to it this way, although it's been identified as a concern right now, we're really addressing this day in and day out. Certainly we've changed our focus. To be sure, we have revamped our mission statement, and we've developed newly defined goals.

But just because we've moved to do a better job to meet the needs of taxpayers, it does not follow that we no longer require taxpayers to meet their legal obligations. That's never been the intent here. It is the role of taxpayers to understand and meet their tax obligations, and most do so. A very high percentage of folks do so without even a single intervention on the part of anyone with the Internal Revenue Service.

We want to do a better job at helping that overwhelming majority of taxpayers to comply, but we have not in any way lessened our commitment to taxpayers to comply. Let me underscore that. We haven't lessened our commitment to taxpayers to comply, and it's important that small minority who are not willing to comply are not permitted to get away with not complying. That's one of our principal roles, to make sure that we don't put additional burden on compliant taxpayers. People expect this of us, and we remain committed to doing just that.

Certainly, over the past year there was some confusion and misinterpretation by employees and managers about the meaning of some of the aspects of the Restructuring and Reform Act of 1998. You may have heard, for example, about Section 1203, which our employees have referred to as the "ten deadly sins." What that basically sys is that if somebody violated this one section of the act itself, it could result in removal. Then we also had a Section 1204, which addresses the use of statistics inside IRS.

But we've really worked hard on trying to alleviate the concerns of our employees, and we've done this right from the commissioner all the way down. The top leaders in our organization, by educating our employees, clearly elucidate our position in every way that you can possibly think of.

We've reinforced our position to employees that enforcement activity is a very vital component of our strategy for achieving overall compliance. But it's not the only component, and enforcement revenue is not a good measure of success in achieving our goal of service to all taxpayers.

Mr. Lawrence: The IRS modernization is a tremendous undertaking and you have to align the organization, the processes and the technology, and I think that would be difficult under any circumstances, but yet you have to continue the current operations. Can you talk to us about this change in general, and how it takes place when the IRS can't disrupt the filing season?

Mr. Wenzel: Well, we've talked already about how important it is to communicate effectively with our employees. But what we've also tried to do is to make sure that we communicate information on an ongoing basis with all our stakeholders, including various practitioners and liaison groups, other government agencies, such as the Small Business Administration and Social Security Administration, and many large and small taxpayer groups.

A good example is what we did in January when all of these external stakeholder groups came together here in Washington, D.C., and we held a press conference that was broadcast throughout the whole country. We called it our modernization conference, and it was entitled The New IRS Stands Up. This provided an opportunity for many taxpayer and tax practitioner groups to get a glimpse of our new organization and hear firsthand what was happening within the Internal Revenue Service.

It's so important for us as an agency and our mission to have open and frequent communication. Our ability to achieve employee and customer buy-in to our many changes that are underway in our organization, has been a key to much of our success thus far.

We really recognized in the earliest planning stages of the modernization that internal communication was important, but that it was also necessary to manage communication and decision-making operations in order to keep our top management out of endless and repetitive meetings.

When you talk about managing change, we've established a management process within our organization for each area of change with an executive steering committee is how we're organized consisting of the commissioner as the chairperson and identified senior executives to perform as the top-level governing body.

Additionally, included in those executive steering committees is the assistant secretary of the Treasury Department, the assistant secretary for administration of the department, our president of the National Treasury Employee's Union, NTEU, and many, many other key leaders. We work within this executive steering committee to provide consistent direction and prompt decision-making on major issues that affect progress in any or all of the change areas.

Mr. Cook: Bob, let's talk a little bit more about the employees. You've touched on that several times throughout this discussion this evening, and you've talked a little bit about some of the things that you're doing differently with the employees to include them in this effort. But how do you feel the employees are dealing with this culture shift within the IRS, and what if any resistance have you seen?

Mr. Wenzel: Jim, we've really tried to issue timely communications within the organization and to be receptive to any and all incoming correspondence. The example I gave with our commissioner having an e-mail address -- believe me, employees utilize that. At least that's been our experience. We've gotten tremendous ideas and suggestions directly from our employees that way.

We do have a very effective communications and liaison organization within our agency. We value that and make sure that we provide the right staffing and budget for communications and liaison which really helps us provide consistent and timely outward-bound communications to our employees.

Going a little bit further on that, we've been thoroughly committed from the top down, and it's gone back several years now, to listening to our employees. And one of the ways we do that is to conduct an annual employee survey using survey feedback action processes.

We just started our year 2000 survey. We expect somewhere close to 80,000 of our 100,000 employees to voluntarily take time out to do this survey. Since we've done this kind of survey for four years, we have a base line experience. We can compare from one year to the next in terms of how we're doing.

But let me just go back and say perhaps most importantly for our employees and our participants, that over 600 of our employees right now representing all functions, all areas of the country geographically in all positions within the service are participating in our whole design efforts. This is our phase 3 of our design effort. In phase 1 we've had about 400 employees, phase 2 about 500 employees, and now we're in our final phase. They are linked to their peers around the country, so there's a lot of active engagement, a lot of communication has taken place.

What's so important here is that so many employees have spent months away from their families and their regular work in order to contribute to the original design efforts, but we had more volunteers than what we actually could accommodate in our effort.

So, I think that with what's happened within the Internal Revenue Service. Our employees feel good that they have this opportunity to have the input. I also believe it's helped through this difficult transition as it relates to their attitude and their feeling about their job and their role within the IRS.

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

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers, and tonight's conversation is with Bob Wenzel, deputy commissioner of operations for the IRS. I'm joined by Jim Cook, a consultant with PricewaterhouseCoopers.

Well, Bob, I'd like to follow-up on something you mentioned in the last segment about working with the union. I'm curious to know how it is to work with the union as a key stakeholder in this effort.

Mr. Wenzel: I really can best answer that by saying that my personal experience has only been extremely positive. We started to build and strengthen our partnership with the NTEU going all the way back to 1987 when the commissioner and president of the NTEU signed an agreement to become partners in the way the IRS goes about our business.

As I said, it goes back a number of years and has become stronger and more professional as I see it with each year that passes. It's now reached the point, for example, that the Restructuring and Reform Act of 1998 calls for an oversight board that still has not been officially finalized with Congress and by the administration, but hopefully it will be in the near future.

One of the individuals nominated to be a part of the oversight board of the IRS is the former NTEU president. He has been nominated and I expect he will be appointed as a member of the oversight board. Our current president of the NTEU, Colleen Kelly is also a very active member of these executive steering committees and is actively engaged in policy and key decision-making at the executive steering committee level.

Of course, we have at the headquarters, at the highest level of the Internal Revenue Service, what we call the national partnership council. The council consists of the president of the National Treasury Employee's Union, myself, and the top leadership, and it's a representation where it's literally almost equal numbers of individuals appointed by the president of the National Treasury Employee's Union and those executives that I appoint.

We meet every other month, normally for about 3 days on key issues of concern to both of us, and all the recommendations in terms of what comes out of that effort is forwarded on. You can see a very high percentage of those recommendations being implemented throughout the Service.

So, while we go back a ways, and it's important now that we we're going through this change that we've engaged NTEU once again. They're the people that I've talked about being on the design teams. The national president of the NTEU also has the opportunity to appoint a number of members from the union to be a part of those design teams.

Those appointments are not all just management type appointments. It's that partnering effort that really we've committed ourselves to continue to have a strong and effective relationship with mutual goals, obviously, improving the quality of service, the quality of work life for all of our employees, and increasing our employee and customer satisfaction.

We have three basic goals in terms of measures, and that is customer satisfaction, employee satisfaction, and business results, and NTEU is a critical part of making that happen.

Mr. Cook: Bob, you've talked a lot about the reinvention efforts, and I always find it interesting that the general tone in the media about the IRS tends to be somewhat negative. But despite that, I'm always amazed about the fact that the IRS is in fact the model around the world for how to run a tax-administration organization. As the deputy commissioner of operations, you have primary responsibility for all of those programs that address customer service, collect the revenue, process the payments, issue the refunds. I'm interested to find a little bit more about how you and your people ensure that these programs operate in an effective and efficient manner.

Mr. Wenzel: That's a good question, and you just reminded me again of one of my experiences in my career when I was in Detroit for 7 years, and part of that time I was responsible for the state of Michigan and the customer-service program for the entire state.

One day I had a group of reporters in my office. It was near the end of the filing season in that particular year, and I asked a question. I said, when are you going to write an article that says something positive about the Internal Revenue Service, and one of them looked at me straight in the eye and said, "Bob, that doesn't sell newspapers."

It's when you make mistakes. Of course, we realize that because we have a very delicate mission in terms of our responsibility. We're very conscious of the fact that we really need to make sure we don't make mistakes, to keep them to a minimum and if we do make them, and to learn from the mistakes so that we can improve our operation.

Jim, the other side of that if I may comment, is that I'm really proud to say, and without any bragging, is that the Internal Revenue Service remains the leader throughout the world in tax administration. I say that, and I can bring in leaders from other countries that will vouch for that. We have regular visitors come into the Internal Revenue Service from around the world, including their commissioners, if you will, and their top staffs, to learn about our operations and how we go about our business.

We're doing that in spite of lagging technology and resource needs. That we've been able to maintain this leadership role is testimony to the commitment and dedication of our employees, many of whom literally have forced our 40-year-old computers to continue to work. And it's just amazing how they are able to do this. We�ve also been consistently fortunate, I believe, because of Commissioner Rossotti's highly effective and efficient leadership. He's now been with us over 2 years. Along with other top leaders, and a very, very dedicated work force from the top down and the bottom up, we are convinced that we not only will ensure continued tax-administration leadership, but we will provide better, more effective operations serving as a model throughout the world.

Mr. Lawrence: Internet speed is changing how everybody thinks about federal agencies, including the IRS, and I'm wondering how has technology impacted customer service at the IRS.

Mr. Wenzel: This really is a great opportunity for the IRS to serve our customers even better through technology. There is also a great incentive for us to be able to provide better, quicker service to taxpayers. Our ability to serve taxpayers is key to our ability to achieve our mission, and electronic tax administration is a vital piece of our future plans. We've moved into the Internet in a very, very big way, and we'll continue to look for more ways to serve taxpayers through technology.

I guess it may be fair to say that the future of electronic tax administration is really the real future of tax administration, and I mean that.

Our electronic-filing strategy is both ambitious and totally within reach, and it includes use of the Web for a wide range of tax administration purposes. As I'm sure you're probably aware, we also have underway a multiyear plan to modernize our core computer systems. This is critical to our success. Our goal is to be able to provide the public with the same level of service and responsiveness the private sector is able to deliver.

With the continued support of the Congress, and once again, the leadership of our commissioner, Charles Rossotti, and our chief information officer, Paul Cosgrave, we really expect significant results and enormous technological improvements over the next several years.

Mr. Lawrence: I'm afraid we're out of time. Thank you very much, Bob, for spending some time with us today. Jim and I have enjoyed our conversation very much. This has been The Business of Government Hour, conversations with government leaders.

I'm Paul Lawrence, a partner at PricewaterhouseCoopers, and the co-chair of the PricewaterhouseCoopers Endowment for the Business of Government. To learn more about the Endowment's programs and research into new approaches to improving government effectiveness, visit us on the Web at See you next week.

Gene L. Dodaro interview

Monday, November 29th, 1999 - 20:00
Gene L. Dodaro
Radio show date: 
Wed, 05/24/2000
Intro text: 
Strategic Thinking; Missions and Programs; managing for performance and results...
Strategic Thinking; Missions and Programs; managing for performance and results
Magazine profile: 
Complete transcript: 

Arlington, Virginia

Wednesday, May 24, 2000

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

The Business of Government Hour focuses on outstanding government executives who are changing the way government does business. Our special guest tonight is Gene Dodaro, Chief Operating Officer of the U.S. General Accounting Office. Welcome, Gene.

Mr. Dodaro: Welcome, Paul. Thank you very much. I'm pleased to be here.

Mr. Lawrence: And joining me in our conversation is Pat McNamee. Pat's also a PwC partner. Welcome, Pat.

Mr. McNamee: Thank you, Paul.

Mr. Lawrence: Well, Gene, let's begin this first segment by talking about GAO. How would you describe the various activities that take place at GAO?

Mr. Dodaro: Well, GAO exists to support the Congress in carrying out its constitutional responsibilities and to help improve the performance and accountability of the federal government for the benefit of the American people and there are various facets of that broad mission of the GAO, and I'll mention four categories briefly.

First, we help evaluate federal programs and activities in order to determine how well they're working and whether or not they should be modified or improved, and this really runs the gamut of the federal government's activities. For example, in health care we would look at the safety of the nursing homes in terms of whether the federal government's providing adequate oversight to ensure that the elderly are being properly taken care of.

In the national security area, we'll look at counterterrorism measures that are being put in place by law enforcement agencies. We'd look at the recruiting and retention policies and strategies to ensure ready military. We'd look at the weapon systems modernization of the Department of Defense.

We also would look at the management of federal lands in the natural resources area. Many people don't realize that the federal government still owns 30 percent of the landmass in the United States and several billion dollars of the outer continental shelf.

And we look at whether or not federal assistance to foreign countries is being spent as intended. We look at the execution of trade agreements of which the United States is now party to over three hundred and growing. And the list goes on and on to include the safety of the air traffic control system and our national highway structure.

The second major category is basically auditing the nation's finances to make sure that the taxpayers' funds are being appropriately accounted for and that the public's money is being spent efficiently and effectively in accordance with federal law. And in this category we do various financial audits of government entities, including the financial statements of the entire federal government. We help set accounting, auditing, management control standards for the conduct of public officials. We also produce a high-risk series which includes areas that are particularly susceptible to fraud, waste, and mismanagement in the federal government. For example, in the Medicare area, we've had an ongoing struggle to combat fraud and abuse in that particular fast-growing health care area. In fact, health care expenditures in the federal government are growing twice the rate of any other federal expenditure.

We would also conduct specific investigations of alleged illegal activities or improper conduct on the part of federal officials and issue various legal decisions and opinions concerning compliance with appropriation law, for example, in the direction of the Congress.

The third major category would be identifying for the Congress emerging issues that they need to focus on. And some recent examples here are, in the 1990s, we surfaced early on the need to address the year 2000 computing challenge and also the vulnerabilities of the federal government to computer security intrusions. And we've seen recent events prove us right in highlighting that for the Congress in protecting our critical infrastructures, both in the public sector and in the private sector. We've also focused on the long-term financial condition of the federal government and the need to deal with the changes that will ensue as a result of changing demographics to the Social Security and the Medicare trust funds with the advent of the Baby Boom generation in a couple of decades.

And lastly, in the fourth category I would mention, is where we're helping the Congress respond to particular events that have occurred. Two recent examples would be the fire situation in Los Alamos. We've been asked to take a look at that issue, which is typical of when we have particular disasters, and the Congress wants to know why did it occur, how can we prevent these situations from occurring again. We've also been asked to testify recently on the "I Love You" virus and what the federal government can do and what kind of responsiveness did the federal government enact to protect its assets during that event.

So the bottom line is that GAO is a very diverse, professional services organization. The scope of our responsibilities is as vast as the federal government being one of the world's largest enterprises. And our basic governing principle is to do work to support the Congress, to help them make informed decisions on behalf of the American people, and to advance constructive recommendations for improving government.

Mr. McNamee: You mentioned supporting the Congress, and I'm not sure how many people actually realize that GAO is part of the legislative branch of the government. Can you describe a little more about GAO's relationship with the Congress?

Mr. Dodaro: Yes, Pat. The GAO is part of the legislative branch of the Congress and that is to ensure its independence from the Executive Branch to help the Congress carry out the checks and balances envisioned in the Constitution and in our system of government. That independence is further assured by the fact that the Comptroller General -- in this case, the current Comptroller General David M. Walker -- has a fifteen-year, nonrenewable term, like his six predecessors before him.

Basically, the vast majority of our work is in direct response to requests from chairmen and ranking minority members of various committees and individual members who are also on particular committees of jurisdiction, and that runs into the oversight of federal government programs, as I mentioned earlier.

We work with the Congress in helping them make appropriation decisions. For example, it's typical for the Congress to ask for our advice before making major investments in information technology systems, given the past problems with many federal expenditures that haven't actually produced the improvements that were intended through multibillion-dollar purchases. And basically, we provide a lot of assistance to the Congress, working very closely with them.

We've recently issued and are testing a set of congressional protocols now which explain our commitments to the Congress in clear, transparent terms that are consistently applied, and that Congress can hold us accountable for delivering. And we deal with, you know, basically 535 members of the Congress, as well as the delegates from the various federal territories. And we want to have a commitment to each and every one of those clients -- Congress is our primary client -- and also produce work that can help them effectively represent the American people who elect them to come and act on their behalf.

Mr. Lawrence: Well, tell us about your career and the various positions you've held at GAO?

Mr. Dodaro: I've been with the General Accounting Office since 1973. I came to GAO directly from college. I graduated with an accounting degree. And then my early years at the GAO had a wide variety of experiences in different areas, for example, looking at the problems of illegal immigration and smuggling of aliens into the country; licensing of radioactive materials for medical, educational, research, and industrial purposes; I was involved in a major study evaluating the implications of changing Puerto Rico's political status to a state or revised commonwealth status or even independence; I also was involved in a major nationwide study looking at the impact of countercyclical revenue-sharing that occurred in the mid-1970s, following the high inflation and recessionary period during that period of time. And the idea of that program was to provide assistance to state and local governments to help compensate them for losses of revenue during recessionary periods, and also, basically, increases in certain expenditures that would increase as a result of unemployment during that period of time.

In the early 1980s, I was involved in a major GAO project for two years looking at the initiatives -- at that point labeled "new federalism" -- to take over a hundred federal programs and consolidate them into block grant programs and give more discretion to the state and local government.

Mr. Lawrence: Let me ask you to hold the rest of your answer. It's time for a break. We'll be right back with more of The Business of Government Hour. (Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers, and tonight's guest is Gene Dodaro, Chief Operating Officer of the U.S. General Accounting Office. And joining me in our conversation is Pat McNamee, also a PwC partner.

Well, Gene, let me continue with your career, because before we went to a break you were in the middle of describing the positions you've held and your various experiences.

Mr. Dodaro: Basically, in the early 1980s, this major block grant study was an experiment in new federalism really on behalf of the federal government. And there was a lot of interest on behalf of the Congress as to the recipients of federal assistance under these 100 categorical programs that were folded into eight block grant programs in the health care arena, social services, community services, low-income energy assistance, et cetera.

We had received multiple requests, so we created an interdisciplinary team in GAO and looked nationally at many states across the nation and local governments on how they were carrying out their new responsibilities, and found them to be handling their responsibilities very responsibly. And we had made some recommendations from some increased reporting requirements, but that was a major turning point in the federal relations with state and local government.

Following that, I was involved in another pioneering effort at GAO to begin looking at the entire management operations of individual departments and agencies. At this point in time, in the 1980s, we began seeing recurring problems in our audits of individual departments and agencies, and felt we weren't getting to the root causes of the problems. So we launched this new type of work, where we would work with the top leadership team of individual departments and agencies, look at their planning structures, their strategic focus on the agencies, look at performance management, their personnel approaches to carrying out the work, and found a lot of serious deficiencies at the departments and agencies.

For example, I led studies at the Internal Revenue Service. We did actual management studies of the Office of Management and Budget and the executive office of the President, the Office of Personnel Management, Labor Department, Social Security Administration, et cetera. And really, the common findings of these management reviews helped lead to the creation of the Government Performance and Results Act because we found an absence of strategic planning, performance measures in the individual agencies, and it added to the discussion and the genesis of that legislation later on.

Following that experience, which lasted several years, I was asked to go to the Accounting and Financial Management Division in GAO and there, at that point in time, the Chief Financial Officer's Act was being passed in 1990, and that led to increased responsibilities for the GAO. So I helped, at that time, change GAO's work force around to accept these new responsibilities.

And then I became the assistant comptroller general in charge of our accounting and information management work at GAO. And in that capacity, I led the first ever audit of the federal government's consolidated financial statements, which began in fiscal year 1997 and 1998, and they continue today.

This was a major achievement. The federal government was the last major segment of our economy to really impose on itself the management discipline of a financial audit. And so this was a big effort to mobilize and work with inspector generals across the government to help them carry out their responsibilities and GAO's to do these audits. We worked very closely with chief financial officers across the government, as well. And in that capacity also, I was responsible for GAO's work within the year 2000 computing challenge and also looking at major IT investments and working with the Congress and the Administration to help shape the Clinger-Cohen Act, which put in place chief information officers across the government, as well.

I've been in my current position now as chief operating officer for GAO for the last year, and I've led efforts to put in place a strategic planning process for GAO. We've just issued a strategic plan and our first annual performance plan and accountability reports, so we're trying to lead by example in that we evaluate how other agencies are implementing the Government Performance and Results Act. So we're going forward and producing and complying with the Act even though we're not covered by the Act.

Mr. McNamee: I know one of your areas of responsibility in GAO, Gene, is meeting visitors from foreign countries and working with your counterparts in other governments. Can you tell us a little bit about GAO's international role and the recent international conference you attended?

Mr. Dodaro: Few people know about the longstanding involvement of GAO in the international arena, and this dates back to Comptroller General Elmer Staats, who started a training program whereby developing countries in particular would send representatives to GAO for a four- or five-month study course to learn the basics of auditing. And in fact, in the 20 years since that program's been in existence, we've graduated about 300 people and more than a dozen have gone on to actually become the auditor general in their particular country.

There's also an organized effort of close to 180 countries around the world where we work with counterpart agencies who are, in effect, the GAO of their particular country, to share experiences, to develop common standards. And basically, there's a commitment on the part of this international organization to help developing countries, and it's particularly useful now in working with Eastern European countries who are beginning to establish democratic forms of government.

So we provide a lot of technical assistance, support, and help. And with the globalization of economies, enterprises, and government processes now across the country, we foresee that this good investment we've made in working with our counterparts across the globe will become even more important as we have to work to look at issues that transcend boundaries and government borders, particularly in the financial markets and institutions area. Health care is now becoming a global issue, as well. And so this has been a good investment and GAO is very well known and looked to as a source of leadership in the international auditing arena.

Mr. Lawrence: One of your recent activities has been the reorganization of GAO. Could you tell us about that reorganization and how GAO is now organized?

Mr. Dodaro: Yes. This is a major change for us. We've made many changes and improvements over the years, but this is a fundamental realignment of GAO. It's being done to provide us more alignment with our strategic plan that we've worked very closely with the Congress in shaping.

GAO also has had a significant downsizing during the late 1990s, going from an organization of roughly 5,500 people to an organization now of almost 3,300 people. So we've looked at our field structure, we've streamlined the field offices and are in the process of closing some now.

At headquarters, we've also moved to flatten the organization. We've eliminated divisions, which were the major operating units of GAO structure, and have reduced the number of areas from 31 issue areas of the government to 11, in effect, flattening the organization considerably.

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

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers, and tonight's conversation is with Gene Dodaro, Chief Operating Officer of the U.S. General Accounting Office. And joining me is Pat McNamee, also a partner at PwC. Pat?

Mr. McNamee: Thanks, Paul. Gene, can you describe for us a little bit your role as Chief Operating Officer of the GAO?

Mr. Dodaro: My responsibilities as Chief Operating Officer is to work closely with David Walker, the Comptroller General, to carry out the leadership of the GAO. One of my primary tasks right now, in addition to completing our strategic plan, will be to implement our realignment, which will be fully effective by the beginning of the next fiscal year.

There are a number of transition issues that need to be dealt with. We're moving to a major effort to push accountability down in the organization and build quality into the products, to continue to make improvements in our ability to serve the Congress, and to have a more flexible, nimble organization moving into the next century.

I spend a lot of my time reviewing the requests from the Congress to help set priorities on staffing, looking to make sure that we are being responsive to our clients' needs, and monitoring the more sensitive and difficult and complex assignments throughout the course of their development, implementation, and reporting to the Congress. Also working a lot on building institutional capacity within GAO. That's particularly challenging now given our downsizing environment, our efforts to replenish our pipeline in the human capital area. And I work very closely with GAO's Chief Mission Support Officer SallyAnn Harper and our General Counsel Bob Murphy, who, along with Dave Walker and myself, make up GAO's executive team.

Mr. McNamee: We know that human capital is a major issue of the Comptroller General David Walker. Can you tell us about the changes GAO has made or is considering making in terms of is own human resource management?

Mr. Dodaro: Human capital has been one of the preeminent issues that Dave Walker's focused on in the year and a half that he's been comptroller general. And it's particularly apropos given his experience in the private sector and the fact that he has been a human capital expert.

We started with doing an exhaustive human capital profile of the GAO. I mentioned our downsizing efforts before by 40 percent over a period of time. Basically, we had a hiring freeze in place for about five years. As a result, we have more people at the mid-level and the upper levels at the GAO than we do at the entry level.

So a big effort is underway to reinstitute and reinvigorate our recruiting efforts to get people into the organization. And it's particularly important because, like a lot of other federal entities, we're facing the potential loss of a lot of our senior managers over the next five years. In fact, one-third of GAO's entire work force is eligible to retire by 2004, 55 percent of our senior executives. So it's very important -- particularly because the Congress looks to us as continuity and institutional memory of government -- that we'd be able to replenish our work force and have a steady succession planning effort so that we can be responsive to the Congress in a timely fashion.

We're looking at our performance appraisal systems. We've established an employee advisory council broadly representative of GAO to work with us. We've instituted very detailed surveys of our employees to learn their interests and concerns, and we are opening up two-way communications throughout the organization to solicit ideas. We've instituted an employee suggestion program.

And so we have a wide range of activities going on. We're also going to be conducting a skill inventory across the organization to be able to look at our strategic plan and what kind of skills that we're going to need in the next five to six years, evaluate what we have in-house already, and that will help dictate what type of training activities we need to provide, as well as what areas we need to target to recruit.

We know we're going to have to have more people with information technology experiences, but we're also moving and adapting to changes in the federal government, which now, after 30 years, is spending more on health care than on defense. And so, there have been some profound changes in the nature and composition of federal spending, and there will be more as the federal government responds to changes in society and the world at large, and we need to be ready to be able to help the Congress in a most effective manner.

Mr. McNamee: Gene, one of the interesting parts of your job at GAO is getting to work on a lot of the major issues that face the government today. One thing I'd like to start off talking about was responding to the Y2K threat for the government. Can you tell us a little bit about GAO's activities in the Y2K area and through what the lessons learned were from the government's successful response to the Y2K challenge?

Mr. Dodaro: I think the Y2K experience has several profound lessons. Number one, it demonstrates that when the federal government applies its talent, resources, and has effective leadership, it can get a problem solved. And the successful transition into the year 2000 and the very few disruptions that were held was very much a testimonial to the dedicated efforts of federal employees throughout the federal government. GAO played a unique role in this in that we were one of the earlier people raising this, along with several members of the Congress, as a problem, alerting the federal government to the need to address this issue directly.

We actually created a set of four guides: One on how to do the conversion planning, one on business continuity and contingency planning, one on how to do testing, and one on day one planning for this activity. And those guides were adopted by the Executive Branch and the President's Council on Y2K Conversion as the official policy for the federal government. So this is a case where an audit organization helps preventing problems, being a constructive force in addressing these issues directly.

We worked very closely with the Congress. And this is also a case where the Congress was actively involved in helping craft solutions, providing effective oversight. Both the House and the Senate were very actively involved in this endeavor and we worked very closely with the President's Council on Y2K Conversion and John Koskinen is the chair of that council. People who have been in the auditing business for a while know that usually you do not have a hundred percent adoption of your recommendations. In this case, for the three or four years we were engaged in this, we issued well over a hundred and fifty reports and dozens and dozens of recommendations. All were adopted and effectively implemented quickly by the agencies.

We also worked, in this case, internationally with our counterparts and with our counterparts at the state and local level. We had conferences with state auditors. I was also asked to be part of, as an observer, the U.S. delegation to the United Nations when John Koskinen helped orchestrate a meeting up there and effectively mobilized the world.

And so, it provides a good lesson in not only how the federal government can operate and carry out its activities, but there were successful engagement at the state and local level, the international level, and, in particular, with the private sector. I think this provides effective lessons learned going into computer security and critical infrastructure protection, where the federal government needs to have an effective partnership with the private sector, which owns most of the computer assets in the country.

Mr. McNamee: What's your impression of the impact of the Chief Financial Officers Act?

Mr. Dodaro: The Chief Financial Officers Act has had a very important cultural effect on the federal government. Basically, it's moving the federal government to instituting effective fiscal discipline. It's a major change and it's very difficult, if you can imagine a large corporation that operated for 50 or 60 years and spending billions of dollars and not having financial reporting, statement reporting and auditing in place, and the federal government also has a very decentralized accounting structure. And the CFO Act is helping the federal government impose the discipline to get on top of that and to provide the type of accountability over federal funds that the public really expects and demands. And I think if the Act is effectively implemented it will go a long way to restoring public trust in the federal government.

Steady progress is being made. In 1996, we had about 6 of 24 major departments and agencies get clean opinions. That number has almost doubled now in the last fiscal year, so individual agencies are beginning to come on board. The challenge now is to go beyond just clean opinions and improve the underlying financial management systems so that agencies have timely data on a day-to-day basis that's reliable, and to effectively manage and oversee the federal government's operations.

So a good start, tremendously needed discipline imposed in the federal government, but a long way to go to effectively change and transform the reforms contemplated under the Act into a day-to-day management reality at the federal agency level.

Mr. McNamee: GAO's also been involved heavily in the oversight of the Government Performance and Results Act, or GPRA. Can you give us your impression on the impact the GPRA's had so far?

Mr. Dodaro: I think the GPRA, again, is introducing another very important paradigm shift in the federal government to focus more on results, away from process and inputs to outcomes. I think it's important to note, even though the Act was passed in 1993, just this past spring, we've completed, across the federal government, the first full cycle of the Act, having strategic plans developed in 1997 for fiscal year 1999. And now the first reports against those performance plans are being produced.

So we're still somewhat in the early stages of government-wide implementation. Progress is being made. More agencies are taking it seriously. More committees on the Hill are legislating with this in mind, but there's a number of additional things that need to be done, again, to make this a day-to-day management reality and integrate with the budget process.

Mr. Lawrence: Okay, with that we've got to take a break. We'll be right back with more of The Business of Government Hour. (Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers, and tonight's conversation is with Gene Dodaro, Chief Operating Officer of the U.S. General Accounting Office. And joining me is Pat McNamee. Pat's also a partner at PwC.

Well, Gene, let's spend this last segment looking ahead to the future. And I know the Comptroller General and you recently testified before Congress on managing in the new millennium, shaping a more efficient and effective government for the 21st century. Can you tell us about that testimony?

Mr. Dodaro: This was a very important opportunity provided by the Senate Committee on Governmental Affairs to take a look ahead at the federal government and also it was a venue for us to talk about our strategic plan and support to Congress in carrying out its responsibilities.

The basic message of that testimony was that dynamics have changed markedly as we transition into the new environment and provide a lot of opportunities. For example, the Cold War has ended. We're also transitioning into the new millennium with a much different fiscal position. Thanks to hard decisions by the Congress and the Administration and a burgeoning economy we're now in an era of budget surpluses rather than deficits. So we've slain the deficit dragon temporarily, although there are looming fiscal pressures as with the advent of the Baby Boom generation and changing demographics.

But for the time being, we've got a window of opportunity here, and it's an opportunity to look at the dynamics that are changing the shape of the federal government and the environment which it operates in. Globalization, changing demographics, changing security threats, quality of life considerations, are all changing the federal government's expectations for government and requiring it to be more responsive, results- oriented, bottom-line driven, and also more effectively managed and implemented.

And also, there's a huge opportunity now with the budget surpluses to look ahead in a more long-term fiscal posture to look at what the federal government does and how it conducts business. And there's really an opportunity and an obligation to look forward now, and to really scrutinize the federal government's basic programs. A lot of programs were started many years ago for well-intended purposes. Times have changed, the environment has changed, and now's a good time to sort of take a look at that.

And this testimony puts forth a couple of points along the management lines. Number one, it talks about the need to implement effectively the management reforms that were put in place in the 1990s -- the Chief Financial Officers Act, the Government Performance and Results Act, the Clinger-Cohen Act -- and basically says this was a very good set of management reforms that were put in place, but we really have to implement them effectively to reap the benefits of those reforms.

And we also point out the missing element in management reforms, which is human capital in the federal government, and that the people side of government has not been attended to effectively and really needs attention and reform to make all these other management reforms work effectively and to help the federal government be responsive to the American people and to be more flexible as we enter into this new millennium and face new challenges facing the federal government.

In that testimony, we also talked about the opportunities for the Congress to look at different ways it can enhance oversight and work in a partnership manner with the GAO and with the Executive Branch in bringing about the type of federal government that we need to operate effectively in the 21st century.

Mr. McNamee: Gene, as we talked about a little earlier, you've been very involved in technology issues for the government. What do you see is the impact of technology on the government in the years ahead?

Mr. Dodaro: I think technology holds tremendous promise for improving the responsiveness of the government; restoring confidence in government with citizens; and the ability to interact directly with the citizens, both in terms of answering their questions, helping them find information they need about their government; and also providing information to the public to increase public confidence and safety.

There are a number of real issues, though, that are really important. Number one, the gap between the private sector investment and reaping the benefits of technology in the federal government is growing. About 40 percent of all capital investment by the year 2003 in the private sector will be for information technology investments. And really, as the Chairman of the Federal Reserve Board Alan Greenspan points out, a large part of the economic growth and development in the United States has been fueled now by productivity increases because of investments in information technology over a number of years. So that needs to be a contributing factor in improving government.

Now the key to government improving its performance is really effectively implementing the Clinger-Cohen Act of 1996. That Act put in place a chief information officer structure across government, required modern investment management practices, required federal agencies to develop architectures so they could have interoperability and effective security systems put in place, and it really put in place a modern set of best practices that were being employed by the private sector. And this was based on research done by GAO and, working with the Congress and the Executive Branch, is to put that into effect.

I also think these reforms have been tempered a little bit in terms of being implemented by the focus necessarily on Y2K preparations, but the benefit of Y2K was that it also got managers' attention about the important role of information technology and the dependency on it for improving their operations. So technology holds the key to really reforming dramatically the federal government.

Reforms are in place, but they need to be effectively implemented and this will be a major challenge for the federal government going forward to improve its operations and also deal with important computer security concerns about protecting the information that the federal government receives from private citizens in an appropriate manner.

Mr. Lawrence: What other major changes do you envision in the government of the future?

Mr. Dodaro: The government of the future is going to have to be much more responsive and flexible to be able to change to the dynamics that are unfolding. Take globalization. We now, in the United States, are a party to over 300 trade agreements, with the potential increases in world trade. World exports have doubled almost as a percent of gross domestic product over the past 10 years. Foreign investment in the United States has increased, which helps our economic development, but it also makes us vulnerable to changes in other economies. And so, the federal government is becoming much more intertwined as the global interdependence increases and it's transcending a number of different areas in the federal government. That is a challenge to the structures and institutions of government because it requires working across agency boundaries, across departments, and the federal government needs to create new structures and processes in order to implement that effectively.

Also, the changing demographics are going to profoundly change this country. By the year 2020, about 20 percent of the United States population will be 65 or older, up from about the current 13 or 14 percent. We could have as many people in this country 65 or older as we have 20 or younger. That will change the service requirements for the federal government in not only entitlement reform areas in Social Security and Medicare, but also transportation requirements and other attendant housing concerns.

Also, the labor force in the United States is becoming more diverse and not growing at an exceedingly fast pace, calling into question whether or not we'll have the necessary skills in the labor force to move as information technology and other demands call for a more highly skilled work force, and that has attendant issues associated with it in regard to immigration and other issues.

So a lot of dynamics are at play right now, and the rapid pace of changes in technology combined with these other factors of globalization, changing demographics, really call for a federal government to be more responsive, more focused on results and outcomes, and one that can operate across departments and agencies and not just within the traditional government structures of individual departments and agencies -- a major challenge. I believe the federal government's up to it and I think, with a lot of partnership between the Congress and the Executive Branch, that the federal government can be prepared to meet all these challenges very effectively.

Mr. Lawrence: Well, I'm afraid we're out of time, so we'll end there. I want to thank you very much, Gene, for spending time with us tonight. Pat and I have enjoyed the conversation very much.

Mr. Dodaro: I've enjoyed it, as well. Thank you very much, Paul, Pat.

Mr. Lawrence: This has been The Business of Government Hour, conversation with government leaders. I'm Paul Lawrence, a partner at PricewaterhouseCoopers and the co-chair of the PricewaterhouseCoopers endowment for the business of government. To learn more about the endowment's programs and research, visit us on the Web at See you next week.

Dr. Thomas L. Garthwaite interview

Monday, November 29th, 1999 - 20:00
Dr. Thomas L. Garthwaite
Radio show date: 
Mon, 08/21/2000
Intro text: 
Missions and Programs; Organizational Transformation; Strategic Thinking; Leadership; ...
Missions and Programs; Organizational Transformation; Strategic Thinking; Leadership;
Magazine profile: 
Complete transcript: 

Arlington, Virginia

Monday, August 21, 2000

Mr. Lawrence: Good evening, and welcome to the Business of Government Hour: Conversations with Government Leaders. I'm Paul Lawrence, a partner at PricewaterhouseCoopers and the co-chair of the PricewaterhouseCoopers Endowment for The Business of Government. The Endowment was created in 1998 to encourage discussion and research into new approaches to improve government effectiveness. Find out more about the Endowment by visiting us on the Web at

The Business of Government Hour focuses on outstanding government executives who are changing the way government does business. Our special guest tonight is Dr. Thomas Garthwaite, Acting Undersecretary for Health at the Veterans Health Administration.

Recently, the PricewaterhouseCoopers Endowment published two reports on the VHA. The first is called "Transforming Government: The Revitalization of the Veterans Health Administration," and the second, "Transatlantic Experiences in Health Reform: The UK's National Health Service and the U.S. Veterans Health Administration."

Tonight, we want to find out more about the VHA's transformation and reform. Welcome, Dr. Garthwaite.

Dr. Garthwaite: Good evening, it's a pleasure to be here.

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

Mr. Greben: Good evening.

Mr. Lawrence: Well, Dr. Garthwaite, as Acting Undersecretary for Health, you're the chief executive officer of the VHA, the nation's largest integrated health care system. Can you tell us about the VHA?

Dr. Garthwaite: Sure. The VA is strikingly large - it has a budget of about $19 billion, and provides health care to veterans through approximately 180,000 staff, 172 medical centers, over 650 ambulatory care and community-based clinics, 134 nursing homes, 40 domiciliaries, 206 readjustment counseling centers, and various other facilities.

In addition to its medical care mission, we provide a significant amount of graduate medical education and it's said that over half of the doctors in America have had some part of their training in a VA facility.

In addition, we're one of the nation's largest research organizations and do approximately $1 billion in combined research across the country. And finally, we back up the Department of Defense and the National Disaster Medical System in times of emergency.

Mr. Lawrence: Your career with VA is quite long, dating back to 1976, what changes have you observed in the 25 years?

Dr. Garthwaite: I even did a little bit of my residency training in VA, so it goes back slightly further than that. It's interesting to think about all the changes in medicine during that time and the changes in VA.

Clearly, the VA used to be predominantly an inpatient health care system, and over the last 20 years, but especially in the last five years, we've moved to provide a significant amount of care in the outpatient setting. At one time, about 30-some percent of our surgical procedures were done in an outpatient setting; we're closing in on 80 percent of our surgical procedures as an outpatient.

We've gone through changing reimbursement schemes. When DRGs came in the private sector and Medicare in the mid-'80s, about a year after that, the VA adopted a reimbursement scheme.

It was originally called Resource Allocation Model, it became known as RAM. And it worked variably well, I think, in the VA, but ultimately kind of pushed us to do too much with too little. We were just dividing up a fixed pie.

We've gradually emerged to a reimbursement scheme that mirrors managed care. We used a larger population base capitation model and that has allowed us to move some dollars around the system and put it more appropriately where veterans live.

We certainly had to adapt to the use of technology and that's a constant across all of health care. A unique part of the VA, I think, has been the emergence of health services research in VA and what we've done in the last few years is try to push health service researchers to communicate better with managers.

You know, managers make a lot of very important decisions and control a lot of dollars and do that with relatively imprecise data often - data that's not subject to statistical scrutiny.

Health services researchers carefully analyze the data, design experiments, apply rigorous statistics, publish it in a journal and often it sits in the journal for many years before anyone acts upon it.

We didn't think that either of those was the ideal state. We really thought that managers should use as much statistical and analytical rigor as researchers and we didn't think researchers should find out important things and not have them acted upon. And we really worked hard to drive together health service research and management and have several major initiatives along that regard.

Another thing that we've done, that I've noticed changing dramatically in the VA, has been the emphasis on prevention. Years ago, I think we waited until the end of a disease and we came in with tubes and scalpels and tried to save the patient at the end-stage of an illness. Last year, we had immunization rates approaching 90 percent for pneumonia and influenza and we believe that in patients who have lung disease, and who are elderly, that every time we give a shot, we not only save lives and prevent hospitalizations, we save $294 with each shot that we give.

So there's a dramatic evolution from care at the end of a disease towards care across -- all the way from detection and prevention of disease, all the way through more aggressive treatment.

The final thing that's I think really dramatically different in the years that I've been in the VA is the emergence of information systems and the VA's really been a leader in information systems dedicated to patient care.

You know, we didn't have to bill for many years, so in the private sector, the computer systems were developed and maintained primarily around billing. Since we weren't billing, we developed and maintained them primarily around the delivery of health care. And if you think about it, ultimately, the most effective and efficient and the highest quality way to deliver health care would be supported by good informag systems around the process of delivering care. So I think we're a little ahead there.

Unfortunately, we had to begin to bill and so we're catching up with the private sector in how to bill, but I think we're ahead in how to use computers to deliver care.

Mr. Lawrence: You served as the chief operating officer of VHA during the greatest period of transformation in the organization's history. Could you tell us about the challenges and the results of this transformation?

Dr. Garthwaite: If you can imagine walking into probably the second-largest bureaucracy in the United States government; at the time we had 205,000 employees and ran a system that was largely centralized, that is, policy came from Washington and although we originally, I think, had some input from advisory groups in Washington, a lot of this was centrally driven policies.

When Dr. Kizer came in and I joined him as his deputy, one of the key underlying tenets of the reorganization and transformation of VA was to decentralize. We believed that, although the broadest policies had to be set in Washington, the implementation of those policies almost certainly has to occur much closer to where the action is out in the field. And although we can see the major policy decisions, the implementation would be quite different in the Bronx than it might be in Boise.

So that was really a challenge. And to do that, we reorganized into 22 networks and each network, then, was responsible for not just the facilities, but the people, the population we were covering within those geographic areas.

That's really a critical change, as well. In the past, it was competing facilities; each trying to have all the programs that were possible in medicine; each trying to have the tertiary care; each trying to have the latest-and-greatest technology. But what was missing was the coordination of care and the preventive medicine, the primary care for the rest of that population before they needed that tertiary care.

So, in the end, what we were able to do was to refocus all of our staff on the concept that it is really about that population, not about the facilities. Now, I don't say we're 100 percent there today, but we've come an awful long way. That is really one of the fundamental tenets.

That also changed us from specialty care to primary care. It changed us from inpatient care to outpatient care. It changed us from end-of-disease care to prevention. So it had dramatic effects just going from a facility-based organization to a population-based organization.

The real key to the change, I think, in making it all happen was the use of performance measurement. And the use of performance measurement did several things for us. One, it forced us to have conversations about what's most important, what the real goal is. Secondly, it forced us to then say, what would be a measure of that. And, third, it said what kind of progress have we made? It gave us an opportunity to chart our progress towards those goals. So, I think, more than anything else, performance measurement really led to the dramatic changes we've seen.

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

Mr. Lawrence: Welcome back The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers and tonight's conversation is with Dr. Thomas Garthwaite, Acting Undersecretary for Health, Veterans Health Administration.

When we closed out the last segment, Dr. Garthwaite, and I wanted to get your perspective on 25 years of government service, what qualities have you observed as key characteristics of good leadership?

Dr. Garthwaite: Well, I guess the thing that stands out to me is, the quality of a good leader is to have clarity of vision, because if you don't have clarity of vision, it's hard to develop a shared vision with all the employees of the organization. I think if you don't have a shared vision with all your employees, you can only get them to go part way towards any goal.

I mean, we really only go where we believe we want to go. We can be ordered to go someplace, and we'll go reluctantly if there's enough of a power structure there, but when we really go enthusiastically somewhere, it's because we see the goal, we agree with that goal and that vision, and that's how we get there. So, to me, the first part is to really have that clarity of vision.

I also believe that people need sound principles and integrity, I think that's a critical piece because no one will follow anybody they don't believe in, and I think that's another critical piece.

Finally, the ability to listen. It's impossible to know everything, but in an organization of 180,000 people, for instance, we have somebody who has a good idea about almost everything. The hard part is to listen. You can find a lot of people who will be quiet while you're speaking, but you find relatively few people who actually listen to what you have to say, incorporate that into thinking and then turn it into a true dialogue with you.

So, I think that's another key piece of leadership, especially in today's society, which I think is moving from a kind of hierarchical command and control structure to more integrated and virtual organizations and more democratic leadership.

Mr. Lawrence: We discussed earlier the reorganization of VHA into the 22 veterans integrated service networks. How do these networks operate and make decisions and what have been the results of this reorganization?

Dr. Garthwaite: It depends a little bit on where you sit, how you believe how they operate. We believe that we've given them a significant amount of authority and control to operate relatively independently. We give them broad national policy. We occasionally step in and try to guide them back on the straight and narrow.

Others haven't been quite as complimentary as that. I think the Congress has been a little concerned that there's a little too much authority and independence. But my take is that they've done very well, given the rapid evolution of an entirely new structure.

One of the things I think has helped us a lot in moving forward the networks was that during the early implementation, and even to this day, we meet frequently. We have a monthly leadership board meeting with the key headquarters leadership and the network directors, all 22.

We did that monthly, in person, for the first several years, and I think that helped minimize the competition and maximize the collaboration. I think it helped each learn from each other's mistakes and implementation difficulties. I think that really allowed us to do reasonably well in the implementation networks.

Mr. Lawrence: VHA places a strong emphasis on patient safety and has created four patient safety centers of inquiry. Could you tell us about these centers?

Dr. Garthwaite: Sure. The centers are really part of a comprehensive strategy in patient safety. Probably three or four years ago, we looked at what was happening in health care and challenges we had in providing consistent care across all the facilities that we operate and began to take on a systematic approach to improving outpatient safety, which included an advisory group to help set up the program; a center for patient safety; a handbook; a mandatory reporting system; the Centers for Patient Safety and, more recently, a voluntary reporting system.

The Centers are looking specifically at what we can to do to engineer in safety in health care. And they look at things from human factors analysis - Do we have enough people? Are they overtired? Are the machines too confusing? Are they designed to be easy to use or is a mistake almost inevitable based on the design of those things?

In addition, we're looking at things like the role of the environment on worker performance; things like simulations. We have an anesthesia simulator in Palo Alto, where a team from an operating room can go in and this simulated patient can have all sorts of difficulty and even die in front of the doctors and nurses, if the right actions aren't taken. Now, when I say die, I mean, figuratively. But you can simulate almost everything and you can watch and even record on TV all the interactions of the people and the kind of things they need during an emergency and whether they're there.

It's really led to some, I think some important understandings about how teams work together; how teams function in emergencies; and how to provide the needed tools to respond to an emergency in a better fashion than they would when they started the simulations.

In addition, we can also see if people are up to date on their training, know what to do and whether our training needs to be modified to improve that. So, a lot of exciting research and actions being taken in the patient safety arena.

Mr. Lawrence: Related to the area of patient safety, VHA recently launched a three-year $8.2 million program to set up a system to reduce medical errors in conjunction with NASA. Can you tell us more about this?

Dr. Garthwaite: NASA for years has run an aviation safety reporting system, which seeks to minimize the personal inhibitions to reporting close calls or actual errors.

It's been found that if you're involved in an error, an adverse event, or a close call, you make a mistake. You're inhibited by a fear of the consequences if you talk about that. You're also inhibited somewhat by the shame of having to admit you made a mistake. So there's a series of reasons that people aren't quick to point their mistakes.

But most people would like to see the systems get better. They would like to see the situation they found themselves in where a mistake was possible, be fixed. And so, it's been found that if you can make the culture right, the people will readily report anonymously the situation that led to this near miss or this adverse event.

That's what we're setting up with NASA. If something happens, you give the wrong medication, but no one was injured but you know they could have been, you can write that up. You have your name and phone number on there. You send it in to NASA; NASA will call you back and make sure they have the story right, so they can interpret it. They will tear your name off and they'll send that back to you.

Then that information about that event is entered into a database, it's computer searchable and NASA has set up computer programs that have allowed them to look for patterns in this description of these adverse events in aviation and we'll be able to use that programming expertise in medical care, as well.

So we're real excited about this. We think it will be the perfect complement to our mandatory reporting system where an actual adverse event did injure a patient and where we need to get to the root cause of that.

In addition, we'll have this voluntary reporting system that will get to near misses, minor adverse events that might otherwise go undetected and allow us to identify as many possible vulnerabilities in the system so we can get about the business of fixing them.

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

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers and tonight's conversation is with Dr. Thomas Garthwaite, Acting Undersecretary for Health, Veterans Health Administration and joining me in the conversation, another PwC partner, Greg Greben.

I wanted to close on one last thing we were talking about in the last segment, which is, one of the innovations under discussion at VHA is Web pages for individual patients to store their medical information electronically in a single place and I'm wondering about the hurdles that need to be overcome before that becomes a reality.

Dr. Garthwaite: Our vision is that the only person that really owns the complete medical record is the patient and the people the patient gives permission to own it. So that, as the VA health care system, we would have all the records on an individual that we had created during our care for the patient; anything they ask us to use in the assessment of their care and the delivery of their care.

Once you make that sort of leap into the patient owns the record, then you have to start talking about how do you, where does he store it, or she store it?

Our vision is that we might help provide veterans that opportunity of a place to store it, especially for the patients that use us for the predominant part of their medical care. So we see a Web page or something like that, a very secure place where electronically the data can come together and where the security is tightly controlled and where the access is controlled by the patient's wishes.

We call that Healthy Vet for the main Web site area, where they can get health information and have their records stored, and right now using the name Healthy Vault for where it's stored, because, in a way, we want to think the medical record as stored every bit as securely as your money and your other valuables.

So that, to us, is a key piece of future. The neat part about this is, once you have your medical record electronically, then instead of this very hard to read, nonstandard information on paper, you now have something that you can analyze much more readily; that you can share much more readily; that you can get a second opinion on much more readily. And you can begin to group together with other patients and look across patients inwardly at the health care system and ask what kinds of quality outcomes does that health care system have.

So when I talk to people about the revolution in the electronics and information in health care, it's not so much just about the fancy stuff people can do, which is, move or do telemedicine, and teleconsultation and a variety of other things.

I think the real revolution will come when the patients own the record and can band together and hire somebody to help them pick the providers, because suddenly, for the first time, capitalism will really rain down and health care will force people to provide quality that they can demonstrate and not demonstrate to themselves or to an accrediting body, but demonstrate to a group of consumers who are looking in at them. That will, I think, dramatically change for the better, our health care system.

Mr. Lawrence: Well, what about the privacy concerns of having all that information? I imagine that's a big hurdle to overcome.

Dr. Garthwaite: I think privacy concerns are a hurdle but I think they're much less of a hurdle, if you go into it with the fundamental belief that the patient owns the data. So that the patient wouldn't join a consortium that they didn't want to.

The patient's data wouldn't go to a pharmaceutical company to market to them their newest products. It wouldn't go to a health care organization just because they had contact with a health care organization. You'd have to specify that you want to share all your record with that health care organization.

And so, if the patient owns the record, I don't think that it will get out of whack. It's when the hospital sells to the pharmaceutical company who then comes back and markets their medications and begin to sell these databases for other reasons that there are really going to be concerns, or if someone from an insurance company can come in and exclude from coverage people who have certain diseases or conditions.

I think those kind of things are the fear that drive the privacy concerns. As long as the patient owns that record and the other people that have parts of that record aren't allowed to sell that information off, I think the rights and privacy of the patient can easily be protected.

Mr. Greben: We've discussed some of the complexities of VHA: The sheer size, the number of facilities, et cetera, as well as the various missions: medical care, medical graduate education, and research. How do you manage such a complex organization?

Dr. Garthwaite: Wish I knew. Well, you obviously have to get a lot of people involved and we've tried a couple of things. We've tried to hire the smartest people we could from wherever they are. In the past, the VA was, I think, guilty of being a little insular and hiring from within. We have hired whoever we could find we thought could do the best job. So, we've hired a significant number of our leaders from outside the VA and I think that's been helpful.

A second piece that I think is helpful in management is the development of the performance measurement monitoring system. We've been able to focus people on key measurements that we think really reflect our progress, both as facilities but also as a larger system.

By picking things to monitor and to measure that are critically important to patients, we've turned the focus of what your job is from the old days, where it was kind of impressing the person higher than you are in the hierarchy to now making some measurable change in the life of a veteran, their immunization rates, their surgical mortality, the number who are put on aspirin and beta blockers after a heart attack. You go down the list, the customer or patient satisfaction scores for your facility.

All those things that we measure, you're going to have to change how you do the process of care and make it better to make them change. So that's made for a lot of focus in local facilities and nationally, on how to make that happen, which is all about the process of delivering care and I think it's made us a much better organization.

Mr. Lawrence: How does VHA attract, hire, and retain top performers, especially in the area of quality health care?

Dr. Garthwaite: Well, that's getting harder and harder. One thing we have on our side is we have a wonderful mission. It's pretty noble to take care of America's heroes, do research, train tomorrow's health care providers. But altruism only goes so far, if the salary structure isn't any good. So we've tried to make sure that our salary is the best that we can make it within the current legislative mandates that we have.

We also try to challenge our employees. We want them to feel like it's fun to come to work. We want them to feel that it's challenging to come to work, that it's a good thing that they have a noble mission.

We'd also like them to believe that, for working with the VA, they will grow as professionals and as people, that they will have an opportunity to learn things and at their level of confidence and the things that they know that are marketable inside the VA, and outside the VA, will grow as they've come on.

I would say we have a lot of work to do in this area. Although that's a belief system we have and although we've taken some significant steps in that regard, I think that's a part that's lagged a little behind and is a major initiative that I've started working on in my new capacity.

Mr. Greben: How has VHA handled reductions in staff?

Dr. Garthwaite: Most of our reductions have been through attrition. We've proposed some involuntary separations, or as the government calls them, reductions in force, or RIFs, but we've ended up separating relatively few people via that mechanism. We've used buy-outs, early retirements, and general turnover to try to restructure the workforce.

One thing that doesn't show up on our FTE statistics has been the use of contracting, and in many areas where we've put in community-based outpatient clinics, we've ended up contracting for services. And so, there are several additional FTEs that are contracted for. That's a different way of doing business for us.

Mr. Lawrence: You described a period of tremendous change in VHA. How have you worked with the unions, during this period?

Dr. Garthwaite: We've had a national union partnership that I think has helped get national issues out on the table and debated. We've sought local partnerships in all of our facilities and I'd say the vast majority have working and relatively good union partnerships.

Clearly, there are some areas where we still have either no partnership or less than ideal partnerships with the union, but we continue to try to work through those areas individually.

But I think, overall, our record's been pretty good. We've brought the union into our national meetings. We've brought them in to advisory boards at the national and local level and we've also sought their opinion as we send out policies.

Our instinct is to send out all our policies during development for comment to all the stakeholders that are important to us.

Mr. Greben: VHA has launched many new initiatives and changes in the recent past, can you describe some of these initiatives and specifically comment on the challenges that you faced?

Dr. Garthwaite: Yes. We've had an incredible number of things we've tried to put into place. For example, a recent one has been implementing bar code medication administration. We've asked that all the medications that are given in the VA health care systems are checked by bar code between the drug itself, the medical record and the bar code that's on the patient, so that it's the right drug, it's the right dose, it's the right time, and it's the right person.

The challenge with that, especially, has been vendor problems getting the stuff on time, technical issues, but incredibly, trying to teach every nurse who gives out a medication across our large system to go with the new technology has been especially challenging.

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

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers and tonight's conversation is with Dr. Thomas Garthwaite, Acting Undersecretary for Health, the Veterans Health Administration and joining me is another PwC partner, Greg Greben.

We were just closing out the last segment talking about the new initiatives and changes. Want to continue?

Dr. Garthwaite: Right, in addition to the bar coding, we've had to do a variety of other things, from computerized patient record to pain as the fifth vital sign, to implementing reasonable charges in our billing system.

I know the latter one has been especially challenging because we have no culture for billing so we've had to train coders, we've had to train clinicians to document in the chart. We've had to train others to make sure the codes are correct and justified by that documentation. Then to get the bills out, to make sure they're collected and all that process is pretty hard when you start, really, from ground zero.

Mr. Greben: What do you think are the major challenges that VHA will face going forward?

Dr. Garthwaite: Well, you know, I often see more challenges ahead than others because I've been fighting the current challenges and have a sense of those. Clearly, the emergence of technology and how to use it, how to deploy it, how to pay for it, how to kind of get over the hump from the old technology to the new technology safely, and efficiently and effectively is certainly a challenge.

That's both computers, but also fancy diagnostic machinery, and fancy therapeutic machinery, and new medications, and genetic testing, and all those sort of things.

I see huge issues in workforce, from challenges to competition for workers with the wonderful economy that we're experiencing, finding people that want to go into health care and nursing and a variety of the professions that health care has been challenging. That competition for workers has an upward pressure on pay.

All of the government workers have been noted to be getting older and being closing in on retirement, so there's some very special issues related to the federal government and the retirement systems and the age of the average government worker and that's even worse in VA for nurses. Some real issues in workforce for us.

We have huge infrastructure issues. We have a lot more buildings than we need but it's not a simple process to talk about closing those and it's not a cheap issue to think about how to take them down and how to restructure our infrastructure to meet the needs of today's veterans.

There are clearly some veteran demographic issues. In the future, around 2010, there's a significant drop off in the number of veterans in the United States and we anticipate a drop off in the need for medical care by veterans. So one has to either imagine a different, or emerging role for the VA health care system, or significant changes in its size and scope.

Our sense is that it's been a real investment for the taxpayer to build this large system. It provides some valuable functions in addition to providing the health care and its research and education missions and that there are potential other roles that will provide taxpayer value on their investment.

The good news is that, by reinventing and transforming the VA, I think the potential roles that the VA could take on in the future have expanded. I mean, I think five years ago, one wouldn't look to a large lumbering bureaucracy that couldn't demonstrate the quality of care that it gives for any new tasks. But, today, I think you have a much leaner VA that's very responsive, that's high technology, that's high touch, that can demonstrate to anybody who wants to look, the kind of quality-of-care we're capable of providing. We're having trouble finding systems out there that have benchmark performance measures as good as ours. So I think that we have the potential of really being a model system and one that also provides valuable service in research and education.

Mr. Lawrence: When you change the way you do business, there tends to be resistance. How have you dealt with this and what advice would you give other leaders of change?

Dr. Garthwaite: Well, I'm not sure how well we've done in overcoming resistance. I would say, for sure, we've seen resistance. Clearly, our strategy has revolved around the traditional things, such as communication, where everyone tries to convince people that the change is for good reason; that to share the successes frequently, often, and to try to maintain an upbeat attitude about why the change is necessary. I think we've done that reasonably well, but I think that we still have a significant amount of resistance.

The unique aspect to the VA is that we've changed dramatically at a time when health care's changing dramatically, as well. Part of our strategy has been to remind folks within the VA to talk to their colleagues in other health care systems to understand that it isn't all just VA changing, but all of health care is undergoing dramatic change.

Most recently, we're really trying to arm our employees with some information about the quality measures that have changed so dramatically and so we've given all our employees a little folding card that essentially tells them the key positives about the transformation that we've used to sell the improvement in quality.

The fun part about that is that we did that and the Veterans Canteen Service, which operates all our cafeterias across the system saw that and said, "Hey, that's a great idea," so they made tray liners that have that on it and they printed 4 million tray liners. Sometimes when you're sitting back, you have an idea, you never know how it's going to be taken by other parts of the organization and operationalized.

I think the important point is that you've got to give people a reason to change. You have to make sure that they understand the importance of that change and that it makes sense to them. I think by and large what we've tried to make changes in, has made sense. We've tried to say, you know, everyone should get immunized, why aren't they? Everyone should get these medications, why don't they? Patients should feel that we're compassionate and courteous, why don't they and how do we get better at that over time?

If you define those goals carefully, I think most people get on board with them if they see the same vision and I think if you keep your focus on the patient they usually do.

Mr. Lawrence: How about advice for the people working in the organization, for the managers or leaders of the future in terms of dealing with this new environment?

Dr. Garthwaite: Well, again, I would just go back to a very simple premise. You know, I think in a previous presidential election, I think the phrase, "It's the economy, stupid," was used and I tell people, "It's the patient, stupid." If you really focused in on the patient, if you're worried about their waiting times and if you're worried about our communication with them, if you design systems that make sense to the patient, then you're going in the right direction.

Whereas, if you just say well, we have to preserve this old structure that we've had for so many years because my goal in life was to be the assistant chief of that structure, that's not the same as saying, you know, it doesn't matter what my title is as long as the patients don't have to wait in line, that they are treated with courtesy and respect, that they get the proper diagnosis and proper treatment.

That's what we're really about as an organization. We're not about creating management structures and titles that people aspire to, we're about creating outcomes that patients care about.

One of my favorite analogies is that when you fly in an airplane, you may not crash, you may get from one point to another, but your satisfaction may not be perfect all the time. And you can imagine what the executives must be measuring in certain airlines versus others. There's one that I used to fly often in which the CEO of the organization knew how long it takes from docking the aircraft at the jetway until the bags appeared on the carousel. Now, that's different than knowing whether or not you had empty seats, because, as you and I know, that if you had empty seats, we're happier, but the CEO's not happier. But we also know, because empty seats mean we're sitting in the middle.

Whereas, you and I can probably predict which airlines actually know and measure how long it takes the carousel to get there, because we're standing down there for a half an hour waiting for our bags to appear. With the airline that I know measures that, you don't wait.

So, the real issue is how do all of our employees really believe and measure things and try to make those change that are important to the patient. So, it's not so important to the patient whether or not the person above you in the hierarchy thinks you're a good person and that you wrote a nice report, they do care if they wait. They do care if they're treated with courtesy. They do care if they get the right medications. They do care about their visit to the medical center. That's what you have to be focused on, always.

Mr. Lawrence: Well, that's a good point to end on. Greg and I want to thank you for spending so much time with us this evening, Dr. Garthwaite. Thanks for joining us.

This has been The Business of Government Hour. To learn more about the Endowment's programs and to obtain copies of the two reports on the VHA, "Transforming Government," and "Transatlantic Experiences in Health Reform," visit us on the Web at See you next week.

Thomas R. Bloom interview

Monday, November 29th, 1999 - 20:00
Thomas R. Bloom
Radio show date: 
Thu, 04/20/2000
Intro text: 
Thomas R. Bloom
Complete transcript: 

Arlington, Virginia

Thursday, April 20, 2000

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

The Business of Government Hour focuses on outstanding government executives who are changing the way government does business. Our guest tonight is Tom Bloom, director of Defense Finance and Accounting Service. Welcome, Tom.

Mr. Bloom: Great to be here.

Mr. Lawrence: Joining me in our conversation is Wood Parker, also a partner at PricewaterhouseCoopers. Welcome, Wood.

Mr. Parker: Thanks very much, Paul. I'm pleased to be here as well. And Tom, thanks so much for joining us.

Mr. Lawrence: Well Tom, in this first segment, tell us more about D-FAS. What is it and what are its responsibilities?

Mr. Bloom: First of all, let me say that I tell anybody who will listen that I think I have the best job in Washington, D.C. There are a couple of reasons for that. One is that we have a very clear mission at the Defense Finance and Accounting Service, and we've got some really great people. Our mission is to provide responsive, professional finance and accounting service to the Department of Defense. And our success is actually very easily measured. It's ultimately defined by how well we service the commanders and managers in the field, with a particular emphasis on the war fighter.

Some people ask about my job and it is somewhat schizophrenic, if I might say. I ask the question sometimes, am I the chief finance and accounting officer of the largest entity in the world, which is what the Department of Defense is, or in my position as the head of the agency, am I really the CEO of a $2 billion corporation with 20,000 employees?

Defense is really big business. As the Finance and Accounting Service for the Department of Defense, we pay out to folks over $1 billion each and every day. Each month we pay over 5.5 million soldiers, sailors, airmen, Marines and civilian employees, as well as retired and annuitants. And we pay over 144 million invoices each year.

Mr. Parker: Tom, you mentioned that one of the descriptions or potential descriptions of your job is a CFO. And I noted in your experience you've been a CFO before. You've also been an Inspector General before. Could you talk about those two different positions and two different sets of responsibilities and what you're bringing from those experiences to the Defense Finance and Accounting Service?

Mr. Bloom: Well, certainly the positions are very different. I've been lucky enough to be a CFO at the Department of Commerce, as well as GSA, the General Services Administration. And at the Department of Commerce, I was not only CFO, but I was also the Assistant Secretary for Administration. The job at GSA was really much more of a pure accounting and finance position, although having developed a close relationship with the CEO there; I was brought into many of the discussions of general business areas.

The two CFO jobs were very fulfilling jobs. Again, we had a very clear mission. We had teams that worked together very well to get the mission accomplished, which is to give financial managers the kind of information they need to manage better.

The job of an Inspector General is very, very different. I like to tell folks that the two years I spent as Inspector General were very much character-building years. It is a very difficult position to be an Inspector General. There is a feeling, really on both sides of the fence, both in the Inspector General community as well as the folks who are being looked at by the Inspector General Community, that it needs to be a contentious relationship. That makes that job very difficult sometimes.

Mr. Parker: How do you think those jobs prepared you for your current position?

Mr. Bloom: Well, certainly the two CFO jobs very much helped me prepare for this position. They both involved a lot of finance and accounting. In fact, the GSA job was almost exactly the same, it's just that the magnitude at DOD and the Defense Finance Accounting Services is really so much larger.

Another good thing about the Department of Commerce CFO job -- as I mentioned, I was also the Assistant Secretary for Administration – was that it was very much a management job. I was very much involved in procurement as well as human resources. I had the civil rights office. So it really was a broad spectrum of management, which of course comes in handy being the CEO of a large organization, as D-FAS is.

Mr. Parker: Why don't we take a step back and tell us more about your career. I understand you've also been in the private sector as well. So I'd be curious to know how that transition worked and the pluses or minuses, having people come from the private sector.

Mr. Bloom: Well, I've spent most of my career, actually, in the private sector, starting from junior staff to rising to senior partner in a large CPA firm. That actually was great preparation also. I am an accountant, with all the good and bad that comes with being an accountant.

The transition, actually, was easier than one might think, although it wasn't my first transition from the world of public accounting into the government. I had done that once before when I was a senior banking regulator at the Federal Home Loan Bank System. So I'd done the transition before, and I think that made it easy. But I do want everyone to know that there is a transition. There is a big difference between the private sector and the public sector.

The biggest area that I would note would be the area of risk and reward. In the public sector, too often folks are afraid to take risks. In the private sector, we had to take risks to continue to exist. To stay relevant we had to take risks. There had been a history of that in the private sector. Now that, to a certain extent, is changing in the public sector dramatically. And that is one of the big transitions that I think everyone in the public sector is going to have to work with.

One of the things that I like to always ask our folks now that I'm in the public sector, when we're going to do something or when we're going to spend money, I'll ask the question, "If it was your money, would you spend it that way?" That's sometimes a bit of a foreign concept to them, as strange as that may seem. But we are trying to change the way we think about things in the public sector and not just at D-FAS, but I think, throughout the government.

Mr. Parker: Well, having been in both sectors, what is it about the public sector that attracts you?

Mr. Bloom: Where else would someone give me a $2 billion business to run? So there is that factor, but I'm also a third generation public servant. My grandfather was a public servant. My father was a career police officer. And so it's in my blood, to a certain extent. And the work is just so interesting. You're always doing new and interesting things. And while I enjoyed my career in public accounting, as I am sure you two enjoy your career, there's really no reward like helping out in the public sector. And, again, running a business, which is what D-FAS is, is very rewarding and very challenging.

Mr. Parker: How about in terms of attracting new employees, in terms of attractiveness of the public sector? There are no stock options at D-FAS.

Mr. Bloom: None that are worth anything. You know, it makes it a challenge. We clearly have a challenge ahead of us in the public sector to recruit and retain the best and the brightest. Certainly in the '60s, there was a feeling with President Kennedy and some of the things that President Johnson did, there was a feeling, a really good feeling about the public sector, particularly the federal public sector. In recent years, we really haven't enjoyed that same feeling in the public sector. It does make a difference in our recruiting. We need to be able to capitalize on the great things about public service.

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

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers. And tonight's conversation is with Tom Bloom, director of Defense Finance and Accounting Service. Wood?

Mr. Parker: Tom, before the break you were talking about the importance of public service. And in our job we feel it is very important that we make a contribution, and so I share your commitment to public service. Let's talk a little bit more about D-FAS. I understand you have a new vision for the organization. Could you tell us about it?

Mr. Bloom: Sure. There are really four tenets of our vision. The first tenet is to be a world-class provider of finance and accounting services, with a strong corporate identity. There are two catch phrases there. The first one is "world-class provider." It is no longer good enough to be just the best in government or one of the best in government or as good as the average in the private sector. We are going to have to be world-class at D-FAS. We are going to have to be in the top ten percent of folks who provide the kind of service that we provide. If we are going to be competitive and relevant and best value to our customer, we are going to have to become world-class.

The second part of that is to have a strong corporate identity. The Defense Finance and Accounting Service is a consolidation of the accounting and finance offices that the four Services had prior to D-FAS being formed. So, therefore, we have four corporate identities. What we're trying to do is amalgamate that into one corporate identity where we're learning from one another, where we're picking up the best practices of each.

The second tenet of our vision is to become a trusted innovative financial advisor. We've been too much of a utility, where we have been supplying folks data but not much information. In fact, I've had a commander tell me that we are drowning them in data and they're thirsting for information. So we have to become the financial adviser, the trusted financial adviser, much like you all might be to the private sector.

Our third tenet, and probably the most important, is that we would like to become an employer of choice, providing a progressive and professional work environment for our folks. I like to use PwC as an example when I am talking to my folks. We want the best and the brightest to come to work at D-FAS. We want to attract them by having a progressive and professional work environment, where we are working with the latest in technology, we're training our people all the time to operate in this new economy. We want D-FAS to be a ticket that people have to have on their resume if they want to be relevant in this community. We want the private sector to be beating down our doors to hire our folks. And then I want our environment to be so good that they don't leave, that they stay at D-FAS. We've got some work to go on that.

The last tenet of our vision is we want to be competitive and the best value to our customers. We are going to have to compete with the private sector, probably, for most of our jobs over the next five to seven years. And we should encourage that. We should want that competition. We should want to be the best that we can be, and to be the best value.

Mr. Parker: I understand your motto is "Your financial partner at work," with the Internet "@" sign. And so I'm curious to know how you're refocusing customer relations efforts to support this motto.

Mr. Bloom: Well, you know, our customers are world-class customers. They're the best in the world. And we need to be as good as they are. And we're not quite there yet. We hope our new catch phrase or slogan, "Your financial partner @ work," will emphasize what we're trying to do.

The first word, "your"… we want to make it clear to our customers that we belong to them, that we're there to service them. "Financial," we do provide accounting and financial services, so that makes sense. Third, "partner," we really want our customers to know that we are their partner, that we are in it with them. And we want to do all the things that partners do for one another. We want to communicate and we want to make sure we're servicing them as well as we can.

The internet "@" sign, that's to signify that we are modern and we are jumping full force into the e-commerce world, and we're ready to go with that. The fourth, "work," there's a double meaning there. We're working for them and we're working hard. We've got the same kind of work ethic that our customers have, the hard-working war fighters.

Mr. Parker: In terms of your efforts with respect to your customers and becoming the trusted financial advisor, I understand you're also considering, and you referred, by the way, to the issue of competing with the private sector. I understand you're considering some competitive out-sourcing opportunities within your operation. Could you tell us a little bit about that -- and particularly within the context of trying to become the employer of choice?

Mr. Bloom: Sometimes a tough balance, Wood. We believe very strongly that we can compete well with the private sector. And over the next five to seven years, we will compete out probably 90 percent of the work that we do. We have two initiatives, retired and annuitant pay and civilian pay, two very large parts of our business that we will be competing out in the next year. Our philosophy on this is we want to be doing the stuff that we do best. We think on a lot of stuff that we match up pretty well with the private sector. But the stuff we don't do so well, you know, so be it. That should probably be done by someone else and we stick to what we do best, our core competencies.

Mr. Parker: What do you think you'll gain from that process?

Mr. Bloom: Well, one of the great things about the process is first we learn an awful lot about ourselves. We take a really hard look at the way we're doing business. We've done five of these competitive sourcings in the past. In each case, we have been able to squeeze out a lot of inefficiencies in our process… nothing like competition to make you learn what you need to learn about your operation.

Mr. Parker: But does the competitive out-sourcing produce a challenge in terms of your efforts to be the employer of choice? Sometimes folks are concerned when the boss talks about competitive out-sourcing. How are you handling that?

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

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers. Wood Parker is also a partner. And we're talking to Tom Bloom, director of the Defense Finance and Accounting Service.

Tom, before we went to the commercial, Wood was just asking how difficult it was to be the employer of choice in a possible out-sourcing environment.

Mr. Bloom: It does make it tough sometimes, Wood, trying to keep your folks motivated when they know that there is a possibility that they may lose the competition. But as you all know, in a competitive environment, that does sometimes stimulate the work force. Watching the guy over your shoulder sometimes does make you run faster. Sometimes that can be a positive thing, even with morale.

Mr. Parker: And it is just possible out-sourcing? Those jobs aren't necessarily going to be out-sourced?

Mr. Bloom: Let me make this absolutely clear. These are going to be competitions. And our folks at the Defense Finance and Accounting Service will have the opportunity to compete against the private sector. And again, I'm pretty confident that in most of our areas, particularly our core competencies, that we are going to match up very well with the private sector.

Mr. Parker: You were talking about your vision of becoming the employer of choice, and you alluded to a couple of things you were doing. Tell us a little bit more about some of the things that you are doing to achieve your goal of becoming the employer of choice.

Mr. Bloom: Well, one of the things that we believe very strongly at D-FAS is in keeping our folks trained. We spend a large portion of our budget, actually an amount that's equal to five percent of our salary expense, in training and educating our folks. We want our folks to work with the latest technology, to understand the latest technology, to learn the latest management techniques. One of the things that I tell our folks is that I cannot always promise them employment, but we want to work hard at making them employable. We believe that will help them do a better job in our business, for us. And it will certainly make them marketable in the public sector.

Mr. Parker: There are 20,000 employees at D-FAS. How do you manage such a large work force, at the same time striving for efficiency and effectiveness?

Mr. Bloom: Some days I ask myself that question. One of the big things that you have to work on when you're running an organization this size is communication. It's easy to say and it becomes almost a cliche or trite, but it's very difficult to communicate with 20,000 employees on a regular basis. One of the things that we're working with, and we're hoping to launch this in the next month or so, is going to be little snippets, video snippets that may be five to ten minutes in duration we'll e-mail to our folks. They'll be able to pull it up on the server and hear me, my deputy or another executive talk about some of our visions, about some of the changes that we are going to be going through. So, communication, really, you can't over-emphasize communication, and it's something we need to work really hard on.

Another thing is you do have to set the vision. You have to make sure that people know what the vision is, what the bottom line is and what the finish line might be. You also have to eliminate all the obstacles that you can. I look at my job, really, as chief obstacle eliminator. If I can eliminate the obstacles so that my folks can get their job done, it will make it a lot easier for them to get their job done.

And you have to empower your work force. There's so much more knowledge down there in the trenches where the work gets done than I would ever know. So you have to empower folks, you have to make folks feel as though they are contributing to the organization.

And you have to have an organization where you encourage some risk taking. This is the public sector, and so you have to be careful that you are controlling your assets, but in order to move ahead you have to have a certain amount of risk. We have to change that in the government culture overall so that people feel more comfortable in taking risks. Then as the CEO, I need to get out of the way and let my folks do their jobs.

Mr. Parker: What does the typical day look like, in broad strokes?

Mr. Bloom: Usually I'll start the day, my deputy and I will spend 20 to 40 minutes talking about what happened the previous day. At least once a week we'll have a staff meeting with all the headquarters folks, and we'll talk about the issues there. Then the meetings start.

One of the downsides of government, and we probably need to work on this, is that we spend way too much time in meetings talking about what we are going to do and maybe not enough time actually doing it. Although meetings are a good way to communicate, if you are doing them effectively. One of the things that I like to do is -- and I haven't done it as much as I would like to -- is to have meetings where everyone stands up, giving new meaning to standing committees. But I try to make the meetings go along as fast as possible, having agendas.

We spend a lot of time at the Pentagon, talking to folks at the Pentagon. But what I really like to do are the customer visits, to get out and talk to our customers. In fact, just last Thursday and Friday we were in San Antonio talking to two of our biggest customers, talking to a one-star general and a three-star general, as well the colonels and some of the middle-level officers that actually get the work done. That's what I really enjoy, being where the rubber meets the road and hearing what we're doing well and what we're not doing so well.

Mr. Parker: We're talking about people, Tom, and you referred to part of your job being the obstacle eliminator. I would think one of your biggest challenges is recruiting. We alluded to this earlier when we talked about the vision. But in the public sector there is a real challenge when it comes to recruiting IT and financially skilled folks and others. Could you talk to us about how you're addressing that challenge?

Mr. Bloom: Well, it's a challenge, particularly at the Defense Finance and Accounting Service and probably the rest of DOD. We missed what I would call a generation of workers. We have not hired many people from 1991 to the present, and so there's a big gap in our work force. And, to add to that, at least at the Defense Finance and Accounting Service, 40 percent of my work force is going to be eligible for retirement in the next five years. That's a big part of my work force. That is a challenge, but it's also an opportunity. And we need to work with that opportunity.

Recruiting is something that I believe is very personal. I've encouraged all my managers, all my executives to get involved in the recruiting process. I would like to see all my top-level people visiting colleges for entry-level folks, as well as getting involved in the recruiting of mid-career folks.

We have a good story to tell at D-FAS. We have the vision. We have the technology, and we have great managers. And you can't recruit the kind of people we need in this environment without making it personal, just as I'm sure you all at PwC are personally involved in the recruiting process. We need to do more of that. It's not just the human resource people involved.

We are at a disadvantage in some cases with our salary schedule. And we don't necessarily have the flexibility that we would like on the salary side. That is particularly true, I think, on the IT side. But you know, one of the interesting things I found about IT professionals is that the challenge is more important to them, many times, than the money. And the idea of working with the latest technology can be a real enhancer.

So, that's a challenge, but it's one that I think in the long run we can do pretty well. And I think particularly we can do well at recruiting folks, you know, in the middle of their career. Maybe the young kids out of college should spend two or three years with PricewaterhouseCoopers, but after that, we're very competitive and can offer a good work environment.

Mr. Parker: And you have a unique workforce that includes a lot of civilians and some military. I'm wondering what challenge that presents.

Mr. Bloom: Interestingly enough, really no more challenge than if you had an all-civilian work force. I've found having the military really help us in meeting our mission. First of all, there's this great tradition that the military folks have. And they're all former and potential customers. And so they have an interesting view of our work.

The other thing that it does, for the civilians, is it keeps in mind what we're here for. We're here to support the uniform folks, to support the war fighter. And having that guy or gal across your work environment reminds you that you're here really serving your country.

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

Mr. Lawrence: Welcomee back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers. And tonight's conversation is with Tom Bloom, director of the Defense Finance and Accounting Service. And joining me is Wood Parker, one of my partners at PricewaterhouseCoopers.

Mr. Parker: Tom, technology is becoming increasingly important in all facets of society, including, of course, government agencies. Can you tell us what role technology has been playing at D-FAS, especially related to your goal to becoming paperless in the future?

Mr. Bloom: Well, technology really is our future. In order to stay relevant, in order to stay competitive, actually, if you remember our vision, every tenet of the vision really involves technology. To become world-class we have to work with technology. In order to be the trusted innovative financial advisor, you have to do that through technology. The employer of choice, people want to work at companies that are state of the art. The last tenet is to be a competitive organization. In order to be competitive, we really have to embrace technology. And we're doing that pretty well.

Right now, for instance, we have 32 new systems that we're in the process of installing, and that in itself is a daunting task. I don't know of any organization, whether it's General Motors or Mobile-Exxon, that has that kind initiative, to put in 32 new systems. So, we're certainly on the cutting edge there.

Mr. Parker: I notice in an effort to remain paperless D-FAS has engaged in e-commerce activities, to include things like document management, electronic funds transfer and EDI, electronic data interchange. I'm wondering how electronic commerce is affecting D-FAS in terms of being more efficient. What happens when a business rolls this out?

Mr. Bloom: Well, paper is our enemy. We're probably going to have banners all over the Defense Finance and Accounting Service that say just that, that paper is our enemy. We are developing as many electronic means and as many electronic interfaces as possible, so that we end up with as little paper as possible.

We have just recently rolled out employee member self-service, where you can change most of your human resource allotment changes, change you address, you can change your exemptions on your tax form. We would like to someday our leave and earning statements, essentially your pay stub, we would like to make that electronic.

And in dealing with the vendors, there is a big push to have them transfer their invoices to us electronically. Not to forget about the small mom and pop vendors, and that really is the lion's share of our vendors are the smaller businesses out there, we're making it easier for them. We're coming up with an electronic interface. We call it WINS, where a business, all they really need is a computer and internet access, which by the way, you can get at your local library, if you don't happen to have that, although most businesses do have that. But they can pull up a screen and essentially put their invoice information on this predetermined screen and send that to us electronically, so that we don't have to deal with paper. There's not the opportunity to lose the paper or to make the mistakes. So we're embracing this e-commerce as much as we possibly can to eliminate that enemy, the paper.

Mr. Parker: How are the employees dealing with all this e-commerce stuff? Normally, it brings about tremendous change. So if you can adapt to the change, that's the first step. But also, one can then figure out that it might involve fewer employees. So it's difficult to imagine a win-win with those two things to think about.

Mr. Bloom: Well, it is a challenge. It's a little bit of the challenge we talked about earlier. Although D-FAS employees, D-FAS has been in existence since, as I mentioned, 1991, and it's just been a flurry of change since we first came about. We had over 300 locations and we've consolidated down to 26. So our people are pretty used to the change. Also, we've gone from 27,000 employees to the 19,000 to 20,000 range. So our people have seen the diminishing of jobs.

We have what we call the Responsible Employer Program, because we believe we do owe folks some consideration, and we work hard to get our folks ready in case their jobs do disappear. So there is a fair amount of trust there. But sure, they're seeing that the technology in many cases, particularly if you're dealing with just paper today, you know, you're at risk. And that can be a morale problem.

Mr. Parker: We were talking earlier, Tom, about training and the importance of training to D-FAS and your people and your commitment to training. Within the context of technology, talk about that training. How is that going to be a change, whether in terms of delivery systems or other means?

Mr. Bloom: Well, first of all, we have on the IT side about 1300 IT professionals at D-FAS. Many of those folks are working with old languages, old computer technology. We are giving them the formal training to deal with kind of the fourth generation relational data base kinds of things. With our accounting and finance technicians, since we are introducing a lot of new systems, they are working with state-of-the-art, you know, dual screens and multi-tasking kind of things. And we think that that's building competencies that they haven't had inthe past. That is a big challenge.

Mr. Parker: How about some of the key issues looking out to the future for D-FAS? Will there be a D-FAS in ten years?

Mr. Bloom: Well, I believe that there'll be a D-FAS. I think that we may look very different than we look today. There may be much more of an emphasis on the accounting side of what we do. Half of our business right now is accounting and the other half is finance, the actual paying of folks. I think on the finance side you will see technology making that easier and maybe turning that more and more into a utility. But on an accounting side, getting the information that we need to get to managers, to commanders out in the field to manage troops better, to manage their individual businesses better, that's really where the future of D-FAS lies, I believe. And we've got a long way to go in that area.

I'm a user of D-FAS. I eat my own dog food, so to speak. We need to get me better information for me to manage my business, so I know that it's true probably for most of the commanders out there. I see a big future at D-FAS in helping turn data into information, so that my commanders aren't drowning in data, but their thirst is being quenched by the information that we're providing.

Mr. Parker: As you look to the future, Tom, and the various challenges we've alluded to, what keeps you up at night? What are the ones that concern you the most, let's say, in the short term?

Mr. Bloom: Well, certainly the thing that does keep me up and it has kept me up is paying our military folks, our soldiers, sailors, airmen and Marines. We don't ever want to miss a payroll. Their families depend on that. They're assuming that D-FAS is taking care of their families. And that's probably a security item. For the nation's security, we have to make sure that we're taking care of our number one customer, which is the war fighter.

Mr. Lawrence: I'm afraid we're out of time. Thank you very much, Tom, for spending time with us tonight. Wood and I have enjoyed our conversation very much.

This has been The Business of Government Hour, Conversations with Government Leaders. I'm Paul Lawrence, a partner at PricewaterhouseCoopers and a co-chair of the PricewaterhouseCoopers Endowment for The Business of Government. To learn more about the Endowment's programs and research into new approaches to improving government effectiveness, visit us on the web at

David Norquist interview

Monday, November 29th, 1999 - 20:00
David Norquist
Radio show date: 
Sat, 01/26/2008
Intro text: 
Financial Management; Managing for Performance and Results; Organizational Transformation...
Financial Management; Managing for Performance and Results; Organizational Transformation
Complete transcript: 

Originally Broadcast January 26, 2008

Washington, D.C.

Announcer: Welcome to The Business of Government Hour, a conversation about management with a government executive who is changing the way government does business. The Business of Government Hour is produced by The IBM Center for The Business of Government, which was created in 1998 to encourage discussion and research into new approaches to improving government effectiveness. You can find out more about The Center by visiting us on the web at

And now, The Business of Government Hour.

Mr. Morales: Good morning. I'm Albert Morales, your host, and managing partner of The IBM Center for The Business of Government.

Over four years ago, Congress and the President created a new department whose central mission would be to secure the homeland, integrating and aligning 22 separate government agencies into a single, cohesive, efficient, and effective department. During this rather short interval, DHS has faced many challenges while continuing to make progress securing our country from threats.

With us this morning to discuss his office and its role is our special guest, David Norquist, chief financial officer at the U.S. Department of Homeland Security.

Good morning, David.

Mr. Norquist: Good morning.

Mr. Morales: And joining us in our conversation, also from IBM, is Steve Watson, partner in IBM's financial management practice.

Good morning, Steve.

Mr. Watson: Good morning, Al. And David, thanks for joining us this morning.

Mr. Morales: David, let's start with some perspective. Many may not realize that the creation of DHS has represented one of the largest reorganizations in government since the Second World War. Could you set some more context by providing us a sense of its mission and its continued evolution?

Mr. Norquist: Sure. The Department was formed out of 22 different agencies, and so we went from something that was not existent to becoming the third largest federal agency, which is a pretty dramatic transformation. Some organizations came intact, such as Transportation and Security Administration, United States Coast Guard. Some organizations, like Immigration and Naturalization Service and the Customs Service, were reorganized during their time with DHS. But the overall idea was that the Department would benefit, the country would benefit by having a department that had one common face at the border, one overarching mission: to secure the homeland, to facilitate lawful trade, travel, and immigration, and to help protect our freedoms. And by bringing all those different groups together with that common mission, that we'd be much stronger for it.

Mr. Morales: So you gave us a sense of some of the components within the Department, but can you give us a little bit more of the sense of the scale in terms of size of budget, number of employees, the geographic reach and footprint of the Department?

Mr. Norquist: The Department has 209,000 employees and a budget of $35 billion for Fiscal Year 2008, and we show up all across the country. If you're getting on at an airline, you'll run into Transportation Security Administration. Customs and Border Protection is the one that greets you at the ports of entry when you're coming across the border or going through Customs security. The Coast Guard is there at sea if you're in trouble, or to help protect the navigable waterways. We have ICE, Immigrations and Customs Enforcement, enforcing our nation's laws throughout the interior. And of course, FEMA during a disaster is there to help and to respond. And so we have a footprint not only throughout the United States, but as well as attaches at embassies overseas.

Mr. Morales: So lots of moving parts.

Mr. Norquist: Yes, indeed.

Mr. Watson: Dave, thanks for that overview of the Department. Could you focus in a bit on your roles and responsibilities as the chief financial officer? What are your responsibilities?

Mr. Norquist: My two jobs boil down to building the budget and being a good steward of taxpayers' money. We just finished the audit on the 2000 budget. We've got the 2008 budget we're executing. We're going to present the 2009 budget to Congress in the beginning of February. And so you have all of those different moving parts at the same time, and we have to make sure that the Sceretary has the ability to reflect in the budget the relative priorities, to be able to address different risks to the nation by investing resources against those higher priority areas.

And so as the chief financial officer, as the different components submit their budgets, I help present them to him as options. What's the relative risk of this threat versus that? What's the relative effectiveness of different solutions? And then he can make the choices about where to invest the resources and the President can submit that recommendation for the budget to Congress.

At the same time, I worry about those funds as they're being executed. Do we have the proper internal controls? Do we have the policies and the procedures to protect the American taxpayers' money? And so we go through review processes of how we execute money. One of the most basic controls you look for is you want to make sure that the person who orders the item and the person who pays for the item and the person who receives the item are three different people. And that is a strong internal control that if you reflect it throughout your organization, it greatly enhances your protection of the taxpayers' money.

Mr. Watson: David, that's a broad set of responsibilities you've defined there, both in budget and as the chief accounting officer in effect. What are the top challenges you're facing right now in executing those responsibilities, and how are you going about addressing those challenges?

Mr. Norquist: Well, Steve, I think the key is we need to move beyond an agency in transition. When I came into the Department, people said, you know, DHS is new, it needs some time. And certainly when you've had a large reorganization, it takes some time to make all the changes you want, but we basically are tackling three areas.

The first is the staff. Do you have the right number of staff with the right skill sets to accomplish the mission? All internal controls begin with people who know how to do their job and do it well.

The second is we've had audits and others that have identified known weaknesses, and so we have a job to go out and address those, to eliminate those weaknesses and fix their problems.

And the third is we have to go beyond that. We have to look at those core things that many other agencies have and take for granted, and ensure that we have them so that we don't have this in the future. One simple example is, most organizations have basic financial management manuals to tell you how to do the processes and the procedures. Our components, some of them brought them with them, but as a department, you don't have that, so you don't know that you've got the best business practice in every organization. And it's our job to establish that, to elevate it, and thereby prevent new problems from occurring. And of course, you have to do all this at the same time you're producing and delivering a budget to Congress and doing the regular day activities.

Mr. Morales: Now, David, you've spent most of your career in the financial community. Can you provide our listeners with a sense of your career path? How did you get started in this field?

Mr. Norquist: Sure. I came out as a graduate of the University of Michigan, with both an undergraduate from there and a master's in public policy. I then went to work for the Department of the Army as a GS-9 program budget analyst through what was then called the Presidential Management Intern Program.

I spent several years with the Department of the Army, and over the course of my 18 years doing federal financial management, I have worked at a U.S. military field site overseas as the director of resource management, I've worked at Army Headquarters, I've worked at a major command, I worked for several years with the House Appropriations Committee, and I've worked at both the DoD comptroller shop, which is their CFO organization, and here at DHS. So one of the advantages of that is I have worked at basically every level at which the federal government spends money.

Mr. Morales: So tell me a little bit about some of these experiences, and how do you think that they have prepared you for your current leadership role and informed your management approach?

Mr. Norquist: I think one of the things that's essential for a leader is to be able to have the perspective of the individuals in the organizations they're dealing with. When you're at headquarters writing a policy, you need to imagine you're the person out in the field site attempting to implement it. Does this make sense to that person trying to implement it? Likewise, you have to take into account the perspective of the Congress. What are their concerns and issues going to be? And so if you've walked a mile in their shoes, if you've had to deal with those day-to-day decisions that are dramatically different between those levels of an organization, it makes it much easier to manage. You understand why something is a particular concern to an organization, or why a certain policy would create a problem rather than be a solution for somebody who's out at the field site.

Mr. Morales: So perhaps more so than any other role, there are many constituents to consider when you're working in this field.

Mr. Norquist: Absolutely. And it's best if you've had the chance to be in their shoes in order to really understand how what you're going to do is going to affect them, and be able to look at how to have an effective control from their perspective as well.

Mr. Morales: Great.

What is Homeland Security's financial management modernization strategy? We will ask David Norquist, chief financial officer at the U.S. Department of Homeland Security, to share with us when the conversation about management continues on The Business of Government Hour.


Mr. Morales: Welcome back to The Business of Government Hour. I'm your host, Albert Morales, and this morning's conversation is with David Norquist, chief financial officer at the U.S. Department of Homeland Security.

Also joining us in our conversation is Steve Watson, partner in IBM's financial management practice.

David, can we talk for a moment about your recent department audit? Now, your department has been working very hard to make headway in a variety of different areas, so would you assess for us your progress on this audit?

Mr. Norquist: Sure, Al, and thank you for the question. The audit for DHS has been in the past a significant challenge, and I think some background here might be very useful. Two years ago, when I came into the Department, we had not just 10 material weaknesses, but they pretty much ran across the Department. For every material weakness, several organizations contributed to the reason we had that. Most of them came to the Department that way. They were not weaknesses necessarily from the reorganization, but ones the Department had inherited, and so this wasn't a problem you were going to be able to solve in a day. But we systematically set out to develop corrective action plans for each and every one of those material weaknesses, and then we began to execute it and track it over the course of the year. And so what's been very gratifying for me is, given all the hours and energy put into that, the results.

We have, for example, had the number of material weaknesses for the Department go from 10 to 7. The number of component conditions that contribute to that went from 25 to 16. Getting a little technical here, but the audit's disclaimer conditions dropped by 40 percent. So no matter how you measure progress in a financial audit, there was significant improvement across the board. The auditors were very favorable about their comments about how we had done. Their guidance to us next year was to keep it up, that that was exactly the type of progress that you should be doing, and the approach was the right way to go ahead.

What we now have done is got it to the point that the vast majority of our organization does not contribute to a material weakness, and we're down to only a few players left, and we hope to be able to reduce that again over the course of the next year as well. And so I've been very pleased to see that those resulted in very tangible results, and results not just of our saying so, but others coming in and saying, yes in fact you have addressed those concerns.

Mr. Morales: Well, that's great progress, and you should be congratulated for that. But as you look to the future, what are some of the steps that you're taking now to improve upon the results in the next audit?

Mr. Norquist: The first thing we're doing is we're producing the second edition of what we call our playbook. And that one is a collection of our internal controls over financial reporting corrective action plans. And so it lays out the steps each component is responsible for. It has milestones by which they're going to meet each of those steps. It has the responsible individual, so I know who I can hold accountable for that. I also then have regular meetings with each of them. One of the important things about a corrective action plan is, like any other program, you have to stay on top of it, you have to monitor it. And so one of the things we did is we created a program management office that effectively treats these plans like you would a program acquisition. Are they on schedule? Are they meeting their milestones? How are they doing, and how much is it they're spending in order to reach those goals?

We're going to do a couple of things different this year building on that success. The first is, many organization either began with a clean opinion and still have them, or the federal agencies have material weaknesses and they haven't eliminated them. We are blessed with several components, like Immigration and Customs Enforcement, which used to have virtually every material weakness the Department had. And in the last two audits, they've gotten to the point that this year they contribute to none.

And that's a reflection on the strong leadership from Julie Myers, their Assistant Secretary. They had a very strong CFO and they had very good corrective action plans. But what that means for me is there are people in that organization who know how to eliminate these problems, who've done it and who've been successful. So now when I sit down with a component who hasn't been able to solve these, I can bring in people from two or three other organizations in DHS who fixed exactly that problem, and now I can have them as sort of an advisory board, helping me review these corrective action plans and helping the components navigate their way through these problems.

Mr. Watson: David, could we talk a little bit more about this internal controls over financial reporting playbook? How are you using it to strengthen internal controls? How are you balancing short- and long-term fixes in the playbook?

Mr. Norquist: The playbook has two tracks. The first track is directly addressing anything that an auditor identified as a material weakness. But our goal with those corrective action plans is not to make the material weakness go away. The goal is to go beyond that, to get to the point that the head of that organization can say not only did the auditor not find a problem, but I have carefully reviewed this process and I believe that the information is correct and the process is sound. And so much like you shoot at a target by aiming slightly above it, we are going to go beyond the point of eliminating the weakness to having confidence in what they call going after the root cause, and making sure we've solidly addressed it.

But we've also got a second track that goes beyond that. We're looking at areas where the auditors have not identified a material weakness, and going through a process of looking at what are the steps we go through. And as I mentioned before about segregation of duties, are those strong internal controls? Do they give us a process that is both sound in design and sound in operation? And when we can validate those, then we can turn to the Secretary and say you can give affirmative assurance that this process is good, not just that the auditors didn't find it, but we've examined it, it represents best practices, you have good assurance about this process. And so we are doing that because I want to get ahead of the audits. I don't want to simply be responding to each weakness and say, okay, I'll play Whack-A-Mole, go after that one next. I want to be looking at where there aren't weaknesses, and knowing that if there is a problem there, we found it and we fixed it.

Mr. Watson: David, I know one of the other things you're looking at is your financial management system and your modernization strategy there. Can you talk to us a little bit about your transformation and systems consolidation plan? What are the next steps regarding this plan?

Mr. Norquist: Sure, Steve. What we have done, when I came in, the Department had inherited numerous financial management systems, and many of them were contributing to some of our material weaknesses. And looking at them, we said do we have any that work well? And we discovered we do.

We have, for example, a system used by Customs and Border Protection, who has a clean audit opinion on their entire financial statement. And their system works very well for them, contributes to no material weaknesses. We also have a system being used by Transportation and Security Administration, and their system works very well for them. And the system isn't the driver between the problems they've had, and they've been very successful in improving their audit position.

So the question becomes, well, do we need to design our own or can we consolidate on either or both of these systems? And from a risk management point of view, asking someone to develop new software for you and tell them these are my thousands of requirements, please meet them, that's a pretty high-risk approach. It's a big challenge. But if you say I've got these two that work and I've got a component that's on a different system, I'd like to move them onto this system, now there are people at DHS who are familiar with it, they know what it does, they know how it operates, and that strategy of migration is much more manageable. You don't have to move the entire department at once, you can move it in pieces, and every step results in a clear demonstrated benefit.

A simple example is in my immediate area, in one of our offices, they process purchase transactions, and their paperwork goes to the accounting shop to enter the data. Under the new system, what they enter would be automatically logged into the accounting system, so there's no risk of somebody mistyping a dollar amount or delay in the paperwork moving. Now the accounting folks can just validate that those in fact are correct, but they're not reentering, and you dramatically reduce your risk of a material weakness, your risk of error, and you most importantly remove the timeliness and accuracy of your financial data.

So we're going through the acquisition and contracting process for that right now, and we'll begin the consolidation and moves over the course of the next several years.

Mr. Watson: David, thanks. We've covered controls. We've covered a new system. Could we talk next about the Improper Payments Information Act? Agencies are required to annually review programs to identify those susceptible to significant problems. As I'm sure you know, but for our listeners, improper payments can include the wrong amount, the wrong recipient, or monies going to the right recipient, but being spent improperly.

What is the Department doing about improper payments?

Mr. Norquist: We regularly test for improper payments. When the Department was first started, we tested based on the size of the activity and the transaction to determine it. Since then, we've been shifting over to doing risk assessment, where are we most vulnerable, and concentrating our test work in that area.

As we have gone through, we've been very pleased to see that across the board, folks have had very good results in their improper payment testing, that the incidents are very low. The most significant exception, of course, is FEMA and the payments that happened during the Katrina disaster. I think people are maybe familiar with some of those challenges. But there, FEMA's done a number of things to strengthen those internal controls. They've increased their capacity to handle the volume of traffic, and that is one item, the simple volume of transactions, that can drive up errors. They've also put in additional automated checks. So for example, to ensure that the person applying for the benefit is in fact who they say they are and entitled to that benefit reduces your chance of error.

We've looked at and done some follow-up testing, and seen that in the hurricanes and events since then, that the error rate is in fact quite low. And so part of that is the volume and part of that is the improvement in internal controls. But we're very interested in staying on top of this issue of continuing our risk assessment and validating that the controls work or, in places where we see a weakness, strengthening those controls to prevent improper payments.

Mr. Morales: Great. Now, David, along similar lines, I understand that transferring money between agencies can be quite cumbersome, and that GAO has repeatedly identified intragovernmental transactions as an issue when they perform their annual audits. Can you tell us more about the government-wide effort to improve its ability to properly count, report, and reconcile these intragovernmental activities?

Mr. Norquist: One of the challenges you have when you go to close out an audit is you have to record how many obligations and how many -- or what exchange of data and finances do I have with, say, the Department of Defense or the Corps of Engineers, and what do they have with our organization. Now, it is quite possible that the individuals and very likely that the individuals within the organization all know about each of those individual agreements. But now the finance and accounting staff at the aggregate has to be able to resolve those. And so if the Department of Defense has one number and we have a different one, you have to figure out, well, what's the difference? Which record am I not having or do you not have from within our organization?

The challenge becomes that the data that's required to be on those documents is pretty high-level. And so you can easily run into a point where I know it's a transaction with DHS and the Department of the Army, but which organization within them? Those are absolutely enormous organizations. And so if we can move to the point of having more detailed data in those records, and I realize it's a specific office within my organization, a specific office within yours, and immediately we can reconcile which one of us is missing a piece of information and get our two numbers to match. So part of this is a standardizing the data. And OMB has been leading the effort in this area, and we're very supportive of the pilots that they are doing to try and examine ways to elevate this, and to be able to have that additional level of data so we know the right way to reconcile these. Otherwise, it becomes manpower-intensive.

And one of the responsibilities you have as a CFO is to say if I were to dedicate, you know, hundreds of thousands of dollars paying multiple federal employees to research this, is there a risk or a problem that I'm avoiding or solving by doing this? In some cases, there might be -- in this case, it may be mostly recordkeeping, and so you'd much rather switch to an automated way than to be spending resources hunting it down in a one-time, one-solution manual process.

Mr. Morales: So do you see a solution for this issue in the near term or is this going to take some more time to resolve?

Mr. Norquist: It's going to take some time, but I think they've been making progress in identifying the types of things that are going to work. And of course, all of us who are affected by this, and that's all of the agencies, are very supportive of OMB and supporting their efforts to find a common solution.

Mr. Morales: It's certainly a vested interest for everyone to see a solution to this problem.

Mr. Norquist: Absolutely.

Mr. Morales: Great, great.

What is the Department doing to integrate budget and performance information? We will ask David Norquist, chief financial officer at the U.S. Department of Homeland Security, to share with us when the conversation about management continues on The Business of Government Hour.


Mr. Morales: Welcome back to The Business of Government Hour. I'm your host, Albert Morales, and this morning's conversation is with David Norquist, chief financial officer at the U.S. Department of Homeland Security.

Also joining us in our conversation is Steve Watson, partner in IBM's financial management practice.

David, we've talked a lot about financial management and accountability, and certainly this is essential to the achievement of DHS's mission, but it continues to be a challenge for the Department since its creation. So focusing on financial management, can you tell us about the challenges inherent to bringing 22 diverse agencies together? And how have these challenges led to the passage of the Department's Financial Accountability Act?

Mr. Norquist: When you look at any sort of self-assessment, are you at risk for problems with internal controls or your finances, one of the first questions they ask you is have you either had significant staff turnover or been through a reorganization? Well, the Department was created, as you mentioned earlier, in the largest reorganization since World War II, and since then, we've been reorganized several more times. And so all of that means that from an independent perspective you're at a high risk for problems and you have to approach it. You will have a lack of standardization in policies, because people came from different organizations, and they bring with them the different policies and practices.

They likewise bring with them the different systems, so they won't necessarily talk to each other or, in some cases, they don't represent best practices. You'll have staff turnover that will kick in because of the change and the reorganization. And you started with a very small headquarters because that was the part that didn't exist when the Department was created. And so their ability to enforce standardization and develop a common culture is a start-up activity.

Recognizing that, Chairman Platz from the Congress and then-ranking member, now Chairman Townes looked at these types of issues and said for DHS, it isn't just about integrating your operations. It isn't about having Customs and Border Protection as part of the Department along with Coast Guard because we want a seamless control of the border. It's as much about the management of the Department and getting those to integrate as well. And I think that's what drove the Financial Accountability Act, is how do we help DHS put an emphasis on that part of the Department's challenge and help them through what clearly to them would be recognized at the very beginning as a hurdle that any new organization would have to get over.

So when I came in, I looked at the Financial Accountability Act, I looked at the types of challenges we faced, and you recognize that it really isn't a single problem. People would say, when I came in, oh, it's the system. Once you fix the system, everything's going to be okay. Well, that's not the only part that was reorganized. That's not the only part that's affected by change. And so I started to map out with my staff and with the CFOs of the components how do we tackle this in a broad range?

And you'd like to do it sequentially. You'd like to say, well, first, we're going to establish department-wide policy. And once we have all of that nicely done and the ribbon on it, we'll move to staffing, and we'll have enough people to implement that. And then you'll lay out the controls and you'll walk through it, but you're up and running. You've got to make payments tomorrow. You've got to support a mission today. You've got to disrupt a terrorist attack right now. And you can't wait on the back office to pull those together sequentially, and so we've attacked them and dealt with those challenges across the board.

We have initiatives in the people area. How do we make sure of the right people with the right training? We've got initiatives to establish the right policies. We have an initiative to put together a financial management manual. Most other departments, you would take that for granted. You'd come in -- in the Department of Defense -- or when I was at the Army, these big, green tomes that sat on the shelf and weighed hundreds of pounds that told you how to do absolutely every step. And here the ones we have are the ones the components brought with them. And so we've been looking at those of different departments, putting together workshops to review what are the best practices that a new department should use, and we've got about half of them done. By this summer coming up, we hope to have the 90 percent solution and be able to publish our set of standards that we can hold folks to.

We talked a little bit earlier about reviewing all our processes. How do we make sure that our processes are right and our controls are right? That, you have to do at the same time. That's what the OMB calls the A-123 reviews. Again, we talked about the systems as well. That's an inherent part of any solution going forward: getting to fewer systems, getting to common systems, getting to those that reinforce your controls.

Another simple example: You can have a rule that says that you can't engage in a certain transaction unless you have an authority or warrant to do that. It's really helpful if your financial system blocks somebody from doing that as well. So it isn't something that you only maintain through external checks, but your system reinforces good behavior by preventing people whose logon does not link to that warrant from being able to engage in those transactions.

And the last part that we focused on was assurance, which is how do you know that over time, these won't decay? How do you know that the controls won't get weak and that people you know, you have turnover. The new person comes in a month or two after the old person left, never quite got the hand-off briefing. How do you make sure that they know what they're supposed to do? And so we have a number of different things to train new people, as well as I have an assurance team that I send out to spot-check these and identify these types of issues before they become problems, before they contribute to a material weakness or before they become a vulnerability that somebody could later exploit.

And so we believe that that intent behind that language, and I really appreciate the strong support we have had from the Congress in this area, is helping to drive us forward in addressing not just one aspect of the financial management challenge, but the full range of challenges that go into strong internal controls.

Mr. Morales: So let me switch gears for a moment here and talk a little bit about the President's Management Agenda, or the PMA. In the last OMB scorecard, nearly half of the federal agencies, including Homeland, received a red rating in financial performance. Could you tell us from your perspective why this is such a challenging area for many agencies across the government? And can you further expand on how has your organization done to progress and improve over the last year?

Mr. Norquist: Delighted to. The President's Management Agenda has ratings on -- sort of red, yellow, green as you progress in solving problems. Many of the earliest ones, such as to get out of red, you have to have an unqualified opinion on your financial statement, well, that alone involves innumerous amounts of work and effort to fix that challenge. And so the standard was designed for the entire federal government and then many organizations who are working their way up that, addressing greater and greater challenges. But for some of us who inherited material weaknesses that prevent an unqualified opinion, you have to be tackling that at the same time you're trying to address the types of challenges that will show up at the higher levels of the standard to make sure you're in compliance with all the laws and regulations that relate to that standard. But it gets back to not focusing on a single problem at a time or thinking that you can just pick a single area, but recognizing you've got to make progress across the board. And what we have found, both here and elsewhere, is that when you make progress in key areas, it really opens it up for everyone else.

To go back to an example, Immigration and Customs Enforcement began two years ago by saying we'll address something called Fund Balance with Treasury. The sample version is, does what we have in our multiple checkbooks match the Treasury's? One of their material weaknesses was that they didn't do it. As they addressed that material weakness, as they eliminated it, all of a sudden, all sorts of other material weaknesses were getting solved. Because in order to get to the root cause of that problem, they were attacking the underlying.

Likewise, in this area, as you begin to address those, you're also addressing the very same problems that would come up as you got to yellow, as you got to green. And so you have to be tackling the full range.

I'm very excited about the progress we've made on the audit. I'm very excited about where it'll put someone who comes after me in terms of their ability to continue to improve both their score on the President's Management Agenda as well as their performance in terms of supporting the taxpayer and supporting the Department's mission.

Mr. Watson: David, sticking with the President's Management Agenda, budget and performance integration is another key component of that agenda. Could you tell us about DHS's efforts to get to green on the budget and performance integration score on the President's Management Agenda? And then more generally, how are you using finance information to inform management decision-making at the Department?

Mr. Norquist: Sure, Steve. The issue here is that you want to make sure that when you're looking at a budget and you're trying to decide what to fund next, you recognize how the funds in the past have been used. Did they in fact accomplish what you intended them to? Are you getting the results that you hoped for? What are the performance standards that you want to set out for the future? And you want that information directly integrated into your budget decision-making. You want that presented to your leadership at the same time, so they're making a decision off the full range of information. This is what's driven OMB's emphasis behind this, is to link the performance results and that what you're getting for your money with how we use additional taxpayers' money.

One of the nice advantages we have in our organization is as the Department was stood up, we created within the Comptroller's Office something called Program Analysis and Evaluation. That office has several responsibilities. One is they work on the President's Management Agenda and the PART scores, the reviews of the different components on how they meet those standards. They also work on the annual performance report. How have we done on the milestones? What were the goals of each organization, and did they in fact accomplish those goals, or how are they doing in accomplishing those goals?

They also have responsibility to review and look at major programs within the Department, not just from a performance, but also from an internal, executing their money, how are they doing on meeting their internal production milestones for new systems coming on board. That office is an essential part of our program build. When we meet with the Secretary or the Deputy, that office is essential to managing that process. They're there at the meetings. They ensure that when a project is up for approval or review or is being considered for additional funding, the leadership knows how it's done in the past. Did it in fact meet its objectives? Is it on schedule? How are they doing on spending their money and staying within budget? And by tying those all into the same organization and by having that with the comptroller -- with the CFO as part of our financial duties, we can ensure that performance is consistently put in front of the leadership to inform them, and consistently linked with our budget and our obligation of funds.

Mr. Watson: David, we talk with many of our guests about collaboration. What kinds of partnerships are you developing now to improve operations or outcomes at the Department? How might these partnerships change over time?

Mr. Norquist: Partnering with other organizations is absolutely essential, absolutely essential to your success as a CFO. Take, for example, other departments. In order to resolve the intergovernmental liabilities issues or any of those challenges, you have to have strong working relationships with the other CFOs of the other departments. In fact, I came to this meeting from meeting with the CFO at the Department of Defense. We have many issues in common, including, for example, the Coast Guard, which performs operations in Iraq, but also through OMB with our council -- the CFO Council there. That close relationship allows you to tackle many of these issues across organizations.

But it also works within an organization. Inside of my organization, we have regular meetings with the CFOs of each of the components. And in fact, I strongly encourage in the hiring process that we have CFOs who have worked in other components or at the headquarters in order to ensure that they have a broader understanding of their mission other than the office and the organization they're in. They've worked in another place. They understand how the two offices work together. Because so many of the issues that we work on, whether it's immigration and border enforcements, whether it's preventing terrorists from entering the country, require extensive collaboration between the organizations. And the financial world reflects that as well.

Perhaps the most important one that I would flag, particularly for the audit, is the close working relationship we have with our inspector general and our independent auditors. And this is a place where it is absolutely critical for us to have them involved in everything. We bring them into our regular meetings. My view is, I know that they're trying to identify weaknesses for the audit, but I'm trying to find them as well and fix them as well, and if they find them, I want to hear about it. I'm not interested in trying to hide the information from them. I want them to see the transparency. That also helps them, because they know going through the audit that they're seeing everything that you're seeing. They're seeing what's going on, and have a much better understanding of the solutions you're taking, what approaches you're using.

One of the ways we have used that strong solid relationship to improve our process is when we initially developed the corrective action plans that we talked about earlier, we asked the IG to take a look at them while they were still in draft. And we asked a few set of questions: do these in fact represent appropriate responses to the challenges that you've identified? Is it clear that the people who developed the corrective action plan understood your findings? The last thing you want to do is be solving a problem that's different than the one they found. You want to make sure you captured theirs, so you get that feedback. Do you think that these corrective action plans are in fact likely to be effective? Are they the right approach? Are they going after the root cause?

Some people will sit back and wait until you're done, and then they'll come back in and say it didn't work, you didn't succeed, and you should have sent something different. That's not particularly helpful. I've already spent a lot of time and resources. I would have preferred that up front. Our inspector general, our auditors, and others have given us a lot of that feedback early, so if they don't think an approach is going to work, they give us that feedback, we can fix it. That's why our corrective action plans last year were so effective. They had been reviewed by a number of people who knew the problems in detail, could provide that good feedback, and so when we executed them, we really saw success, we really saw them pay off.

We're going to do the same thing this year, sit down with them again. They're independent. They're not going to promise you it's going to make your weakness go away. They're still going to look for things. But they're going to let you know if you're off on the right track. They're going to give you that additional feedback from having another player who understands the process. And likewise, again, the close relationship that we have with committees on the Hill, both those on the appropriations side, on the budget, and those on the authorization and oversight side, you know, on the Financial Accountability Act and so forth, all of those are strong and essential to our progress. Because much of our work has been successful because of the support we have had from them.

Mr. Morales: So it's feedback in real time then.

Mr. Norquist: That is very helpful and it's absolutely essential.

Mr. Morales: Great.

Now, at the start of the show, you talked about the 209,000 employees at DHS, but we know that more and more government work is being carried out through the use of contractors. So could you tell us how federal managers can effectively manage this ever-increasing blended workforce? And what are some of the key differences intrinsic to these two core groups?

Mr. Norquist: Well, I think a manager has to recognize that whatever organization they're going to be in, they're going to have both. And they need to recognize their strengths and weaknesses, just as you would with the employees on your staff. What are their strengths and weaknesses? How can I team people up to get the best results?

For example, if you're looking at a challenge or a mission that is stable, it's enduring, it's perhaps a core government mission, that's a place where you're really looking for your federal workforce to be your strength and your backbone. This is a place where you want to develop depth of experience, where you don't want to be potentially changing over the support on a regular basis, because it's essential to your success. You did it last year, you're going to do it next year, and you can manage the work that way.

But there are other places you run into where there's a real surge requirement. And in the audit, for example, this comes up in some areas where while at the same time you're producing the audit, you're trying to solve certain problems. You will not require that intensity and that level of work in perpetuity. You will not need it, so there's no reason to bring on board a large number of federal employees who then after a year or two, you will not have a requirement for that. So you strike a balance.

You identify what are the challenges that are best suited to an organization in the private sector where they can provide that search. In some cases, you're looking for something where they can make a rapid trade-off between technology and staff. In the government, we have a very hard time doing that. You know, we're developing right now the guidance for our 2010 budget. We're about to go to print on the 2009 budget. We're in the midst of executing 2008. So our planning is several years ahead, and our ability to make trade-offs are affected by that. Whereas with other organizations, if you're contracting for a service, they can make those trade-offs very quickly, and the private sector does a very good job at that.

And so as a manager, you really have to recognize both their performance boundaries as well, of course, there are certain legal ones or there are certain ones where by law and by the interest of the government, you want to keep in-house. But it's an important balance to maintain, and I think any manager should recognize that they're going to need both and they're going to end up using both.

Mr. Morales: So along these same lines, you know, given the critical role that financial management plays in the mission and program delivery, could you give us your view on how the role of the CFO will need to evolve in the future?

Mr. Norquist: Well, I think if you look at how the CFO has changed over time, everyone's always been focused on the budget. Ever since the appropriation committees were created over 100 years ago, you had that emphasis on the budget, and everyone understands that process. It's well-established, it will drive itself. But CFOs have had greater and greater responsibility on the internal control and the accountability side. And you've seen this in various levels of legislation that have been passed over the last set of years. And that's helped strengthen and improve the focus of the CFOs on the full range of the financial transactions, following them right out the door and making sure that the strong controls are in place.

Different offices have been tackling this in different ways in the past. And so what you've seen here is ability to get more standardization and more control and a repeated emphasis -- and the resources that come with that, the ability to put the staff on it to ensure that you're doing those checks. And a lot of benefit comes from random sampling and random checks to ensure that the controls are working properly.

Mr. Morales: Great.

So what does the future hold for the Department of Homeland Security? We will ask David Norquist, chief financial officer at the U.S. Department of Homeland Security, to share with us when the conversation about management continues on The Business of Government Hour.


Mr. Morales: Welcome back to The Business of Government Hour. I'm your host, Albert Morales, and this morning's conversation is with David Norquist, chief financial officer at the U.S. Department of Homeland Security.

Also joining us in our conversation is Steve Watson, partner in IBM's financial management practice.

David, I'd like to continue transitioning to the future. Could you give us a sense of some of the key issues that will affect the CFOs and budget offices government-wide over the next couple of years?

Mr. Norquist: I think the central issue that will be affecting CFOs government-wide over the next several years, particularly the next year, is recruiting and retention. As you look at the agencies like Homeland Security and then the Defense Department, who is continuing to expand its ability on the audits, there's an increasing demand for people with accounting skills or people with CPAs. And as the size of the Defense Department begins to take its effect, you'll see that marketplace become very competitive, which means for the rest of the organizations who have been doing well, we'll be actively hiring their staff away and bringing them onto our organizations, creating challenges for them. And Defense Department, of course, will be by far the largest player in that area as they move forward on the process. So it creates an incentive for us to focus on training our staff and expanding the pool of people with that skill set, as well as the retention to keep the people who've got the longevity to understand the issues and how to solve those challenges.

Mr. Watson: David, on a broader basis, what are some of the major opportunities and challenges your organization will encounter in the future? How do you envision your office will evolve over the next five years to meet these challenges?

Mr. Norquist: Well, we're going to go through a transition over the next several years. We are going to shift from being focused on putting together those building blocks. Do you have a financial management manual? Do you have the right number of staff? Do you have the basic training courses? Can you establish a program for bringing people into your organization? Can you consolidate your systems? Those will either be done or well under way within the next year or two, next couple years, which means that what we're setting up for is, in my case for my successor, that he or she can look at an entirely new set of choices. They won't be talking about the Department is in transition or new. They'll be walking into a department that's well-established with as many of the features that we've expected somewhereelse. In fact, hopefully, they'll see it as better because we'll have been able to have adopted the best practices of those other organizations as we went through it.

But that will really create a whole new playing field. They will -- my hope for my successor is that they are not worried about the same issues that I am, that they're able to look at a whole range of new areas, efficiency of operations in some of our financial areas, things that move beyond the internal controls and the policy manuals and things that we've wanted to do to put that basic building block of a new agency in place.

Mr. Watson: David, having staff with the appropriate skills is obviously going to be key to achieving those objectives you've set out there. Would you elaborate on some of your human capital strategies? How are these programs helping you prepare future financial leaders for the Department?

Mr. Norquist: Well, there's one of the things that we started doing early on when I realized that weaknesses can come as much from people as from systems or policies, was if you are a new hire in the Department of Homeland Security, in the financial management field, whether you work for the Coast Guard, Customs and Border Protection, Immigration and Customs Enforcement, we bring you to Washington, D.C. for a central training class, welcome on board. I don't want them to feel that they've been hired into the accounting office on the second floor of the Indianapolis office. I want them to recognize they've joined the Department. And so they need to understand the mission of all the different components of the Department.

They also need to understand fiscal law. In my view, if you're in a financial management profession, you are the residential expert in that room, on that meeting, on fiscal law and internal controls. And you should feel both that you have the knowledge and the obligation to speak up if somebody is suggesting a policy or procedure that would create a problem. And in many cases, some of the government controls are not inherently obvious to someone who's not in our profession why you have that segregation of duties, why you have some of those other controls.

So they need to be able to stand up and say, wait a second, we need to check the fiscal lawyers here to make sure that's an appropriate way. Maybe if we did it this way, with the right notification, that would be the appropriate solution. So we go through that training with them, fiscal law, the budget, the audit, the overview of DHS, and all the other components, to ensure that everyone being hired into the financial management community inside DHS has that core skill set, that strong understanding of internal controls.

It also helps because they get to meet the different CFOs. We have a panel. They get to see who the heads are of each of these organizations. Both times we've done it, the Deputy has come and spoke, so it also is very effective for the morale of the folks to understand that what they do is important to the leadership of the Department.

We're also going to be promoting certifications. There's a number of organizations that provide certifications to the people in the financial management field. My office has put out an announcement to the components saying that we will sponsor those, we will pay for those. We will encourage people to apply for those certifications. I want them to be a professionalized workforce. And if they are willing to spend time and energy to study to pass these exams, we're happy to pay the cost of them to take the sitting fee and the other associated costs with that. And I recognize that they may take that skill set and go work for some other component inside DHS, but that's great. Because if they move from Coast Guard to ICE or from ICE to Secret Service, that's better for us as a department, and so we're also focused on building that skill set.

We'll have an award ceremony to recognize success. I think it's important for people who have been able to have as much success as we have had in the last few years to be able to be recognized for that. I think that's a positive reinforcement that's worth promoting.

In addition to which we have the CFO Mentorship Program, and this is really about preparing the financial leaders of tomorrow. I think you asked that as sort of the ending to your question, but I'll bring -- come to it here, Steve. When I looked across the Department, I asked the question where are the next set of CFOs coming from?

If you look at Department of Defense or anywhere else, they have an entire pipeline. You go to colleges, you recruit, you bring them in, you promote them up, they move up. Our staff came from other agencies. They came from Treasury, they came from Justice, they came from the Drug Enforcement Agency, they came from the Department of the Navy. They weren't developed and promoted from within. And so I realized that we were going to have to establish training opportunities and developmental opportunities so we can build that next group of career civil servant CFOs.

Our mentorship program is four years -- four months long. And they come in, and we've got five people in this year's class and we had five in last year's. And they spend time with the different CFOs. They spend some time getting residential training and leadership training. And the idea is to expose them to the many challenges a CFO has.

In the financial management field, most people are either from the budgeting side or the accounting side. A CFO has to manage both. And so if the mentor candidate has a budget background, we send him to work on the accounting side to understand the audit and how it relates, and vice versa. And I think this really helps lay the groundwork for a future group of people who everyone can turn to and say that's the next generation. That's the group of 15s and 14s that we look to promote over the next several years.

Again, it's no guarantee; have to compete just like anyone else. You don't have to go through the program to be selected. But by participating in it and by supporting it, I am trying to promote, and I think we've been very successful, in building that future cadre of managers.

Mr. Morales: So, David, we talked about maintaining this high-quality technical workforce, but what about at the front end in terms of attracting new employees to DHS or to the financial management ranks? What are you doing in this area?

Mr. Norquist: We have a number of initiatives underway. We've done a lot of basic outreach, going out and setting up booths at jobs fairs and conferences and things to try and attract. We've reached out to other organizations to promote the opportunities.

I think one of the things about DHS that is particularly appealing is it's really a place where you can make a difference. You can come in here and if you work in the area of financial management policy, we are writing new policy. We are putting in for places that didn't have it. You can come make a difference. If you are in any of these other areas, this is a place where you can wake up in the morning and recognize that what you did that week has really made a difference in making the world better, whether you work in the Financial Management Office or whether you're patrolling the border or whether you're doing checks on people boarding airplanes or whether you're looking for terrorists or you're protecting -- rescuing people at sea. People at DHS consistently are able to wake up and point to the successes and the accomplishments that they have had, and have that job satisfaction of knowing that the mission is really what made it successful.

We're also in the financial management area setting up an internship program to bring in folks from universities. Most departments have those, but our staff, as I mentioned, came from other departments. And so with Congress' support, we'll be reaching out to universities looking for those people with CPAs or financial management interest to drive them and draw them into the Department, give them the training and the rotational opportunities they need, and begin building that pipeline so we have a place to draw our GS-7s and GS-9s into our organization as opposed to simply always taking from other departments.

Mr. Morales: David, you're obviously very passionate about your work, and your success is unquestioned. So what advice could you give to a person who perhaps is out there, whether, you know, they're coming out of college or perhaps, you know, have several years in the workforce? What do you tell them if they're thinking about a career in public service?

Mr. Norquist: What I would tell them is to go where their passion is, to go where their heart takes them. This is not a job you do because it's going to make you large sums of money or it's going to make you famous. This is a job you do because you believe that you can make a difference. And so if you're really interested in boating and safety at sea and the Coast Guard is a place for you, go there, because you need to have a job where you're going to really understand and feel that sense of accomplishment. If you're interested in uniformed military service and protecting the country that way, there are great opportunities there. If you're interested in securing the border, there's a lot of hiring going on on the border protection. But these are places where people can bring safety and security to their friends and family, wake up every day knowing they made a difference interdicting a drug shipment, preventing a terrorist attack. Those are the types of things that you should look for.

In the financial management field, I've always passionately cared about two things, and I've been able to do it throughout my entire career. The first is protecting the country, and the other is protecting the taxpayers' money. And there are very few jobs where you get to do both at the same time, and so I've been blessed by having that opportunity. And I would encourage folks who are interested in a career in government service look for where that -- where your passion takes you. Look for the type of job where you can be satisfied with what you've accomplished and be able to look back on it with pride.

Mr. Morales: That's great, David. It sounds like there's something for everyone and you guarantee a high level of satisfaction.

Unfortunately, we have reached the end of our time this morning, David. I want to thank you for fitting us into your busy schedule. But more importantly, Steve and I would like to thank you for your dedicated service to our government and protecting our homeland.

Mr. Norquist: Thank you, Al, thank you, Steve, for having me on the show. I appreciate the opportunity to talk about the success that we've had at the Department of Homeland Security, our improvement both in the audit and in internal control. I particularly thank all those hard-working folks in the Department who day-in and day-out make all of this possible. If anyone is interested in the financial management career field at DHS, just e-mail us your resume at We'll let you know where the applications are, help you navigate your way through some of the job application process.

Mr. Morales: That's great, thank you.

This has been The Business of Government Hour, featuring a conversation with David Norquist, chief financial officer at the U.S. Department of Homeland Security. My co-host has been Steve Watson, partner in IBM's financial management practice. As you enjoy the rest of your day, please take time to remember the men and women of our armed and civil services abroad who may not be able to hear this morning's show on how we're improving their government, but who deserve our unconditional respect and support.

For The Business of Government Hour, I'm Albert Morales. Thank you for listening.

Announcer: This has been The Business of Government Hour. Be sure to join us every Saturday at 9:00 a.m., and visit us on the web at

There, you can learn more about our programs and get a transcript of today's conversation.

Until next week, it's

Steven I. Cooper interview

Monday, November 29th, 1999 - 20:00
Radio show date: 
Mon, 01/01/2018

Q. Todd Dickinson interview

Monday, November 29th, 1999 - 20:00
Todd Dickinson
Radio show date: 
Tue, 04/25/2000
Intro text: 
Missions and Programs...
Missions and Programs
Complete transcript: 

Arlington, Virginia

Tuesday, April 25, 2000

Mr. Lawrence:Welcome to the Business of Government Hour, conversations with government leaders. I am Paul Lawrence, a partner at PricewaterhouseCoopers and the co-chair of the PricewaterhouseCoopers Endowment for the Business of Government. The Endowment was created in 1998 to encourage discussion and research into new approaches to improving government effectiveness. To find out more about the Endowment, visit us on the web at The Business of Government Hour focuses on outstanding government executives who are changing the way government does business.

Our guest tonight is Todd Dickinson, Acting Assistant Secretary of Commerce and Acting Commissioner of Patents and Trademarks. Welcome.

Mr. Dickinson: Thank you.

Mr. Lawrence: Let's begin the first segment by talking about your career. Can you tell us a little about your career prior to joining the U.S. Patent and Trademark Office?

Mr. Dickinson: Well, I joined the PTO about two years ago, after spending about 20 years in my career as a patent practitioner and management participant at several corporations and law firms.

Mr. Lawrence: What do you think prepared you for PTO?

Mr. Dickinson: Well, my whole career has been actually spent prcticing before the PTO so I knew a fair amount about it as a practitioner and also had some interest and involvement in some of the policy issues and challenges issues we face.

Mr. Lawrence: What do you think prepared you to be a leader, though, of a large organization beside the subject matter expertise?

Mr. Dickinson: Well, I think first of all subject matter expertise, but secondly, I had a fair amount of management experience in my corporate practice. I was in-house for much of my career and had the opportunity to engage as a manager in several of those positions.

Now, the scale is a little bit different. The PTO has about 7,000 employees, and I didn't manage that many, but many of the lessons, I think, are very similar.

Mr. Lawrence: Okay. Well, I understand you had an interesting experience that you once represented rock and roll groups in trademark cases. Can you tell us a little bit about those experiences?

Mr. Dickinson: Well, actually that was when I was first starting out in my career. There is actually a problem in the industry where rock groups very often break up and the members go their separate ways or the group itself goes forward but with new members or only some of the original members.

Often there is a problem where some of those individuals who leave represent themselves as being the original group. That's obviously a big trademark problem.

So, we represented the Platters and the Coasters, as I recall who had some significant problems. It was a lot of fun.

Mr. Lawrence: We are beginning to date ourselves now, if we remember that music. You just mentioned some of your positions in the private sector. I know that you held the position of Chief Counsel for Intellectual Property and Technology at Sun Corporation and in addition you also worked at Chevron Corporation and Baxter Travenol. How was your transition from the private sector to the public sector?

Mr. Dickinson: Well, it was an interesting one. As I say, I came into the office about two years ago, having been nominated to be the Deputy Commissioner and was a senior advisor to the Secretary for a period of time while my nomination was pending. It was basically sort of learning by immersion. What I did when I first came in was basically go throughout the organization and learn as much as I could about the organization from the ground up. I met with the senior managers. I met with large groups of examiners, which is sort of the basic level of employee that we have on the professional side in the office. I met with the clerical workers. I just learned as much as I could about it.

Mr. Lawrence: How did they react to that data gathering?

Mr. Dickinson: At first they were a little bit suspicious. They weren't quite sure why I was doing it, and they wondered if there was some agenda. I think after we talked for a long time, they realized that I was genuinely interested in the work that they did and learning more about it in the hopes that it would prepare me to do a good job as Deputy and now as Commissioner so they were very forthcoming.

Mr. Lawrence: Why were you interested in government?

Mr. Dickinson: Public service is something that has been interesting to me for a long time. I am also engaged in political activity from time to time and there is the nexus there. The opportunity to serve and serve this President were ones which were too tempting to pass up.

Mr. Lawrence: Well, tell us a little bit about some of the lessons you learned in the private sector that could be applied to the public sector, and the reverse.

Mr. Dickinson: I worked for oil companies when I was in the private sector. They are large bureaucracies, very similar, I think, in many ways to some government bureaucracies. Some of the things, I think, you could take away from corporate management, and in particular, change management. Lots of corporations because of their competitive environment find themselves having to deal with dramatic change management issues in recent times.

We don't have competition in the government, and that actually, I think, is not a good thing in terms of how it affects management. This is one area where that is the case.

We have to often consider the opportunities for change that our changing environment brings us that are different a little bit from competition. But how to manage that change, I think is one.

I think financial management is another area. We at PTO basically operate like a business. We have a product we turn out. We produce patents and trademark registrations so 98 percent of our work is just that. A lot of the financial management issues that relate to doing that need to be brought up to a more modern management standard. We are working hard on that. Cost accounting is a good example.

Mr. Lawrence: How about the reverse? What do you think the private sector can learn from the public sector?

Mr. Dickinson: Well, that is a very interesting question. This is something that is often thought to be forced on the public sector, but I think transparency is an issue and that public accountability are issues that I think more directly affect the public sector than the private.

I am a strong advocate of transparency. I think that more communication is almost always better than less and having done that, I think we find ourselves in stronger positions.

Mr. Lawrence: How about some of the dealing with people, for example, contrast your dealings with say staff and employees in both sectors?

Mr. Dickinson: That is an interesting question. I think there is a common perception, maybe even a presumption in the public's mind that public workers are less engaged in their jobs, less committed, less enthusiastic in many ways. I have found that not to be the case. In some cases I found it actually to be reversed. We have some of the most committed and really passionate employees I have ever seen, particularly in our examining corps.

That actually leads to issues and some, you know, conflict from time to time. But there is, I think, a real strong commitment at least with the workers I work with to doing their job well.

Mr. Lawrence: Does that affect how you manage them differently than, say, the private sector?

Mr. Dickinson: I don't think so necessarily. I just think it was something I hadn't expected and found. I don't think there is that much difference.

I think a bigger problem is that the rules that affect management are stricter because they are governed by statute or by regulation and cover much more territory. They are more difficult to work with, particularly as they apply to things like personnel management, but we are hopeful that we will get some changes along those lines for our agency, and I know some others pretty soon.

Mr. Lawrence: Broadly defining "customers," then, how would you contrast the difference in both sectors about dealing with the customers?

Mr. Dickinson: The biggest difference, I think, is that customers in the public sector's mind, the concept is not as readily apparent to them. Obviously, the private sector customer is something that they are very familiar with. The need to meet the customer's requirements is one, particularly through quality management, that they become very adept at. In the public sector, the concept of the person who comes to you as a customer is one that represented a cultural change.

In our organization it was a very difficult cultural change in going from, say, a patent examiner who felt they were a judge-like individual who was supposed to render a particular verdict to someone whose goal was to help a customer get their product out the door in a timely manner and a quality fashion.

That change has happened, but it wasn't without some challenges.

Mr. Lawrence: How about dealing with, say, stakeholders versus shareholders?

Mr. Dickinson: We don't have shareholders per se. Our stakeholders tend to be considered our shareholders as well, the owners of our business, if you will. We tend to respond in that sense.

But we do our best. I think we do a very good job at particularly focusing on our stakeholders' interests.

Mr. Lawrence: How do you do that?

Mr. Dickinson: We have a variety of customer feedback mechanisms that really run the gamut. We regularly do customer surveys, for example, of a broad slice of our customer base. We have regular meetings with our customers face to face that we initiate. They come into our office. We have core meetings. For example, a technology group that does biotechnology inventions where we open the doors, and anybody can come in that wants to.

We do a lot of outreach. I spend a lot of time on the road and other managers do as well, going to the customer organizations, answering their questions, and getting their feedback.

We have even gone into cyberspace. I participate on a monthly basis in something called, "Ask the Commissioner." It's an on-line, interactive chat with the Commissioner. Anybody who wants to can e-mail a question, and we broadcast and e-mail back.

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

Mr. Lawrence: Welcome back to the Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers and tonight's conversation is with Todd Dickinson, Acting Assistant Secretary of Commerce and Acting Commissioner of Patents and Trademarks. In this section, let's talk a little bit about PTO. Mr. Dickinson, can you tell us about the office?

Mr. Dickinson: In our office we have about 7,000 employees. Our principal task is the examination of patent applications and trademark registration applications for the issuance of patents and trademark registrations.

We get about a quarter million of each every year now, and it's a very substantial job because the examination process is kind of a quasi-judicial professional judgment, kind of process. It is not simply a registration process.

So, it takes time. It requires a very well-educated caliber employee. We have 450 Ph.D. scientists who work for us. We 450 lawyers, too. It's a very sophisticated and challenging place to work.

It has been around since the first Congress. It is in the Constitution, as a matter of fact, the patent system is. It was one of the first acts the first Congress passed. Our current organization dates from about 1836, so it has been around a long time.

Mr. Lawrence: Well, tell us about your role and position.

Mr. Dickinson: Well, I am the Acting Commissioner at the moment. My nomination as Commissioner is pending. Hopefully, we will get a vote on that pretty soon.

My basic role is leader of the organization. I think the principal tasks I have are management and setting a management direction and focus and a strategic vision for the organization and communication; communicating both internally and with our external customers. I spend a large amount of time on that. We also have a policy role. I am an Assistant Secretary of Commerce as well so we are responsible for establishing and having the principal responsibility for establishing intellectual property policy. That is patents and trademarks and copyrights all in for the Administration.

Mr. Lawrence: What are the challenges facing PTO?

Mr. Dickinson: Well, the biggest one at the moment is growth. We have experienced a huge increase in the number of applications for both patents and trademarks that we have had since the start of the Clinton administration. We have grown almost 60 percent. You contrast that with some decades in this century when we stayed static or even shrank a little bit. That is a staggering increase to try to manage, particularly for a process like ours.

Mr. Lawrence: Well, how do you manage that increased workload?

Mr. Dickinson: Well, the first thing is a fairly traditional thing to do, we hire more employees. Basically, we started this hiring program of about 2,000 examiners and we will finish it four years later by basically doubling the number of patent examiners. That will require us to hire with attrition, something like 750 a year. Finding high tech workers in this current economy is no easy task.

Mr. Lawrence: I was going to ask, where do they come from?

Mr. Dickinson: They come from all over, interestingly enough. We get a lot right out of engineering school or graduate school in sciences. We get some returning for a second career. Some folks I have seen are 50, some even 60 years old. You can apply for a job on our web site and we have a lot that come in that way.

Mr. Lawrence: Well, don't let that go. You have to say the address.

Mr. Dickinson: It's You can apply for a trademark registration on-line. You can read the latest news from our office on-line or you can apply for a job. Don't be shy. We need examiners.

Mr. Lawrence: I know over the last two years we have heard a lot about PTO becoming a performance-based organization or PBO, as it is known around town. From your perspective, what are the advantages of becoming a PBO?

Mr. Dickinson: Well, I think the principal advantage is flexibility and the goal is to have us since we are a business-like government entity to operate more like a business, flexibility in hiring, for example, and in human resources issues generally, flexibility in compensation, flexibility in procurement.

There are a lot of rules in the government that are applied across the government to agencies whose principal function of which is either policy or regulatory. We are not really, at least in our operations piece, one of those. This would give us the kind of flexibilities to operate more like a private sector business.

Mr. Lawrence: In terms of the flexibilities, what about flexibilities in terms of management then?

Mr. Dickinson: It would give us significant flexibility in terms of management. We have a structure now, which has evolved in certain ways, and I won't say ossified exactly, but it is fairly fixed and difficult to change.

This would give us the opportunity to make changes on a more regular basis. It would free us up from things like FTE caps on hiring to get people in the right jobs and the right positions as it developed.

The key there is appropriate oversight, of course. We have a lot of oversight. We have Congressional committee oversight and OMB and Department of Commerce oversight, as a check.

Mr. Lawrence: What is the status of the legislation? Are you still hopeful it will be enacted?

Mr. Dickinson: The legislation that would make us a PBO passed the House as part of a big patent bill. In the House, it is H.R. 1907. It is before the Senate now. The Senate Judiciary Committee will probably take it up. It will have by the time of this is broadcast, maybe been taken up.

The current Senate version unfortunately deletes our PBO legislation or section. That is the only section that is deleted from it. I think that is a strong concern of the administration. We are firmly committed to the PBO. The Mint and other organizations have been successful examples of new PBO's and this, I think, would be another good example to allow us to really operate like a business.

Mr. Lawrence: You just mentioned the difficulty finding government employees. How about retaining and attracting lawyers and other professionals at PTO?

Mr. Dickinson: Well, as I say, the vast majority of our employees are high tech workers in the broadest sense of the word. Attracting and retaining them is very difficult.

Our attrition rate is higher than we would like to be honest. What we need to do is work on compensation issues. We need to make sure we provide an attractive workplace. We are in the process, for example, of consolidating our space, and we would build new buildings for our space.

In that new space it is planned to have a large daycare center and a large fitness facility, things that are, frankly in this day and age necessary to attract and maintain the kind of caliber worker we need.

Mr. Lawrence: What else is attracting them? I know pay is a difficult issue. We have heard that many of these are very specialized employees who can go elsewhere at much more money, but yet they still seem to be coming. What are the reasons they are coming to PTO?

Mr. Dickinson: They come for a variety of reasons, and they leave for a variety of reasons. I think that the principal reason they come is because they see a government job as a secure one and to many it is a good foundation.

The pay, while lagging behind private industry standards in many cases, is still good. The benefits are very good as well. I think the benefit package is helpful in that.

As far as retention goes, compensation is an issue for retention, certainly. We have also found that the nature of the work is one which people weren't necessarily prepared for and want to move on others. They have used this as kind of a weigh station. I guess I am a little disappointed that they would do that.

We find if we are able to hold them for six years or so as a patent examiner, for example, and they get vested in the pension plan and other benefits, we retain them longer term.

Mr. Lawrence: How about the special challenges of managing these types of employees?

Mr. Dickinson: They are significant. They are a very sophisticated work force. They are not shy about expressing their opinions. They are a unionized workforce, which makes for a lot of interesting challenges, working with a government union.

We have established a good working relationship with the union and I am pleased that that is evolving even better. An interesting issue is that they have enhanced abilities to communicate that they didn't have before. We have websites and we have e-mail. I hear from them regularly. I am pleased to do that.

It is interesting because we are traditionally working an issue up a ladder. Now many people just go directly to me or to the other senior managers and that has its own interesting challenges.

Mr. Lawrence: That is great. We'll be back with more of the Business of Government Hour.


Mr. Lawrence: Welcome back to the Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers. Tonight's conversation is with Todd Dickinson, Acting Assistant Secretary of Commerce and Acting Commissioner of Patents and Trademarks.

In this section, let's talk about reinvention of PTO. I know that PTO has been very active in the reinvention front. Can you describe some of the things that have taken place?

Mr. Dickinson: We are what is called a "high impact agency" in the federal government, meaning we have a lot of customer contact. There are about 54 of us, I think, that are designated as such. We are also hopeful of becoming a performance-based organization as we mentioned a minute ago.

This leads to a very natural need to continue to reinvent ourselves. I should also say that since most of the work we do on the patent side is, all that we do is directed to inventors. It is very interesting that we are reinventing ourselves as an organization that has constantly dealt with inventors.

We are doing a number of things. One that particularly I think I brought in from my previous experience in management was the broader question of quality management. We have had traditionally at the PTO quality initiatives of various sorts that were fairly scattered and scatter-shot in some ways. So, one of the first things I did was convene a so-called "quality summit" to make recommendations. They came back to me with a number of them, the key one of which was to consolidate our quality management into one function and have that function report directly to the commissioner's office, which we have done. We have established an administrator for quality management. A person named Mary Lee, one of our senior managers, has taken that job on. That allows us, I think, to get a better handle on a broad range of the kind of issues in reinvention that I think are very important to us as an agency.

Mr. Lawrence: I know you have been focused on improving customer service. Can you tell us a little bit about which kinds of customers and the sort of different services they are getting?

Mr. Dickinson: We have a pretty broad customer base. From the individual inventor who is tinkering in their backyard or garage to the most sophisticated and largest international corporations. About half of our customer base is actually foreign based, foreign corporations that file patent applications and trademark registration applications. So, this gives us a need to meet a lot of different customer requirements and customer demands.

One of the ways we get our feedback most directly is through customer surveys, customer satisfaction surveys in particular. We just had our most recent 1999 results reported back. I am very pleased that they show a significant increase this year in overall customer satisfaction and satisfaction in a number of key indicators such as the quality of the searching we do in patents, for example, that we are very pleased to see moving in that particular direction.

Mr. Lawrence: Yes, I mean it must be a very difficult customer to serve. I mean the applications and the issues themselves seem very complicated. What types of service are they asking for?

Mr. Dickinson: Well, they are asking for service in sort of two broad categories. One is the substantive work we do which is namely examining their patent for patent ability and issuing that as a substantive matter.

The other is our basic customer service thing. Do we answer the telephone and route their call correctly? Do we get their facts in the file?

We move a huge amount of paper and when you move that much paper, a lot of it can get lost unfortunately or be missing. Finding that information is one of the big things the customers are demanding and one of the big challenges to meet, frankly.

Problem resolution is probably the number one concern that is not being met at the moment and we are working on it. If we do things right, people like what we do and the service we provide. That is clear. When they go wrong, they can go really wrong and there is a black hole phenomenon sometimes that we have to work on that we keep the customer informed of where their problem is and how to get at it.

Mr. Lawrence: How is it, having once been a customer on the outside, to see it from the inside now?

Mr. Dickinson: It gives you a lot more respect for some of the things I thought should have been handled very easily. On the other hand, I think my being a practitioner before the office has great value in coming into the office. I assumed that the folks that worked there from top to bottom knew a lot of the issues that we faced outside or at least our position on it. I think I just brought a perspective on some of the issues that may not have been fully realized before.

Mr. Lawrence: Now, tell us about some of the other activities, the other reinvention activities that are taking place at PTO.

Mr. Dickinson: Well, we are moving to use a number of standards that I think will be familiar in private industry that are new in some ways to government. For example, performance measures. We are using a fairly rigorous balanced scorecard approach to performance measures that hadn't really been used before. Getting that up and running has been something of a challenge because getting over the hurdle that sometimes managers have of exposing themselves and their data, particularly with their peers, there are obviously some issues to deal with in getting that out.

We are doing that and I think we have moved aggressively.

We have also just concluded a very rigorous self-assessment. We used the Baldridge criteria. There is a set of self-assessment criteria for government entities and we used that. We had a very broad range of employees in the organization work with us on the Baldridge self-assessment, and it showed some very interesting results in terms of some of the challenges we faced and also some of the good parts of our work as well.

Some specific things with regard to customers, a big chunk of our customer base are independent inventors, one or two time users of our system. They have particular needs that weren't being met as well as they could have been before. So I established the so-called Independent Inventor Initiative creating a new office again of Independent Inventor Programming, which deals with a lot of very specific issues to them; communication, education, and mechanisms for interacting with our office more directly that I think have been very helpful. Prevention of invention promotion fraud is another big issue.

There are invention promotion firms out there who would rip off inventors. That has been very successful. There have been several approaches that we have taken.

Mr. Lawrence: Tell us about managing this change. How is it done? We have found that most people don't like change. So, when we introduce performance measurement, for example, people are very reluctant. How have you gone about implementing that?

Mr. Dickinson: Well, I have been surprised. They have not been as reluctant as you might think in some ways. Many of our managers have either had academic training such as business training and others have had other business experience. That has prepared them, I think, for understanding the need to manage this change as well. They also, frankly, were faced by this sort of tsunami wave of work and they have needed to change. The pressure has been there and it has been dramatic to genuinely reinvent how they do the work or else they fall hopelessly behind. They certainly don't want to do that.

Mr. Lawrence: How about in terms of special things like communication and getting people to buy into the change?

Mr. Dickinson: We have, as I mentioned a while ago, I believe we are in over-communication rather than under-communication almost always. We have established a variety of mechanisms for doing that internally. We report regularly to our employees. I meet regularly with our unions as well.

You mentioned "buy in." I believe very strongly in a consensus-based management system, which wasn't necessarily the case in the past. I use an executive committee structure with all the senior heads that meets ostensibly once a week together and has a very interestingly evolving consensus management system. They didn't bind to that originally. It was interesting. The first executive committee meeting we had lasted about ten minutes and there was like one issue on the agenda. Now, they go almost two hours and the comfort level is that they can bring issues to an executive committee, they can get peer review of the issue, if you will, and peer feedback. It has been very helpful. They have seen in "real time" the benefit to doing this. It has led to, I think, a natural evolution.

That has not always been easy. We have needed to put a big change in our trademark organization, for example. I went to the next level down of managers, the trademark managers and the middle managers to try to get this change in. It was a pendency issue, how long does it take to do the work? I wanted to accelerate it and get to a goal that we had set for the Vice President. They said, basically, back to me, "Well, what do you want us to do?"

I said, "Well, I am not a trademark manager. I am happy to help you. I am happy to give you some feedback, and I am happy to clear the path for you when you develop this action plan, but I am not going to tell you how to do your work." That was interesting because it took a little while for them to appreciate that they were responsible and accountable for developing this plan and making it work.

Mr. Lawrence: Well, where do you think you are in the change process? It sounds like it is beginning. I am wondering what is sort of out there and how much longer you think it will take.

Mr. Dickinson: Well, it will be a function, I think, of how the growth proceeds in our office and what happens to the legislation. I think those are two big issues that will face it. I think we are well on our way to the kind of change managers that we need now to meet the challenges now, and we are also planning very aggressively. We just had our strategic planning retreat the other day for what we see as our likely challenges coming up.

We see continued growth. We see continued stress on the quality of the product we produce and the service we provide. Actually, quality turned out to be a higher indicator than even the pendency time, which has been our traditional performance measure. So, we are making an all-out effort to stress quality in the work that we do.

Mr. Lawrence: Earlier you said you were hiring many more new people. Because of this change, are you hiring different types of people?

Mr. Dickinson: We are focusing primarily on hiring examiners, which is a high tech worker to do the professional review of the files. We have a huge automation activity, too, which we can talk about. The productivity gains of this are starting to be realized. We are just really at the beginning of that realization. We are hopeful that we can apply these productivity gains from the automation activities in times for things like electronic filing of applications, the electronic searching that we are doing much more aggressively these days that will allow us to focus more on the examiner end of the work pool.

Mr. Lawrence: Okay. Well, that's great. We will be right back with more of the Business of Government Hour. (Intermission)

Mr. Lawrence: Welcome to the Business of Government Hour. I am Paul Lawrence, a partner at PricewaterhouseCoopers. Tonight's conversation is with Todd Dickinson, Acting Assistant Secretary of Commerce and Acting Commissioner of Patents and Trademarks.

Well, in the last segment you just began to talk about the future in technology so why don't we spend a few minutes doing that? Why don't we look forward to the future of PTO and tell us what you think that will be about.

Mr. Dickinson: Well, increasingly it is going to be about automation and electronic involvement, if you will, both internally and externally. We are just on the edge of the opportunity that people have to file their work with us electronically. You can file trademark applications now and soon you will be able to file patent applications. They are a more complex document.

We also have automated searching, as I mentioned before. We also recently did something, which the agency, I think, itself thought was kind of radical. I thought it seemed pretty much like mom and apple pie, but it has proved to be enormously successful. That's putting our database, all the patents we have issued and the trademark registrations we have issued up on the Internet, searchable for free by anybody in the world. We are a public agency, and we are required to make that information public and disseminate it as widely as we can. Again, it has been a huge success. Again, it is on our web site.

Mr. Lawrence: Well, there are two parts to the technology question. First is an internal thing. Earlier you mentioned that you are using technology to work better, maybe you can tell us about that.

Mr. Dickinson: Yes. We have spent an enormous amount of investment on automating that we have internally. Searching is a good example. Traditionally, a patent examiner would go to huge file rooms of all of the past patents and other technical literature in addition to patents and search it by hand through the paper. Now, through the automated searching that we have, we have something like 900 data bases, plus all the patents from our office, the Japanese office, and the European office on-line. They can search by key words. They can search by classification. They can search in a wide variety of ways. I think that significantly improves the quality of the searching that we are capable of doing.

Mr. Lawrence: Then you also mentioned that technology is being used by your customers, in particular the Internet, for example. Tell us how technology is affecting that.

Mr. Dickinson: Well, a couple of ways. Pretty soon you will be able to file your application with us electronically and pay for it by credit card. We are one of the first government agencies that will accept your credit card electronically.

We are also fairly shortly going to have e-mail communication directly with customers, which I think is a great improvement for reasons as broad as everybody who has access to the Internet to as mundane as it avoids the problem of missing each other's telephone calls and telephone tag back and forth.

They raise their own issues, of course. We have to decide what e-mail to download and capture in the file permanently, because it is a permanent record, and what we might not capture. There are policy judgments that have to be made, but it will be an interesting challenge. The other side of the coin is that people invent things on the Internet and invent ways of using the Internet so we are actually receiving a fair number of patent applications directed to ways to use the Internet.

Mr. Lawrence: Yes, I was going to ask you, what are the management challenges in dealing with the technological change?

Mr. Dickinson: Well, that challenge in particular affects us because we are seeing a rapid increase in the number of those kinds of applications and keeping up with technology has always been a primary challenge for our office.

One hundred years ago we had to keep up with electronic technology in the telephone, then eventually the television. In this century, we had to deal with the evolution in aeronautics. Before the century began, we used to require you to submit a model of a heavier-than-aircraft invention that you claim to have invented because nobody believed it could be done. In 1903, the Wright Brothers flew and so all aeronautics has been a product of this entire century. So, we have to keep up with technology as each new technology has come along.

The current challenges are things in biotechnology and in computers and software that present unique challenges. The principal way we do it is to hire examiners who have the skills and the knowledge in these areas. If they need to be updated, we send them out for additional training to bring their skill set up to where it needs to be. We bring in a lot of our customers to help educate our examiners on the latest technologies that they need to do the examination.

Mr. Lawrence: Looking further out, say ten years, you know, how do you envision citizens interacting with PTO in the year 2010?

Mr. Dickinson: I would guess by the year 2010 it would almost entirely be electronic, or at least I would guess 75 to 80 percent electronic. I think we would also interact more globally.

One of our biggest challenges is the fact that while the Internet and the globalization of the economy have proceeded so rapidly, the systems that govern electrical property are all nationally based. The laws are nationally based.

One of the big policy challenges we are working on is how to develop, if you will, a global patent system that benefits small inventors, benefits large inventors, small trademark owners and large ones. That is a big challenge, reconciling all those different systems.

Another way we are doing it is connecting all of our offices electronically. There are three major offices in the world that gets about 85 percent of the applications: the Japanese, the European patent office and our office. We need regularly to establish connectivity between our offices, the so-called, "Wire the World" Project, that will allow the information to be shared, reduce redundancies, and again improve the quality and the speed with which we provide our product.

Mr. Lawrence: What kind of place will PTO be to work then for the employees? What will their jobs look like?

Mr. Dickinson: Well, if our space consolidation plan goes forward, we will have a brand new building which is all fiber-optically wired. It will have the latest technology. We have some of the latest up-to-date personal workstations for our examiners in the government. That will obviously continue to evolve.

Hopefully, the climate and the physical plant itself will be a new and better place than it is now. We face the same challenge as anybody else does with aging plant, air-conditioning that doesn't work, and peeling paint and everything else. Hopefully, that will be a lot better, but I think automation, like in most businesses, will be the primary driver, and hopefully, as I say, we will get the productivity gains that people are anticipating for this significant investment.

Mr. Lawrence: How about the types of employees, then? It seems like the subject matter itself is changing very quickly. What would you think the type of employees might be?

Mr. Dickinson: Our employee has changed as the technology has changed. You are absolutely right. We hire, for example, a significant chunk of Ph.D. geneticists in this country. We also have a very diverse workforce. I anticipate that diversity increasing. Of the new pool that we just hired, 30 percent are Asian-Pacific American, 23 percent are African-American. That is for us a very pleasing result that we are regarded by such a diverse set of potential employees as a great place to work. I would expect that that diversity would continue.

Mr. Lawrence: How about the management challenges in the future?

Mr. Dickinson: Hopefully, the growth, well, I guess I shouldn't say hopefully the growth will slack off because I don't know what will happen in that regard. But hopefully we will adapt our systems to deal with this growth in new and better ways. I think we have done a great job to this point, but if the growth continues as it has, and every indication is that it will because many corporations are now starting to see their patent portfolio in very strategic terms as opposed to just the traditional terms.

We need to have the systems that will allow that growth to proceed. So reorganizing our organization is critical, getting the legislation passed so that we can have the flexibilities we need to meet those management challenges is critical, too.

Mr. Lawrence: Well, it sounds like in the future you will have a much greater percentage of knowledge workers, as we might call them now. I am wondering, then, from a leadership perspective what we might expect to see in terms of change then for the type of people who would then be in charge?

Mr. Dickinson: We have always had a pretty high percentage of knowledge workers, if you define knowledge broadly. These are folks who are required to know an awful lot about the particular technologies that they deal with. But as the type of knowledge and the type of information changes and people are using the system to protect the intellectual asset that knowledge represents, we are seeing a definite movement in that direction.

That is one of the key reasons our system is growing because of the recognition that intellectual capital as opposed to physical capital is the wave of the future in the next century. Since we are the mechanism by which you protect that capital intellectually, we are seeing significant growth.

Mr. Lawrence: Well, thank you very much, Mr. Dickinson, for spending some time with us tonight. I have enjoyed our conversation very much.

This has been the Business of Government Hour, conversations with government leaders. I am Paul Lawrence, a partner at PricewaterhouseCoopers and the co-chair of the PricewaterhouseCoopers Endowment for the Business of Government. To learn more about the endowment programs and research and the new approaches to improving government effectiveness, visit us on the web at See you next week.

John P. Mitchell interview

Monday, November 29th, 1999 - 20:00
John P. Mitchell
Radio show date: 
Fri, 04/14/2000
Intro text: 
Missions and Programs; Strategic Thinking; Leadership; ...
Missions and Programs; Strategic Thinking; Leadership;
Magazine profile: 
Complete transcript: 

Arlington, Virginia
Friday, April 14, 2000

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

The Business of Government Hour focuses on outstanding government executives who are changing the way government does business. Our guests tonight, John Mitchell, acting director of the U.S. Mint. Welcome, John.

Mr. Mitchell: Hi, Paul.

Mr. Lawrence: And Colleen Vogel, staff director of Mint operations. Welcome, Colleen.

Ms. Vogel: Hi, Paul.

Mr. Lawrence: Well, why don't we begin by talking about the mint, because most of us at a certain age remember the Mint from the James Bond movie Goldfinger and Fort Knox, but I know there's much more. So perhaps you could tell us about other parts of the mint.

Mr. Mitchell: I'd be happy to. I have the same memories of Fort Knox and Odd Job. As a matter of fact, Fort Knox as a Mint holds over $100 billion of the nation's assets that we protect as part of our protection business unit. In addition, we have circulating coin production that everyone is familiar with as pocket change. We're going to be minting a record 29 or 30 billion coins this year, including the new 50-state quarters program, and the Golden Dollar which everyone is very excited about.

We have a very active IT side and collectibles side as well. We had over a billion dollars in revenues last year in various collectibles as well as the only investment product that we sell, the bullion coin, the American Eagle platinum, gold, and silver, and lots of other things as well. So we're a very active business.

Mr. Lawrence: Well, maybe we can begin by talking about your careers and the various positions you'd had. Colleen, do you want to start?

Ms. Vogel: Sure. I started my career as a GS-2 at Wright Patterson Air Force Base, and as I've grown in my career, I have seen the government grow as well in the way that it does business. In my various positions in accounting, procurement and human resources, I've watched our focus go from the business that we designed to one of customer service and benchmarking and utilizing best practices -- really trying to identify what it is that the customers need and delivering that rather than what we think they need.

Mr. Mitchell: Similarly, as a grade 2 at the Export-Import Bank during college, that was my start of my federal career. I've worked at the Federal Reserve Board, other Treasury offices, a few years in the private sector. That has provided a great balance of the type of skills that you need to work not only in a public-sector agency, but one that has a private-sector focus and business attitude about it.

Even some of the courses that I took for my undergraduate degree at Maryland many years ago, like cost accounting and others, that information was dormant for about 20 years, and then all of a sudden I come into a major manufacturing operation like the Mint and I'm now able to use a lot of the skills that went unused in other organizations.

Mr. Lawrence: What drew you both to a career in public service?

Mr. Mitchell: I think from my perspective it's twofold. The public service is very important to me. It's a passion of mine. It's important to me that whatever organization I'm part of delivers excellent products and services to the public. The Mint specifically has such a wonderful combination of public and private-sector characteristics it's an opportunity to really soar, to flex your wings and to take on a number of different opportunities and challenges that the Mint is pretty unique in being able to provide.

Ms. Vogel: For me, too, a sense of serving the greater good, and putting all that coinage in the public's hand is important. Early on, job security and interesting work is what brought me into the government. Especially for me in procurement… there is a lot of interesting things to do in that field, and it continues to grow and become more important in the business cycle. It's also helped that the public service in general has changed and grown. And working at the mint, you operate using private-sector practices in a public forum.

Mr. Lawrence: You've mentioned that a couple times, Colleen, that you operate in a private-sector setting, and I think most people think of the Mint as just another federal government agency, but it's really not. Perhaps you could talkabout that and some of the flexibility it allows you.

Mr. Mitchell: That's exactly right. One of the things I want to say early on to turn your question a little bit initially, is that one of our opportunities but also one of our frustrations is that we've had the support of the administration and Congress to gain the flexibility to allow ourselves to operate more like a business. So we've been a good opportunity to model various business practices on behalf of the administration and Congress. We have taken to heart all of the President and Vice President's reinvention initiatives and have completed them all at the mint, and they're ongoing and thriving.

One of our frustrations is that other people say, well, you're different and we can't do the same thing at our agency, and that most of what we do is very service and customer oriented and is easily translatable to other federal agencies. In terms of other aspects of the mint, we think that what we do, and the flexibility that we've gained through legislation as well as by taking on other initiatives, allows us to maintain a very high level of the integrity that goes along with being a federal agency and fulfilling our mission as mandated by Congress, but also operating very much in a private-sector manner in terms of being profit and loss driven, very cost conscious, very customer focused. Something we'll be talking about a little bit later, basically reorganizing to be better aligned with our customers in our various business units.

Mr. Lawrence: Colleen, how about some of the procurement changes that exist because you have more flexibility?

Ms. Vogel: Again, a lot of the things that we've done. For instance the procurement executive over at Treasury, when we were describing some of the things that we had done, realized right away that a lot of them were things that other people in the department could do even with the regulations.

Initially, we had done all of our streamlining and things from our own experience and knowledge when we first got the procurement waiver, but once we got through those initial shifts, we found that to change even further we really needed to get some help. So one of the key things that we did is we hired PricewaterhouseCoopers to come in and do a review and a benchmarking of our practices. Jay Tansing led that effort, and they found that a lot of the things we do are best practices in both public and private sector, and we didn't just benchmark private sector. There are a lot of practices out there in the public sector as well. They also come up with some new opportunities for us to make the procurement cycle go better.

One of the main things we did was develop a procurement council of the key managers in procurement to identify the needs across the business. There were a lot of people just looking at their piece of the pie and we found that that wasn't particularly fruitful and we'd get a lot more accomplished. Along those same lines, we conducted a spend analysis that Dun & Bradstreet did for us.

Personally I think that's the most significant thing that we've done recently, because it gives you a lot of information and it tells you where you're spending your money, how you're spending your money, with whom, and it gives you a lot of opportunities to continue to buy wiser. Of course, spend analysis is something anyone could do. You don't have to be waived from the federal regulations to do that. Again, with the procurement council, anyone could do that. We also established cross-functional teams like a lot of folks are doing, and we have a really significant push right now on performance-based service contracts… from small incentives for getting a job done early, to larger more complex measurements.

Mr. Mitchell: One of the things that you hear Colleen addressing is that procurement is very much seen as a partner within the organization with the various business units and corporate CFO and CIO functions. Initially, when we got the waiver from the federal acquisition regulations most saw it as a business opportunity. Some saw it as an opportunity to avoid any sort of oversight. We quickly, with some very good support from senior leadership, dispelled that notion and that, in fact, we would have lean procedures, but ones that would, again, protect the government's interests and have a high level of credibility and integrity.

After that, procurement has marketed themselves very successfully within the organization. They are now seen as a partner from the very beginning, not somebody that you bring in later or even late in the process, and an organization that will get the best products, the best services, the best suppliers, companies, et cetera, into our business units that will help our business units accomplish their work and realize opportunities.

Mr. Lawrence: During this process was procurement elevated in its position in the organization?

Mr. Mitchell: No. It stayed exactly where it was originally which was within the office of the chief financial officer. Thanks to folks like Colleen Vogel, Joan Ting and others in procurement, they took on the leadership themselves and have not only provided great service, but also marketed their service well.

Mr. Lawrence: It's time for a break. We'll be right back with more of The Business of Government Hour in just a minute.


Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers, and tonight's conversation is with John Mitchell, acting director of the U.S. Mint, and Colleen Vogel, staff director of Mint operations. In the second segment, why don't we spend some time talking about your experiences at the Mint, what it was like when you arrived, and what were some of the changes you made?

Mr. Mitchell: When we arrived at the mint, and this roughly goes back 6 or 7 years for myself and the former director, and for Colleen it goes back a few years prior to that. What we found was a very traditional stovepipe-oriented organization and one that did its job well in the old way of doing business, but hadn't been as responsive to the market and hadn’t realized opportunities that were there.

For example, from its perspective, the Mint was customer-focused in that it provided the products to its customer within roughly 8 weeks or beyond for half of its products, and the other half of its products there was no tracking for it because it could take up to months. Now we've completely turned that around in terms of providing standard delivery in 3 weeks, 4 weeks, and many cases within a week, and next-day delivery as well.

Number one, in terms of the circulating coin field and the numismatic or collectable side of our business, the Mint had succeeded in running things the way it had for decades, but really had not taken advantage of the opportunities that the market presented. Number two, the Mint had a customer focus that internally determined what the customer wanted versus talking to the customers to determine what products and services they would want.

Ms. Vogel: I agree. When I first came 10 years ago, the Mint was the government that also happened to be in business, and I think we've shifted to a business that also happens to be the government. Specifically to procurement, small portions of our procurements when I first came to the Mint were exempt, but otherwise we were regulated. Then we received the procurement waiver in 1995 and we began the process of shifting all of our practices to be more streamlined.

Mr. Lawrence: What do you think started all this change?

Mr. Mitchell: Well, I think that going back 5 to 6 years, believe it not, the Mint never had a strategic plan. We're only 208 years old, so I guess it's understandable it took us a little long to get out of the chute. But we'd never had a strategic plan, and we crafted our very first one which, all things considered, was a very modest document, but it is what that document represented to the Mint.

Number one, we designed that document in partnership with our union. We had union leadership sitting around the table with management from the Mint and we created a strategic plan from scratch. And we really focused on our vision, our mission, and our guiding principles as to what values we as an institution held, and then set on a course of accomplishing 12 to 14 projects.

If you look at that plan now, it's not in a good format. It has no measurements. It very much is not aligned in terms of goals, objectives, strategies, performance measurements, et cetera. But it was a great beginning, and two other things to note about it. One is that it projected out a vision as to what we could become and the things we needed to do to get there, including legislation. It also established, as part of our culture, stretch goals, that it's okay to set the bar high, and if you fall short of that, then you still have made much more progress than you otherwise would have made with more modest goals. I think that document and how it was designed in partnership was a very significant turn for the Mint.

Mr. Lawrence: Was it difficult to create, getting people and establishing the vision? I think one of the stories that we hear is that people don't have strategic plans because it's just too hard.

Mr. Mitchell: Yes, it was. It was also an exciting time. I remember one of our union stewards at the time, a gentleman named Dale Nuanis from our Denver Mint, as we sat around the table in those initial years of our strategic plan creation and then modification, there were only maybe 30 or 40 of us off-site for 3 days putting together this plan.

From a relationship perspective, one of the things that Dale mentioned was that as a union individual it was rewarding to him to look across the table and not see three and four-headed management dragons staring back at him; that we're all people, that we all have the same challenges. As the union listened to us as managers talking about all of our different perspectives on how to realize opportunities and how to vanquish a lot of challenges that we had. They also understood that we didn't speak in one voice, we weren't monolithic, that it was a very active discussion which began to build the trust within the organization to deal with issues and not be hung up with personalities.

Mr. Lawrence: How about the adoption of the kinds of goals you talked about? It sounded like the bar was being raised on the staff.

Mr. Mitchell: Well, that's right. What we basically said is, and it takes a while for everyone, ourselves included, to learn how to do this. What we said is, don't assume any of the restrictions that we currently operate under. If we could both resolve longstanding problems that we've had as well as realize a number of opportunities, what do we need to accomplish that. So when I mentioned earlier about how any agency can do what we've done, it's easier for someone to look at us now. We're self-funded. We have a procurement waiver. Nine of ten political positions were eliminated with the full support of the President and the Congress.

We've created new programs. The 50-state quarter program and the Golden Dollar program are all new programs that we worked with the administration and Congress to create. All of those things are in place now that give us the foundation to work from, but we didn't have any of those in 93' and '94. And we basically made our business case to the Hill and to our administration to say, this is what we need to accomplish our objectives. So it's really taking the blinders off, thinking outside of the box, and using any creative techniques you can use to say what could we become, and what do our customers want from us that helps guide that vision as to where we think we should take the Mint.

Ms. Vogel: I think a key to the success, too, is just the partnering with the union and bringing the employees in and not having management go off-site, create a plan and then bring it back. Each year we've gotten better and better at including more of the non-managerial people in the strategic planning process so that it kind of institutionalizes the culture that management has identified for us.

Mr. Lawrence: Earlier you talked about minting a huge number of coins, and I understand you have a half-a-billion dollar capital investment program underway at the Mint to improve the manufacturing plants. Could you tell us about that?

Mr. Mitchell: I'd be happy to. One of the key business drivers we were able to identify to Congress, and in fact the chairmen of our appropriations committees, House and Senate, were fully supportive of this idea. Prior to our public enterprise fund which is how we generate the revenues to recover our expenses and otherwise turn the profits over to the Treasury general fund. Prior to that we were under an appropriation in four other funding sources. What we identified to those chairmen is that we had a business need to become self-funded. One of the key reasons for that was our capital budget and the need for it.

Mr. Lawrence: Let's stop, and we'll come back after the break.


Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers, and tonight's conversation is with John Mitchell, acting director of the U.S. Mint, and Colleen Vogel, staff director for Mint operations. John, before we went to commercial, you were talking about the capital investment program. Let me let you finish.

Mr. Mitchell: Briefly, Paul, what we did prior to our public enterprise fund is; we could only spend something like $5 million a year because, in the appropriations process as we're all well aware, there are a lot of competing priorities. We had equipment that was 25 to 30 years old. We have a very aggressive capital budget that we're 3 years into our 5–year half-billion-dollar capital campaign that is bringing in new high-speed coining presses and annealing furnaces. We're making some building improvements, but the vast majority of that is equipment oriented. We've got state-of-the-art robotics in our San Francisco Mint in terms of packaging our products, and so it's been a good opportunity to catch up.

That half-billion-dollar program represents about 4 percent or so of our revenues, and that's very much in line with industry averages of about 3 or 3 1/2 percent. After this 5 years, it'll settle back into an average of maybe $40 million or so per year. But it's been a very necessary investment as well as recovery from years of neglected capital.

Mr. Lawrence: Let me shift to talking about the employees of the Mint, because you mentioned in terms of your work with the unions as well. I understand the Mint has earned three national labor/management awards, and every manager and union steward has received some front-line leadership training. How did it come about? How did it begin, and what changes has it brought about?

Mr. Mitchell: You're exactly right. We're very proud of the recognition that we've gotten from the Vice President from the President's labor partnership council. It started with the fact that we were the first Treasury Bureau, and perhaps one of the first few in government to sign an agency-wide partnership agreement with our union back in 1994 and we took a very open approach. We included the union in a lot of discussions early on, and so it was partly that change, but also the building of relationships and trust. That greases so much of the operations of a business, for a group of people to trust each other and to deal with only the issues and not get hung up on personalities. So that was very important.

We also had an environment prior to '94, where to say we had strained labor-management relations would not be an exaggeration; our Denver Mint was picketed by its employees… informational pickets since these are government employees. The Denver facility, at the time, had a little over 400 employees, and we had over 200 grievances and other labor complaints. We were not going from a quiet operation into an even stronger one. We were going into a labor relationship in turmoil to what is a recognized and very strong partnership.

Mr. Lawrence: What do you think the lessons learned are from turning about that kind of relationship?

Mr. Mitchell: I think inclusion is very important. Building relationships so that people understand who sits across the table and alongside them. Also, I keep getting back to the business and the customer, we exist to serve the public, and focusing on what it is that we do at the Mint and what our customer wants from us, doesn't just need from us, but what also wants from us, how and how often and time frames and all sorts of other measurements of customer satisfaction; what we as a business need to do and be held accountable for in running a successful business.

The combination of building relationships and trust, getting to know each other so that we work better together as a team and having a team focus, and then having the organization focus on itself as a business that is in existence to serve the public and our customers. I think all of those things woven together is the reason that we've been able to be so successful.

Mr. Lawrence: What else are you doing differently with the employees at the Mint? Let's go through the life cycle. I notice you're actively recruiting, and I understand you have some very interesting training and development programs going on. Perhaps you could tell us about those as well.

Ms. Vogel: We do. We have an individual development plan program for our employees that's very robust and it offers on-the-job training, tuition reimbursement, various job assignments. I'm like the poster child for various job assignments being the procurement director and then doing a rotation through human resources, and now as the staff director.

We've also instituted many flexibility that are just friendly towards our employees like our flexible work schedules, public transportation incentives, telecommuting, things like that that make it just a little easier on the employee and also are good recruiting tools.

Mr. Mitchell: I think, Paul, a couple of things. One is Colleen was responsible for creating an employee advocate position down in our human resources office; somebody that's responsible for coordinating with new employees as they come on board and then working with them for their first months to make sure everything is going well.

While that isn't a revolutionary concept by any stretch, it's something we hadn't been doing, and our employees appreciate. Even our new headquarters location on 801 9th Street in Northwest, our building is a beautiful building that is very much designed around the openness and the environment. Our employees can see an icon as to what the Mint is all about and how valued the employees and their contribution are, and therefore a building that has been designed around those principles with a number of amenities. I hasten to add at a price that's at least $5 below market value. So we did a great job, Colleen and her staff, in negotiating a great deal.

Mr. Lawrence: Well, Colleen, let me ask you something you mentioned about changing jobs. Our surveys of federal employees is by and large they almost hate changing jobs and yet you've been able to do that. How did you do that?

Ms. Vogel: Well, the need was there. The thing about the Mint that I think is unique is that typically in government, it's been my experience, that you get into a series and then that is where you are and there's no moving around. The Mint is different in that when the need is there and if they can match up the right skills with the need… for instance, it didn't seem reasonable to some people that I would move from procurement to human resources, but I did have a degree in human resources and I had some experience. And so it just flowed like that. It was short-term. It was really a matter of hiring someone else to fill the job permanently, but at the same time being able to take an opportunity to let someone else come in who really wasn't too familiar with the day-to-day operations and then find opportunities to help them make change in their organization.

Mr. Mitchell: If I could, we have two points then at this point, the strategic plan and IDPs. We, in our strategic plan in '94 and '95 wrote in deliberately that every employee at the Mint that was entitled to have an individual development plan and that we would support that plan. We also added that they had to take the initiative to create it because initially we were talking about doing them for each employee and then we decided, no, they need to take the initiative to seize that opportunity.

What we also said is that we're going to create an environment where these opportunities can be realized and people can go outside of their current job field and that the key to that success is tying it into the strategic plan and the business interests of the agency. Because we have so many varied operations within the mint, there really is quite an open field for people to provide or identify those sorts of opportunities for them. They work with their supervisor and they work with others to both have on-the-job training, off-site classes, on-site training, as well, and gravitate into other fields.

What we want is for employees to feel that they're contributing, know that they're the reason for our success, and we want to keep them as long as we can. But if they also want to go outside of the Mint down the road and they can gain a lot of marketable skills at the mint, and we have very marketable skills at the mint, then that's great. Then that's a success for us. They helped us for a period of time. We had folks that helped create our Web for example that after 3 or 4 years of developing themselves in that arena have taken jobs with million-dollar stock options and other things that we can't quite compete with in the public sector, but that's great. It's a success for them and for us.

Mr. Lawrence: You raise two questions I'm interested in asking about. First, one of the things, the stories created about the federal work force, is that it tends to be older. A lot of employees are near retirement, and are very resistant to the kind of changes you're describing. So, I wonder is the Mint not typical in that sense?

Mr. Mitchell: I think we were very typical. What we tried to do early on is, a number of folks in leadership positions both formal and informal decided that there was this great opportunity, that the Mint was an incredible sleeping giant. Then what we did was, we found folks throughout the organization, including individuals like Colleen and people from all the different functional areas at every level of the organization. By including the union leadership and union stewards, that bought into it our values, our principles… realizing opportunities, having a fun place to work, allowing people to develop and really blossom, I think that's what's really driven us.

As part of our business, all the things we do with a profit-and-loss focus in terms of our financial management, having an enterprise resource planning system, a Web site that's very profitable and puts us in the top 20 national E-retailers. A lot of stuff we do is cutting edge and therefore our existing work force has changed, but we've also recruited a lot of folks into our organization that are part of a new level of enthusiasm for what we do.

Ms. Vogel: I've also seen, though, that a lot of our employees that have been around for a while, I watched them become rejuvenated also because there was an influx of change and excitement. So those people were driving things. But then also the people that have been there for a while jumped on the wagon and took over as well.

Mr. Mitchell: A very quick note. By and large we have done this with most of the folks that were there when we came on board. There have been some including in leadership positions that just did not want to go that route. So the influx of new talent, but also the re-energizing of existing talent is what's accounted for our success.

Mr. Lawrence: We'll be right back with more of The Business of Government Hour.


Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers, and tonight's conversation is with John Mitchell, acting director of the U.S. Mint, and Colleen Vogel, staff director of Mint operations.

Let me just continue on the last theme because we talked about the change of the present employees, but how about recruiting new employees? It's very difficult for government to do, I understand. You even mentioned it, John, there are no stock options. You have to really want to come to work for the government. So how is the Mint getting new people?

Mr. Mitchell: That's exactly right. What we have is a situation that we can talk about the fact that we are a very fun place to work, people coming to work with us either with existing skills or wanting to develop new ones, that we have an incredibly supportive training program and culture that developing new talents is a good thing and something that we welcome and encourage. Also, the environment that we have is very innovative and risk oriented, obviously measured risks, but nonetheless we encourage risk-taking in our organization. A lot of features that anyone could employ, we do at the mint, and we've also got products that are in everyone's pockets right now.

Everyone is very conscious of the quarters, of the Golden Dollar. They've seen our various promotions. They know that for example Kermit is our spokes-frog for our 50 State Quarters program, and they've seen the new ads with a hipper George Washington out there that's promoting our dollar coin. So, there is a buzz about the Mint that we've been able to create. And beyond that, we want them to know that the reason this buzz has been created is because of our employees. By coming and joining us they can both use and develop skills that are very marketable, that they can either stay at the Mint, which would be great for us, or then move on to something else. That's also great because while they're with us they'll have fun with their work, they'll know they're contributing, and they'll leave with very marketable skills.

Ms. Vogel: Like we were talking about earlier, the flexibility between going from job to job. If you've identified as John said through your IDP that you have interests in other areas, we really are very open to letting you take temporary assignments in those other areas. There's a lot of trust in our organization, so with a sense of trust that your job will still be there for you when you're ready to go back.

I've heard from our presidential management interns, and when they are helping us recruit new PMIs, they frequently talk about the Mint as a breeding ground for knowledge and expanding yourself and for entering various areas that are of interest to you. If you can identify, for the Mint, something that will help them and help you, the Mint generally approves those plans. So the new people coming into the organization find that they're not put in a job and then just left there to do just that one thing, that if they can think of it, they can probably do it.

Mr. Lawrence: Speaking of marketable skills, technology is becoming an increasingly important part of all government agencies, and I understand the Mint was one of the first to install enterprise resource planning, or ERP computer systems, and this has been a big step. I wonder if you could tell us, what is ERP and why has it been so important to the mint.

Mr. Mitchell: I think to say that we had a nonintegrated, Byzantine type of automated systems before our ERP would not be an exaggeration. It was pretty horrible. In fact, it was part of the reason that we could not get a clean opinion back in '94 on our financial statements. We went to an ERP because of the power of the information systems, basically going from the Dark Ages to the 21st century, if you will, because it tightly integrated manufacturing, financial, sales and distribution, and database mining and warehousing capabilities, and we need all of those.

We are a manufacturer, we distribute products. We need to have strong financials. We need to work with our customers and serve them best at the lowest cost. So all of those things together were important to us, or are important to us, and we basically implemented the entire suite of systems, a Peoplesoft ERP solution, plus three other systems in 12 months and went live in October of '98.

Mr. Lawrence: When we talk about bringing ERP to government, we often hear it won't work. This has been widely used in the private sector, but yet it won't work in government, and yet it seems to have worked.

Mr. Mitchell: It works very well. As we usually do at the mint, we saw it not only as a challenge, because it was a very significant challenge especially because it was our 100 percent Y2K solution, so the risks were large with the implementation. In addition, what we saw with it was a tremendous opportunity for both people in functional areas as well as our information technology area to get into state-of-the-art systems that all of us could then benefit from. The very robust data and reporting that it captures, helps us to run our business and to look down the road and see the future instead of looking at reports that are months old. That’s basically managing by rear-view mirror.

Everyone, any federal agency, can implement the ERP. Certainly the financial side of it, but tying it into certain service measurements matches up to what any federal agency does. If you happen to have a particularly unique product or service like we do at the Mint with coins and coin-related products, then for us the manufacturing piece, and we realize we're one of the few manufacturers in federal government, then for us there was an added benefit as well.

It was taking a very bad situation, going out into the market and seeing what the best solutions were and then getting a commitment to implement it within the mint, and also seeing it as a great opportunity.

Mr. Lawrence: You call your call ERP coins consolidated information systems. I read in an earlier interview you said without coins we would not have been able to have been the successful E-commerce site that we now are. What does that mean?

Mr. Mitchell: That’s exactly right as well. What that means is that coins have all of the data out there… from the point that a huge roll of strip that manufacture coins from comes in the front door to where that goes out the door, whether it's bagged coin to the Federal Reserve or packaged coin to a collector. We know where that is and can track that through the entire system as well as what the costs and the revenues related to it are. So on top of that, we have overlaid a Web system that takes advantage of that rich database and now gives us the opportunity and our customers an opportunity, to interact directly with us and place an order for example that goes immediately into the system without any human interaction. Without our very robust ERP, we could not have the kind of Web that we have currently.

Mr. Lawrence: You seem very comfortable with E-commerce, and I'm wondering what challenges does E-commerce present to the public sector.

Mr. Mitchell: I think E-commerce is just an incredible field of opportunities from E-procurement, and Colleen has got that lead on that for the Mint, and the supplier relationships, the opportunity to purchase goods and services that everyone in the federal government needs at the best quality and the lowest prices. I think it's a tremendous opportunity. For us with the additional customer component and the collector of our coins and coin products, it's a great opportunity to very much realize our customer's relationship management, permission marketing and all of the other things that from an E-retail side we traditionally can realize an opportunity from.

Mr. Lawrence: Colleen, how about the challenges of E-procurement?

Ms. Vogel: The challenges are pretty great, actually, because it's so new. It's new really in the private sector also. The good thing is that someone coming to the mint, they're not going to be behind the power curve. Coming to the Mint in procurement you will get on the ground floor of something that is important throughout the purchasing community. We are looking at reverse auctioning, we're looking at buying our products directly from the manufacturers without even going through procurement at all just based on the need as identified through coins.

We're very excited about it, though. We're going to do it, it's very interesting, but it is all very new. So we're excited, but we've got a lot ahead of us.

Mr. Mitchell: I also think, Paul, very briefly, that there's a culture that also goes along with the Web that is very closely matched to the Mint culture. That is, we move very fast and we're very customer-focused. There's an immediacy within our operations, and that very much typifies the Web. So both within the Mint in terms of how we work it as well as how our customers view us as well as recruiting individuals, the Web is emblematic, basically, of the new Mint.

Mr. Lawrence: We're almost out of time, but how about a couple of the key challenges in the future for the mint?

Mr. Mitchell: It's hard to summarize, but number one will be growing this entrepreneurship that we've been for the last 5 or 6 years and maturing it into an organization that's thriving and risk oriented, but also more stable. Then we've also got some other opportunities with our customers and with manufacturing and the Web and the whole E-field that I think we're very excited about seeing what those opportunities bring to us.

Mr. Lawrence: I'm afraid we're out of time. I want to thank you very much, John and Colleen, for spending time with us today. We've really enjoyed the conversation.

This has been The Business of Government Hour, Conversations with Government Leaders. I'm Paul Lawrence, a partner at PricewaterhouseCoopers and the co-chair of the PricewaterhouseCoopers Endowment for the Business of Government. To learn more about the Endowment's program and research into new approaches to improving government effectiveness, visit us on the Web See you next week.

Bradley A. Buckles interview

Monday, November 29th, 1999 - 20:00
Bradley A. Buckles
Radio show date: 
Fri, 05/19/2000
Intro text: 
Bradley A. Buckles
Magazine profile: 
Complete transcript: 

Arlington, Virginia

Friday, May 19, 2000

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

The Business of Government Hour focuses on outstanding government executives who are changing the way government does business. Our very special guest tonight is Bradley Buckles, director of the Bureau of Alcohol, Tobacco, and Firearms. Welcome, Director Buckles.

Mr. Buckles: Thank you. Glad to be here.

Mr. Lawrence: Well, in this first segment let's find out more about the Bureau of Alcohol, Tobacco, and Firearms. As I recall, the agency can trace its history to the Revolutionary War and the Whiskey Rebellion in 1794. Perhaps you could tell us a little more about the history and bring us up to date.

Mr. Buckles: Well that’s right. Some people have also remarked that we were the Internal Revenue Service before there was an Internal Revenue Service. The very first taxes laid by the Federal government were taxes on alcohol. During a large portion of the early United States, excise taxes on alcohol and tobacco formed a major source of U.S. revenue. Income taxes, which, of course, are the major source of Federal Revenue, were a relatively late development during and after the Civil War.

Mr. Lawrence: You began your career at ATF over 25 years ago. Could you tell us about the various positions you've had during your career.

Mr. Buckles: Well, I've had a slightly different career for someone who would be the head of ATF, or the head of an agency of this sort. I entered the government in 1974, in a position of an attorney advisor in the office of chief counsel in our headquarters office and spent my entire career there until I was named the deputy director in 1996. In the chief counsel's office, I held a variety of positions of assistant to the chief counsel, assistant chief counsel for litigation. I was the deputy chief counsel for twelve years and then served as the chief counsel before becoming the deputy director. But, my entire career up until that time was on the legal side of ATF.

Mr. Lawrence: You are currently one of the highest ranking career officials in the Department of Treasury and I'm curious, could you tell us about your role as a career official in a very political town and very high profile agency?

Mr. Buckles: Well, it's what makes the job interesting. Let's put it that way. I'm a career employee and I love the fact that I do it. I've worked with Republicans and Democrats throughout my career, probably more Republicans than Democrats to this point in time, and our issues are controversial with both sides of the aisle.

In Congress, they don't necessarily fall along party lines when it comes to issues surrounding alcohol and tobacco and firearms. So, it's an interesting challenge to be able to work with those issues and everyone on them. It's why I believe the ATF's primary value is to be depended upon by the political leaders of either party as someone who tells it straight, deals with the issues fairly and frankly, and doesn't attempt to carry its own agenda onto the sensitive issues that follow these products.

Mr. Lawrence: Are there different management perspectives, based on where you are as a career official versus a political appointee -- that we expect different management styles, perhaps.

Mr. Buckles: Well, I don't know that it would be so much different management styles because there are political appointees who would be running agencies of ATF's size -- throughout the government. I think, as an executive, they probably would face the same challenges that I would face.

One thing that is different is that they would normally carry the responsibility of setting the administration's political agenda on different offices and programs that they were responsible for, whereas that is not our responsibility to set the political agenda. Our responsibility is to execute on the agenda set by the Congress and the administration.

Mr. Lawrence: A few minutes ago, when you described your career, you said you had spent some time as the deputy director. How did that prepare you to become the director?

Mr. Buckles: That was probably the most important time. I served as deputy director for four years. One of my principal roles as deputy was to chair of our strategic leadership team. That's almost like a board of directors, if you will, within the agency that we use to set our strategic plan and insure it's being implemented throughout the agency. That was the first direct management position that I was in at ATF and it was probably the most important in terms of setting me up for my job now as the director.

However, one of the advantages of working in the chief counsel's office and being in headquarters was that I had been part of the executive staff and strategic leadership team in various forms for probably about 15 years prior to becoming director. So, I have a good history on what we've done in the past, why we did things in the past, what worked, and what didn't work. The deputy director job then set me up where I was in the position of actually making the decisions about those as opposed to being in an advisory capacity.

Mr. Lawrence: What were the lessons you learned from actually having to make the decisions, as opposed to being an advisor?

Mr. Buckles: It's always easier to give the advice. I can tell you that. Even the transition from deputy to director… as deputy I was often in a position where I was advising and recommending to the director what kind of positions to take and I am now in a position where I don't make recommendations. I have to make the decisions and carry them out. It's a different mind frame that you must be into, but I've enjoyed it and it's new challenges that I've found very exciting.

Mr. Lawrence: One of the things I found interesting is that you bring a legal background to this position, rather than, I think, a more traditional law enforcement training. So, I'm curious how your legal background has helped you as director?

Mr. Buckles: As I've watched this city change and government agencies change over the years, everything you do in the management area is becoming more and more a legal issue. I'm sure it's the same thing in the private sectors where counsel are playing a much greater role in almost everything a corporation has to do because of the legal implications.

The same is true, and probably even more so, in the Federal government where personnel decisions, procurement decisions, the whole range of things that would normally be management issues, are all very heavily laden with legal requirements. Having that background and understanding the legal implications of different aspects of our work, I think, is something that helps me tremendously in dealing with and understanding the implications of the problems that we face as a bureau.

Mr. Lawrence: I've also heard it said that the study of law just makes an individual more rigorous about approaching problems as well.

Mr. Buckles: Well, I think that is probably true because of the way we learn things as lawyers. The way we learn to analyze and break things down -- test theories. It is a different way of thinking than you would quite often see in some traditional management approaches which can be somewhat more rigid in terms of the decision making process.

Mr. Lawrence: Speaking of management, a minute ago you talked about the strategic leadership team. Could you tell me a little bit more about this team and its role?

Mr. Buckles: We sat down five years ago to set out a strategic plan for ATF -- this was a task that we were set to by then Director John Magaw who had joined the ATF from Secret. When we sat down at that time, part of the structure we came up with to carry those plans out into the future was that we had to operate as a team on the executive level to see any of those plans through. If we simply came up with grand schemes and then everybody went back to their office and took care of their own business, the strategic plans would not be met. The day-to-day demands would continue to govern the decisions that were being made as opposed to the long-range goals.

By setting up a strategic leadership team, which was composed of all of the assistant directors who were required to be thinking beyond their particular business operation, everyone was required to be thinking of larger bureau issues and the implications of all of the decisions we were making. It forced us to make more strategic investment decisions about where we were going as an agency and, by using that larger body, make sure that everybody was pulling in the same direction and achieving those goals.

Mr. Lawrence: Well, great. It's time for a break. We'll be right back with more of the Business of Government Hour.


Mr. Lawrence: Welcome back to the Business of Government Hour. I'm Paul Lawrence, a partner of PricewaterhouseCoopers, and tonight's conversation is with Bradley Buckles, director, Bureau of Alcohol, Tobacco, and Firearms.

Well, on this second segment, let's talk about ATF. I'm curious, what are some of the biggest changes you've seen at ATF since you've started?

Mr. Buckles: Well, it's hard to know where to start. When I arrived at ATF in 1974, it had only been an agency for two years. Prior to that, it had been a division in the Internal Revenue Service. As a two-year old agency, it was still searching for exactly what it was supposed to be, what its mission was. And it had a lot of people who had worked at ATF during days when moonshine liquor was the highest priority of the bureau, going back into the '50s, when that was a very big part of what ATF did. That transition, moving from a focus on alcohol issues to the firearms and the explosives area, and on top of that, being a bureau that was set adrift from the Internal Revenue Service, was quite a challenge to figure out how to pull all that together into a cohesive fashion.

What I saw over the years, I once used the analogy of a child growing up… that as part of an agency in trying to be able to know where we're going you have to have a sense of your past. There was so much of ATF that was new at the time. We were trying to learn what we were without really having a past to work from. Firearm laws were new. Explosive laws were new. It took quite a while for us to have a real sense of our mission and what we needed to be doing and for that to start to jell.

Again, using the analogy of a person, which I've used a couple times in different speeches, if you think about when we started the strategic planning mode, it would have been when the agency was about in its early '20s. Just like people, sometimes you have to get through those early times of groping, not sure of what you want to be and how you ought to get there. And by the time you're in your 20s is when you really start having a sense of what you want to be in life.

As an agency, that was a period of time when I think we were able to jell, to have a vision for what we wanted to be, a vision for how we were going to use the laws that we had under our jurisdiction and accomplish important public policy goals. So, that's kind of what I saw with ATF… a growing posture where we were making mistakes sometimes going in wrong directions, learning from those mistakes and going in another direction, until finally it all began to come together, I think, just five or six years ago.

Mr. Lawrence: I was going to ask about the management challenges the agency faced when its mission began to expand or get other emphasis in the firearms example you indicated?

Mr. Buckles: That was a difficult one. Now one of the things that have alcohol, tobacco, and firearms together is the similarity in the statutory structure of all of those laws. It's how it all ended up in the same place in the Internal Revenue Service, for example. Each of the products is heavily taxed. Each of the products has a regulatory scheme that calls for licensing. Each of them has various controls on them from a regulatory fashion that the license businesses need to comply with. They have a lot of criminal misuse issues surrounding them.

So, they all have those common themes and that’s how they ended up in the same agency. From a technical point of view, the types of tasks being carried out under those laws were quite similar. But the philosophy behind each one of those laws and the purposes were different. When I first came, there was a heavy emphasis on the alcohol work. Trying to translate that… having inspectors who had worked in alcohol plants suddenly go into firearm dealers. It’s the same kind of work, but it's a very different thing walking from a large alcohol plant or winery into a retail firearms business in terms of your sense of yourself.

That took a long time. It was a tough transition as I watched it happen. As a matter of fact, when I first came, we still had inspectors who were in distilled spirits plants with government locks on all of the warehouses. And distilled spirits plants couldn't even take the distilled spirits they produced unless a government storekeeper would come and unlock the warehouse, let them have a certain quantity of liquor that would be measured at the time -- and then it would all be locked up again under government lock.

So, these were people who were working in this field suddenly dealing with issues surrounding firearms and explosives. It was a management challenge to figure out how to get your work force retrained and reoriented towards new work. But all of that boiled down to, as much as anything, people issues in terms of training and development of people.

Mr. Lawrence: There are several Federal law enforcement agencies, as well as many state, that work closely with you. I wonder if you could talk about who they are and what those relationships are?

Mr. Buckles: Probably almost every Federal and state and local agency. ATF is in a position where the laws that we enforce… for example, the gun control act, the actual title of that statute was the State Firearms Assistance Statute. Because that's what it was designed to do, to put a Federal overlay on top of state laws that basically requires dealers and others to comply with state laws, we could deal with the interstate aspect of that. So, anytime you are dealing with that kind of law, everything we're doing is basically trying to assist state and local enforcement authorities. But when firearms are involved -- people rob banks with firearms -- drug dealers use firearms. Almost any other kind of crime, even at a Federal level, is quite often going to involve firearms or explosives. So that requires us to work closely with a variety of other federal agencies as well.

It's something that is part of ATF's culture. We have a saying that we have a history of partnerships that goes back even into the '50s, the old moonshine days. We've always had very close relationships with state and local agencies. That's basically part of our standard operating business, getting along and assisting others.

Mr. Lawrence: A lot of Federal agencies don't work well with other agencies. I'm wondering what the lessons learned are from your experience?

Mr. Buckles: I would leave that judgment as to whether some of them do or don't to others. But I will say this. I think that in law enforcement and in government in general, the old paradigm was that everybody had their responsibility and you could basically carry out your responsibilities and didn't need other people to do it.

But the world has become too complicated, too fast moving. Everything is done too quickly and people can't operate in that environment any more. So, the challenge of every law enforcement agency is to be able to get along and cooperate with others.

The only solution to that would be, for example, a national police force and nobody believes that's the right direction for this country to go. So as long as we believe for a lot of reasons there shouldn't be a national police force, then that makes it all the more incumbent upon Federal agencies to learn how to deal with each other and cooperate. I'm very optimistic about how things are working in that area.

Mr. Lawrence: It's time for a break. We'll be right back with more of the Business of Government Hour.


Mr. Lawrence: Welcome back to the Business of Government Hour. I'm Paul Lawrence, a partner of PricewaterhouseCoopers, and tonight's conversation is with Bradley Buckles, director, Bureau of Alcohol, Tobacco, and Firearms. One of the things I was interested in is that ATF has published a customer service plan. I was curious if you could tell us about the plan and who your customers are.

Mr. Buckles: Sure. Maybe before I talk about that plan, I'll mention some of the backdrop on developing that. ATF has, I think, been in the forefront on trying to redesign, re-engineer the way we operate and operate more like a business. Traditionally, governments didn't have to operate like a business because, unlike a business, they didn't have competitors and they also were a creature of statute or law that fixed what their responsibilities were and how people had to deal with them.

We've seen over time that more and more of the government is being expected to act like a business, to prove its value every day. I think that an agency like ATF that has had a history of people challenging whether or not we should exist, how we do our business. That has, from a government agency point, been very difficult.

Not every agency has had to face what we have. But what we've tried to do is turn that challenge about our existence and our worth from a liability to an asset. That asset being that we're going to be able to prove our worth. So we are going down a path that's going to attempt to hold ourselves more accountable, to make ourselves accountable publicly, in order to prove our worth.

Customer service plans is just one of those elements. We have performance plans and goals that arise out of our strategic plan as well. But the customer service plans deal with both internal and external customers to get back to that question. Basically it's going to cover anyone that we have to do business with. That's going to be people that we license, people that pay taxes to us, people who have to file different kinds of applications and approvals that were required to make in almost all the industries that we regulate. So that's the major part.

In the law enforcement arena, we also have customers, customers of our firearms tracing capabilities, customers of other law enforcement services that we can provide the state and locals. With those, we're trying to set plans on each one to measure what it is the customer wants and whether or not we're delivering what the customer needs. Then, when we are asking for money and appropriations we can show to the Congress what it is we're doing with the money they gave us, who the customers are, and whether or not we're satisfying that need.

Mr. Lawrence: You also mentioned in the list of plans a performance measurement plan. Could you touch on that too, please?

Mr. Buckles: Sure. That's a requirement of the Federal government that every agency is supposed to set up some sort of performance plans that show how they are meeting their strategic goals. I like to think that we've been out front on that at ATF. We're going beyond simply performance measures of what we're doing and trying to show the actual outcome of what we're producing as well.

Again, it's very important. When we go to the Congress and are asking for money, we're almost challenging them. Look at what we do… look at how much money you're giving us to do it. We'll challenge you to go anywhere else and see that somebody else can do a better job at this or do it at a better value. That's the challenge that we want to be able to put forward. We're confident if we're measured against other people on those goals, people will readily see the value and worth of ATF.

Mr. Lawrence: A key factor in the success of any organization is its people. Could you tell me about the ATF personnel system and the career path of an ATF agent?

Mr. Buckles: Sure. I'll start with the second one, the career path of an ATF agent. Normally we're hiring as agents people at a fairly young age, generally straight out of school or, perhaps, with two or three years of law enforcement experience, quite often at the state and local level. One of the challenges we have on attracting people is that since we're a nationwide organization, we need a work force that's mobile.

So, we have to attract people who are willing not only to suffer the challenges, the threats, and the dangers of being law enforcement officers, but the disruption of being moved and what that does to one's family. And so, it's a difficult challenge that we have. Normally, an agent, if we have somebody who rises to the level of an assistant director, has probably moved at a minimum seven times in their career to go through progressively higher level positions.

They'll generally have to move when they are going to become a supervisor. They'll move again when they are going to become a manager. They'll move again when they are going to become an executive in the field. Somewhere in there they are going to have to have come in and out of headquarters a couple of times before they reach the higher level of operation within the bureau.

But throughout that, what I think gives us an advantage is that people drawn into the law enforcement profession, unlike others… there's a certain dedication to the profession that allows them to put up with some of those problems. They believe in the larger mission that they're trying to carry out as law enforcement officers. We wouldn't have the same success with people in other fields in ATF. If we were uprooting people who were personnel specialists or contract specialists, we wouldn't see that same willingness to go through the moves and suffer that kind of disruption.

We've got two or three work forces within ATF, agents are one major portion. They make up slightly less than half of the bureau's total population. We have inspectors that are not sworn law enforcement officers, but they inspect license premises and ensure compliance with the regulatory requirements. We have chemists, auditors. We have lawyers. As you can see, lawyers haven't been required to move, unlike agents. So, it's a very diverse work force that we deal with at ATF and the agents are just one segment and they tend to be what people see because they are our most public segment of the bureau.

Mr. Lawrence: Have you had problems recruiting?

Mr. Buckles: Not too much. It's surprising. It's a dangerous field to move into. There are a lot of law enforcement agencies that are trying to hire these days. But ATF's reputation within the law enforcement community seems to always give us a leg up on hiring. I know even other Federal agencies sometimes groan when they hear ATF's hiring because there are agents in other segments of the Federal government who have left other agencies and come to ATF.

Mr. Lawrence: What are the challenges of managing an organization that is nationwide, as I understand it, with something like 331 field offices. How do you manage a decentralized organization like that?

Mr. Buckles: That is one of the greatest challenges. Now, when it comes to law enforcement operations, the business is driven by what the problems are in each location. We can have law enforcement officials who are basically empowered to respond to the problems that are taking place in a given area.

It becomes more of a challenge when we talk about our regulatory responsibilities where we're licensing somewhere in the neighborhood of 80,000 businesses around the country. We have offices all over the country that are interacting with those businesses, advising them on how they are to conduct business to make sure they’re in compliance with the Federal law and regulations. It gets much more difficult to keep the consistency that you have to have in a regulatory environment which is different than you have to have in a law enforcement environment.

That is the greater challenge that we face with a decentralized organization and we try to carry that out through a whole variety of things. But I have to tell you, information technology, Internet, and similar communications systems are rapidly improving out ability to get information out and to maintain consistency without trying to direct every single decision out of headquarters.

Mr. Lawrence: How about the training of ATF employees. I'm just curious -- what kind of training is offered?

Mr. Buckles: One of our major directorates is an office of training and professional development. We consider that a major part of our business, both training our own employees and we do considerable training for state and local and other Federal officials as well. So, with that office, we are able to provide extensive training, for example, with agents and inspectors.

The main occupation series have very detailed, long term training programs that they have to go through before they can even be an ATF agent, and the same would be true of inspectors. The time period is not quite as long. But the office of training is also responsible for ongoing training for all of the other professions in the bureau. We do our own agent and inspector training, but when it comes to other forms of training, we outsource a lot of that -- rather than trying to reproduce it ourselves.

Mr. Lawrence: Well, it's time for a break. We'll be right back with more of the Business of Government Hour.


Mr. Lawrence: Welcome back to the Business of Government Hour. I'm Paul Lawrence, a partner of PricewaterhouseCoopers, and tonight's conversation is with Bradley Buckles, director, Bureau of Alcohol, Tobacco, and Firearms.

On this last segment, I'd like to look out to the future, but first start by looking back. ATF recently celebrated its 25th anniversary. As you look back, what are some of the milestones and achievements that stand out to you?

Mr. Buckles: Well, over the 25 years, I think that if you look at the enforcement of firearms laws, the collection of taxes, that ATF is an agency that has had tremendous amount of successes. Man for man, dollar for dollar, our tax collection is difficult to surpass.

We only have a couple of hundred people that are dedicated to the collection of approximately $13 billion in taxes. We do it very efficiently, very effectively. We've changed the system where in 1979, we still had inspectors in the plants keeping a proprietor's stock of liquor locked up behind a government lock to a system where we can now collect all of these taxes with a relatively small number of people.

Our goal, of course, is to collect the most taxes with the least amount of people and the least amount of grief on the part of the people who have to pay the taxes. We've been making great strides along those lines over the whole course of that 25 years in modernizing the collection system. In firearms, we've moved from a nation that basically had no firearms laws on a Federal level in 1968, to a system now where there are 103,000 Federal firearm licensees.

There are very controlled systems through which firearms are sold. We've implemented -- successfully implemented -- the Brady law, the Federal assault weapons statute, and a whole variety of laws over those years. We've also grown during those 25 years by receiving responsibility over the explosives industry through the Federal explosives laws. And the work that we've done in the area of bombings and arson, which flows from the explosives laws, has been a source of great pride with ATF.

Federal arson investigators from ATF were responsible for a lot of the work on the church arsons that were occurring a number of years ago, and we had a very high success rate in bringing those to conclusion. We now have a fire research laboratory that is being built out in Beltsville, Maryland. That's going to provide state of the art fire research for arson purposes… that we're working with the U.S. Fire Administration and others to have a world class facility. So, we've accomplished a lot over these 25 years from the days when we were pulled out of IRS and told to figure out what we were supposed to do to where we are today.

Mr. Lawrence: What are the key challenges for the future?

Mr. Buckles: Well, the key challenges that ATF faces are probably what every industry faces and that's technology and information. That is the direction that we need to be going where we can make the biggest impact, whether it's our revenue responsibilities, or consumer protection responsibilities, or our crime fighting responsibilities.

What we can do from a technology point of view of providing information and knowledge into the right hands is going to make a difference. Our technology and information area is allowing us to setup a national crime gun information center in West Virginia. It will allow people for the first time to really understand the movement and the trafficking of crime guns, where they come from, where they're going, in a very systematic way. Before, when we dealt with the problem, when a crime gun was used, we worried about trying to catch the person who committed the crime.

This will be a system that will allow us to take a more proactive approach to crime guns. We also have technology systems that are going to allow us to identify firearms on the basis of ballistics evidence. Today, you can -- if a firearm fires a round -- look at the projectile or the shell casing from that firearm… and it's like a fingerprint for a human being. People can look at those and identify it.

Technology is going to allow us, I'm sure, in the not too distant future, to be able to have that shell casing fingerprint associated with the serial number at the manufacturer level. We have a pilot project going on with one of the manufacturers right now to do just that. That means when a shell casing is recovered from a crime scene there's no suspect, there's no gun found, but if there's a shell casing left behind, we would be able to look at that shell casing and identify the firearm that it was fired from. And then from that, go back and trace the ownership record of that particular firearm.

Our ability to be able to provide this type of information to local law enforcement trying to solve a murder, is going to be a critical part of our future business in ATF. In the tax area, there are alcohol taxes and tobacco taxes collected -- not only at the Federal level, but also at every state level. And we're looking for ways in which, using technology, we can start blending those systems together to have a system that works more or less seamlessly to collect both of our taxes without causing duplicate efforts in 51 different locations.

Mr. Lawrence: What are the challenges for the employees? In one of your examples you spoke about it a minute ago, you described a system where employees were manually locking up stock. Now it sounds, from a description of the technology and the science brought to it, it's a very different employee now.

Mr. Buckles: That's right. The employee that we're going to be looking at is going to be much more information based as well. The service that they're going to be providing is not necessarily unlocking a lock or always helping physically investigate a crime scene, although that will be necessary. The tool that we will bring will be a greater level of expertise. I think that's what our value will be in the future. It’s not just the individual helping and doing the work but the expertise that's going to be behind every ATF agent and they'll be carrying with them.

Every ATF agent has a laptop computer today. That laptop computer is locked into virtually every database we have as a bureau. An agent arriving at a scene to help a state and local officer today, and even more so into the future, brings with him every piece of information that the bureau has with them in terms of helping solve that crime or deal with the situation they're looking at. The employee of the future is going to be the employee that has that laptop computer and brings with him the entire expertise of the bureau each time they show up.

Mr. Lawrence: Just to give our listeners a sense of perspective, the United States isn't the only government that faces challenges on alcohol, tobacco, and firearms. So, I'm curious, how do we fare compared to other nations dealing with similar problems?

Mr. Buckles: Well, as I explained, we have, I think, a very efficient system these days for collecting the alcohol taxes. If you -- just to digress for a second -- if you remember back in the '50s when there were the moonshiners, one of the reasons is that the tax on alcohol at that time was $10.50 a gallon on distilled alcohol.

If you think about what $10.50 was in 1951, compared to what it is today. Today the tax is only $13.50, so it hasn't gone up very much. It would be like if the tax was $50 a gallon or something today. So part of our system has been that the tax burden isn't there and we get much better compliance. But, we've been working with a few countries that are decades behind us when it comes to establishing these systems. We've worked with a number of the former eastern block countries, with Russia, Hungary and a number of other countries to help them try to set up a tax code that's never existed on alcohol and tobacco products.

The problems they're having with widespread diversion of the product, widespread illegal activity is reminiscent to what we would have faced many years ago, in some cases, reminiscent of the Whiskey Rebellion.

Mr. Lawrence: Well, I'm afraid we're out of time. So, I want to thank you, Director Buckles, for spending some time with us this evening. I've enjoyed our conversation very much.

Mr. Buckles: Thank you for having me.

Mr. Lawrence: This has been The Business of Government Hour, Conversations with Government Leaders. I'm Paul Lawrence, a partner of PricewaterhouseCoopers, and the co-chair of the PricewaterhouseCoopers Endowment for the Business of Government. To learn more about the Endowment's programs and research into new approaches to improving government effectiveness, visit us on the web at See you next week.

Barbara L. Burkhalter interview

Monday, November 29th, 1999 - 20:00
Barbara L. Burkhalter
Radio show date: 
Wed, 05/03/2000
Intro text: 
Barbara L. Burkhalter
Magazine profile: 
Complete transcript: 

Arlington, Virginia

Wednesday, May 3, 2000

Mr. Lawrence: Good evening, and welcome to The Business of Government Hour, conversations with government leaders. I'm Paul Lawrence, a partner at PricewaterhouseCoopers, and co-chair of the PricewaterhouseCoopers Endowment for the Business of Government. The Endowment was created in 1998 to encourage discussion and research into new approaches to improving government effectiveness. To find out more about the endowment visit us on the Web at

The Business of Government Hour focuses on outstanding government executives who are changing the way government does business. Our guests tonight are D.J. Lavoy, director of HUD's Real Estate Assessment Center.

Mr. Lavoy: Thank you.

Mr. Lawrence: We are also pleased to welcome Barbara Burkhalter, deputy director of REAC. Welcome Barbara.

Ms. Burkhalter: Hi. Thank you.

Mr. Lawrence: Joining me tonight is Barry Dennis, also a partner at PricewaterhouseCoopers. Hi, Barry.

Mr. Dennis: Hi, Paul.

Mr. Lawrence: Why don't we begin this first segment by talking about REAC and your careers. I guess we'd be interested in finding out more about REAC.

Mr. Lavoy: The government always likes acronyms. REAC stands for the Real Estate Assessment Center. And what is the REAC? It is an organization that was created by Andrew Cuomo, secretary of HUD, with the sole purpose of looking across all of HUD’s program areas and assessing the property and the management of the property across that entire portfolio — new concept in government, not so in the private sector. Basically, cross-matrix management is the model.

Mr. Lawrence: Barbara, any thoughts?

Ms. Burkhalter: Well, I think we had some problems, and REAC was set up to solve a lot of those problems, and to achieve a more efficient, streamlined, centralized government.

Mr. Dennis: Each of you I know has had a really diverse career path. Each of you has gotten to the positions you're now in following a different path. Could you each tell us something about how you got to where you are?

Mr. Lavoy: Sure. The goal that has brought me to this point, or to this post, has been an interesting one. My career started out a long time ago as an aviator in the Marine Corps. I also had a background in finance and a background in management that has brought me to numerous reorganizations and building of organizations. This has been somewhat the poster test, if you will, for 25, 28 years of government service.

I left the Marine Corps a few years back, and at the invitation of the secretary came in to build this organization. The background of being in leadership positions, of being involved in change management, building IT systems, and being involved in the change dynamic are things that I have been fortunate enough to be involved with.

Just by beautiful coincidence I think, and probably the secretary's insight, those four criteria or qualifications are what I brought to the game. I'm sure Barbara can tell you that she has similar ones, which she will in a minute.

This has been probably a textbook case of being able to take an organization that didn't exist and bring it into an operation capability as a function of having those unique backgrounds. Barbara?

Ms. Burkhalter: My background is primarily as a financial manager. I started out working for the budget office in the state of Wisconsin. After that, I went to a large public accounting firm for 12 years as a financial manager. So the whole financial assessment business was one of the things that HUD saw from me to put me in this position.

I’ve also spent about 8 years with public housing programs, another piece of the puzzle and knew how the programs actually operate. Then the third piece was designing systems. One of the things I had done at HUD was design a large financial management system, install it and implement it for hundreds of users. I think all of those pieces together were why I was plucked out of the program and put in this position.

Mr. Lawrence: This is an interesting combination. D.J., you had no HUD experience, as I understand it.

Mr. Lavoy: None.

Mr. Lawrence: Barbara, you had a lot.

Ms. Burkhalter: Yes.

Mr. Lawrence: I'm wondering the pluses and minuses of having people from both outside the organization and inside the organization starting REAC.

Mr. Lavoy: It has proven to be extraordinarily complementary, and I'd have to defer to my partner here to see if she had the same opinion. In my view it has been, because I brought a fresh view and the background that saw the change that was required as an outsider.

I would offer that Barbara has for some time been frustrated, as are many of the managers within government, at not having the opportunity to put change in place. I think that, in itself, was one of the things, because an opportunity came, and when the stars align and everything looks right, then those opportunities are rare, and that's what I think the REAC is all about. We've had that kind of opportunity.

Ms. Burkhalter: I guess the way we've divided up the work, in some ways, is I focus on the financial work and D.J. focuses on the construction side because those are our two prime businesses. The other way was I handle a lot of the internal work of the REAC and he handles a lot of the external work of the REAC. So we have those talents. Also, I'm much more interested in dealing with the people, the contractors, building systems, and I like that role. And he likes the role -- I hope he likes the role, because that's role he has -- that deals with the constituents and the politics and the external side of the business.

Mr. Lawrence: Did you both come as a package, or who was hired first? How did this come about?

Mr. Lavoy: Barbara had been here, as she said, for 8 years.

Ms. Burkhalter: I was at HUD for 8 years, and I was brought in to kick the REAC off. It was a little but staggering at the time, and they needed new people. So I was brought in first, probably a month to two months ahead of D.J.

Mr. Lavoy: Right. One day the secretary called me in and said you've done quite a few things for me already, but I think there's one more thing you can do that will make a big difference to this country and to the future of HUD. Then, he asked if I would mind being in charge of an organization called REAC. He explained to me what it stood for, and the two of us met each other there the next morning, Barbara and I. And here we are today.

Mr. Dennis: It sounds like the secretary specifically wanted to bring in the diverse backgrounds you have.

Mr. Lavoy: Yes, without question.

Ms. Burkhalter: New people that had no real connection with even the thought. It was a new thought that had been set up say 6 months earlier, but we were there to implement it, to make it happen.

Mr. Lavoy: In Washington (and many people will smile to themselves in acknowledgement) people appreciate, and my own experiences amplify this for me, the mantra that you should get things done quickly and you do them as accurately as you can to get the 80 percent solution and then refine. You can say, anecdotally, that's to fire, ready, then aim, if you will.

And that all comes about because many people don't want to see change. And it's not because they are bad and you're good, it's just that they're comfortable with the way business works, i.e., HUD and some of the things that were working and not working, and the Secretary being the visionary he is, I think quickly understood that.

As Barbara said, 6 months prior to REAC there had been a lot of looking at what had to be done to fix a "troubled agency" that had been in fact declared so, and that's what his success story and what I think his legacy is. He has turned around an agency that was basically on its knees into something now of a benchmark, and the REAC has been a big part of that. His vision, him being able to take the players, myself, Barbara and other key people, and put us together, to say this is what needs to happen, then give us the resources to do it has helped us be successful.

Mr. Dennis: Again, you each do bring a very different background to the job. I know you've worked very effectively together. It's clear you guys have taken different roles but meshed well in accomplishing what you have. What in each of your backgrounds has prepared you to do that so well?

Mr. Lavoy: Good question. I'll ask Barbara to answer that one first.

Ms. Burkhalter: In other words, to be compatible?

Mr. Dennis: To take a jet fighter pilot and a financial analyst in different roles and to do it so seamlessly.

Ms. Burkhalter: Well, you know what? We're actually having fun. I have to tell you that it's been the best job I've ever had. It's been the most fun I've ever had, and I think it's because things happen every single day. Every single day we're able to make a difference and we're able to make something happen. So that's part of it. I think both of us just enjoy that process.

Mr. Lavoy: I'd concur with that. I think that philosophically we both, as do most of, in fact all the people that are there, believe in good government. That may be a high-sounding statement, but you have to have that understanding or philosophical underpinning. We believe that this project is important. There are 6 million people who depend upon the housing provided by HUD. And the look of satisfaction on the faces of almost everybody who sees the things we've been able to accomplish is probably one of the real drivers for us. There is a definite outcome; people's lives are affected, and we are making change.

More personally, we both are committed to excellence and we both believe in making things happen. And that is probably the real strong point that enables us both, from different backgrounds, diverse if you will, work together; that philosophical point is the one that I think really gives us the most symmetrical application to this.

Mr. Lawrence: Well, great, and it’s time for a break. We'll be right back with more of The Business of Government Hour.


Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers, and tonight's conversation is with D.J. Lavoy, director of HUD's REAC, and Barbara Burkhalter, the deputy director, and joining me is Barry Dennis.

Well, we know that REAC is an E-business, and you've won an award from Government Executive magazine. Could you tell us about that?

Mr. Lavoy: Happy to. The award recognized our excellence in creating a system by which we electronically record the condition of properties. That sounds kind of technical, but the E-business in a bigger perspective is one that really tells the story of the new HUD and the REAC specifically.

As in many parts of government, what the problem has always been is that we've known how to do the job, but we basically have done it using paper, and paper by virtue of the volume and handling and logistics makes information retrieval less efficient. Picture a warehouse full of material provided every year. Say then you have a question and you have to go back and retrieve from this warehouse full of material an answer.

Knowing that was a problem and knowing what business areas we had to be in as assessors, we decided from the very beginning to build our entire REAC using the E-commerce model, in which everything is done on the Internet using electronic medium. As a result, we are able to take data, reams and reams that has now been put into data warehouse format for us, and do incredible amounts of analysis, including accurate, reflective, portfolio management, et cetera.

Let me defer to Barbara at this point just to add to that, but this has been the part that has been the most successful for us is creating this environment.

Ms. Burkhalter: I guess I was thinking back to the very beginning when we first started looking at the systems. At various times, as the system didn't seem to be working perfectly, we were tempted to use paper. I think several times along the way someone would have wanted to use a piece of paper to do an inspection or to take the financial statements, but we had to resist that at every turn because the volumes and the management of that would have been impossible. We had to insist on the electronic even if it was harder than maybe we were able to handle at the time and really push for it.

Mr. Lavoy: That's certainly true. We have been tempted, but we have been able to avoid those temptations for the most part. The volumes I speak of and the data? Just to make it relative for the audience; we perform 40,000 physical inspections of 6 million units and produce 22,000 financial statements, many, many pages in each provided by CPAs, IPAs, et cetera. Taking that in a standardized format and then coalescing it to get integrated risk analysis is what we're all about. Just to look at it from the logistics side, it has to be electronic or it can't be done.

But look at where it takes us in the future in terms of government. REAC is really the model for what the future HUD needs to look like, and other agencies of government as well. That same physical inspection that we won the award for is the same one that the Department of Agriculture is getting ready to partner with us and start all their properties. And we are in consultation with the U.S. Marshall's Service to start doing all of their properties using this electronic medium, and the IRS and their tax credit program as well.

What does that say? It's a successful program and all of government is understanding the importance of E-commerce in doing all of their transactions, in this case really E-business, business-to-business, using the electronic medium and all the things that it brings to the table.

Mr. Lawrence: How did being an E-business change the work? I get a sense obviously that it went faster and easier, but how else did it change the work?

Mr. Lavoy: The quick answer is, it has enabled us for the first time to be able to do real-time analysis by enabling us to have visibility of the key factors.

Ms. Burkhalter: In the past, the employee would receive a hard copy or paper version of a set of financial statements. They would probably, in turn, create some ratios; typical to the banking industry, they might record a quick ratio or current ratio. And then they would do something about that, all at their desk with paper, but people in headquarters wouldn't know anything about the results of that work if they even did it or how they did it, because it was all in different formats. The opposite is everything electronic. The computer does the math and the employees then do the specialized innovation to solve the problem. Intervention to solve the problems. That's the big change in the work product.

Mr. Lavoy: I have to bring in an additional point to go with that. You asked, how does it change the work. Well, that is really the fundamental piece and I kind of glossed over it, and I shouldn't have because it is the first time a government employee, or any employee for that matter, has been able to have all of the base line analysis done for them. So all they have to do is focus on what are the problems.

We have basically removed all of the cursory work and gone down to hard analysis with all of the individual efforts being focused on that. And you can truly, for the first time, do good risk analysis because you can remove those non-problem areas and focus your efforts on areas that are, in fact, in need of more human intervention.

Ms. Burkhalter: Even with a reduced work force, if you're focusing on just the problems, you can actually have a reduced work force and get more done.

Mr. Lavoy: Right.

Ms. Burkhalter: If that 5 percent of the problems is your focus as opposed to the 100 percent.

Mr. Lavoy: True risk analysis. Yes.

Mr. Dennis: REAC is implementing an E-business approach that is a new approach for everyone, private sector or public sector. Do you see any challenges that you're facing implementing it within a government context that are special to the government contexts that you don't see in the private sector? Do you think it's pretty much the same exercise?

Mr. Lavoy: By no means. We do a lot of benchmarking, and I'm a member of CAMI, the Consortium of Advanced Manufacturers International and two or three other professional organizations. In the private sector, it usually takes 6-8 weeks from the time that you want to institute a change to the time you have to put the change in place. You meet the pace of business, and I'm talking modifications here, and a bill is a little bit longer.

In government, because of the contracting issues, because of the existing infrastructure, because of the requirements for efficiency and broad application, there's a much more difficult problem you encounter. You have an existing structure, if you will, a large moving train, and to get it to change directions you have to put an incredible amount of personal effort into it to make it work.

Ms. Burkhalter: On the people side, on the technology side, I'm not sure it is different. I suspect the private sector has the same problems with the Internet access. That's one of the problems we have is our constituents are only moderately able to use the Internet. So we have to help them acquire an Internet service provider to use our data. They're coming of age with us. The technology is very new, so we experience problems with its stability in terms of application and software development.

Then the infrastructure, I suspect a lot of private-sector companies have mainframe systems that are still a little slower, a little older, a little more cumbersome to use, just like we do. So, they may have the same problems too.

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


Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers, and tonight's conversation is with D.J. Lavoy, director of HUD's Real Estate Assessment Center, known as REAC, and Barbara Burkhalter, the deputy director. Joining me is Barry Dennis, also a partner at PricewaterhouseCoopers.

We understand, Barbara, that REAC is very young, only 2 years old, but you've been able to successfully meet several aggressive deadlines. Could you tell us about that?

Ms. Burkhalter: I think D.J. mentioned before the 80/20 rule, and that's really what we follow constantly as our overriding principle. We try to get 80 percent done in 20 percent of the time and then move on because technology moves that fast. If we put all that extra time into that extra 20 percent of value, technology has gone beyond us and we've lost our edge. So we're very aggressive about how much, and when we call it quits and move on to the next one.

One of the ways we've been able to move fast is we have a very flat, simple organization. Everyone works directly for the two of us. We just have business product lines, and we have support lines. Everyone knows what their job is and they're all empowered to produce what they have to produce. They understand a very simple business of a production business with a system to support it.

We have very common business processes. We collect data, we process it, and we report it, and we don't change that. We make everybody follow the same model. We've even named all of our business systems with common-sounding names, except we changed the first letter. I think a lot of that simplicity is what's helped us keep going fast.

Then there is the issue of our contracting. We have very aggressive, flexible contracting so we can move contractors in and out as our business needs changed. Those were my thoughts on meeting aggressive deadlines.

Mr. Lavoy: The aggressive deadlines in themselves are interesting. They make for sometimes working beyond the traditional 8-hour day and the other things that go with it. But as you've heard from our previous comments, it has been a challenge that we enjoyed in our team, and I mean that in every sense of the word.

At REAC, we have a lot of government employees that are people very knowledgeable in resources and in programs in the traditional areas who are perhaps not completely up to speed on some of the latest uses of technology and all the enablers that go with it. On the other hand, we have a gifted bunch of young people who are very, very up to speed on the use of computers and all the tools that are provided via that medium.

Our approach is that we team these two constituencies together, sitting side by side in an open environment, team arrangement the program individual, knowing the subject, is enabled and assisted by a contract individual many times, and then many times government people. But in both cases they work together as a team, work to come to that same conclusion that Barbara is speaking.

That has been something on the visible side. Many times you walk into an office and you'll see government employees who are sequestered in an area and you'll have people who are providing contract support almost sitting on the floors, trying to do the job, and that is exactly the waddle that we would never follow. What we want to see happen and what does happen in our case, is that everybody sits side by side, everybody in the same equal compartment, everybody working on the same type of problems, putting those two very strong skill sets together and coming to the same joint solutions.

As to the timing of it, yes, we've done an awful lot in 2 years, and once again, it gets back to the fact that this is a secretary with a mandate who is looking to be able to accomplish this during this administration.

We know that the fire, ready, aim rule is alive and well and the 80/20 guides us to that point. I think that compression is probably in combining with the individual talents that we've been so fortunate to have with us here in the REAC, has enabled us to get to where we are so far.

Mr. Dennis: You mentioned several times and I think appropriately that to accomplish what you've accomplished in such a short time period has rested on the people you have and being able to use them effectively. Looking at it from their perspective, you've implemented an E-commerce model that is very different from the typical government model. What implications does that have for the employees in the way they do their work?

Ms. Burkhalter: I think this has been hard for our employees. Coming from the other government sectors as well as from HUD, they're used to being policy specialists, they're used to attending meetings, and they're used to advising and guiding somebody else, and we are totally not about that. We are about production, output, and outcomes. We're not as interested in they attended the meeting, but what did they go to that meeting for and what are they going to do with that information in terms of bringing it back to their business and producing a better product.

We're not interested in them showing up every day. We're interested in them actually producing a result. So I think it's been hard for them in some ways, but I'm actually happy, and I think they are too, once they change because this is a more job satisfaction type of a work environment.

Producing something every day is much more valuable I think to a person than just sitting waiting for the phone to ring, coming up with a policy or a thought. I think that after about a year and a half of doing this now, most of our people are pretty happy with what they're doing, and succeeding at it.

Mr. Lavoy: In the dynamics of change, as we all know, the cultural change is the hardest. This has been the real gratifying piece, I think, for both Barbara and myself because we have seen a very, very observable cultural change. Where people used to answer the phone and do the traditional perception of government, everyone now understands that they are part of a team which is different, that they are accountable and will be held accountable to a set of specific metrics. And they're all focused on an outcome that is an outcome that affects an awful lot of people.

I think it's that combination that has enabled us to be able to make the changes we've accomplished so far. People want to succeed and be part of a winning team.

Mr. Lawrence: REAC is a new organization, relatively speaking. Where did the employees come from?

Ms. Burkhalter: I took a look just roughly, and I'd say about half of them are HUD employees and the other half are either private sector or another government agency, and that's really helpful too. Not just private sector, but another government agency having people come to us really brings some new ideas as well. It's probably half-and-half, internal/external.

Mr. Lavoy: Department of Defense, Treasury, Department of the Navy, Interior, and Agriculture¼ . I mean, smatterings here and there. As Barbara said earlier, what we're about is we collect data, we analyze it, and we create knowledge and disseminate it. That's our core competency. It's about financial, about physical, about many other subject areas, we are bringing in people with basic skill sets, financial analysts, engineering analysts, et cetera, and then team them so that we can get to those outcomes.

Mr. Lawrence: Were they aware of the changes that were going to take place, or were you all aware?

Mr. Lavoy: I don't think so.

Mr. Lawrence: For example, I understand there are but two offices in your organization that you both have and the rest --

Mr. Lavoy: Are open.

Mr. Lawrence: Are open?

Mr. Lavoy: Correct.

Mr. Lawrence: Was that because there was no space, or was that by design?

Ms. Burkhalter: Actually we had the luxury, and I'm not sure very many people have this in their career, of being able to design the space to suit the business. We looked at several pieces of property in the city and we picked the one that was totally empty. It was cement blocks, wires hanging from the ceiling, and we designed it from scratch to suit the way we wanted to do business, which was open.

We could have put up walls if we wanted to, but we put the money into the furniture and the aesthetics of the building, and everyone has light, everyone can see a window, and the managers are not up against a wall. The managers are away from the wall, and the employees are close to the windows. We completely turned it around. I can't say that we've had people come in and say they hate working there because most people love it.

Mr. Lavoy: The open environment, when I was working with the Department of Defense doing programming which is interesting work where you're looking at the 5-year budget all the time, and teaming was something that I really saw the value of. You'd bring together 15 to 20 people looking at diverse programs and have to make hard decisions. But being able to communicate real time and work together, everybody rose to the highest common denominator of the team.

I've seen that work and I have used it in two other models, so that is kind of where I wanted to start.

As Barbara said, we were very fortunate. We are in a building that it was hard-wall cement and nothing there. We were able to acquire that property and have it built out so that we enabled teaming with communication built to an E-commerce model. That is a unique opportunity, where you can start from scratch and build your environment to your business model. Because, as you know, in most cases you have to adopt, and if it's going to be established government offices, you're going to have the traditional honeycomb. That just does not enable real-time communication or individuals to be able to do real-time knowledge sharing which is part of the strength of our organization.

Mr. Dennis: You both have mentioned lack of walls organizationally, I think, essentially, lack of walls physically to facilitate teaming within the office.

Mr. Lavoy: Right.

Mr. Dennis: I've witnessed that you've done, also, an unusually good job of developing teaming among the REAC employees and the contractors you use. That's not that normal in the government or anywhere else that I'm aware of. How have you accomplished that strong teaming between the contractors and your employee?

Ms. Burkhalter: I think one of the things we did, again, we build systems as our primary business, building automated systems to collect and process data. We put programmers right in the work areas alongside of business people. Just think of what that does. Typically you'd put your computer programmers in a wall-less, windowless cell some place.

Mr. Lawrence: That's where we'd put them. Yes.

Ms. Burkhalter: Right. You hide them because --

Mr. Lavoy: They look at little different sometimes.

Ms. Burkhalter: You might think that that's the best way to do it. We have them right out in the open and we watch programming as it's occurring. D.J. and I can walk through these hallways through their work areas and we can watch what they're doing so we know that they're actually working.

Secondly, if they have a question about the requirements, am I programming this correctly, all they have to do is spin their chair around and talk to a business analyst and ask "is this what you meant?" Or come over and look at the screen. Does this look like a screen that would work for you to do your business. Just think of the power of that real-time programming and systems development in production support.

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


Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers, and tonight's guests are Director D.J. Lavoy and Deputy Director Barbara Burkhalter of HUD’s REAC. Joining me is Barry Dennis, also a partner at PricewaterhouseCoopers.

You spent some time so far talking about the data you collect and the analysis you do, and I'm just curious looking out, what do you think the potential uses and additional analysis are for such information, both within say HUD and other organizations as well?

Mr. Lavoy: Let me just take a stab at that first and then defer to the rest of the table here because I know there's going to be a lot of good opinions on this. And it's really what the future of the government is about and, I believe where the current administration is heading.

Having the responsibility to the citizens of the country and to account for the dollars that are spent is an awesome responsibility. And it's one that is a lot of times not really understood by even government employees in terms of what you really do with your dollars and where they go.

The recipients, on the other hand, are expecting services. In this case, the mission of HUD is to provide housing. Traditionally we serve the lower one-third of our social stratum that need that hand up, that first start, that FHA starter house, that public housing for those that are going to transition into our economy.

Being able to actually do good risk analysis so that we can look at those providers that are doing what we are requiring of them as a government agency has been something that has been elusive at best in the past. Our data, we believe and know already, just by virtue of being able to do projections and risk analysis, trend analysis, et cetera, can tell us how many of all the properties we've inspected are in good shape. For example, 85 percent of the 6 million properties may be in good condition, another 10 percent are in need of very immediate repair, and 5 percent are in desperate shape. And in fact, the individuals managing them probably don't need to be in the business with the government any longer. The residents there certainly need to have their lives amended quickly so that their standard of living can be better.

I think, in short, the future is that credible government is based upon having good information so that government can make good decisions and that we can provide the services that we, in fact, are responsible for providing and that the Congress intends and provides the funds for.

Ms. Burkhalter: I was thinking about some specifics that our data could be used for — and we're not yet ready to do it — but as soon as our data is fully collected we'll be able to predict defaults on certain loans. With good data and with correlation, we can maybe do some things like that as opposed to reacting after the fact. Can we be on the front end of business decisions?

The same applies to income verification. Our families have to pay rent based on their income. Wouldn't it be nice to be able to report on the front end whether someone was eligible before they get into the program and then have to evict them or collect back rents from them. To the extent we can use our data up front because we have good predictive early-warning systems, I think that would be really valuable to the government and to the taxpayers.

Mr. Dennis: You're collecting large amounts of data that HUD has never had before, allowing HUD to do a much better of ways than they've been able do in the past. But a lot of this data has also never been available to the private sector. Do you see applications or uses for the data in the private sector as well as in the government?

Mr. Lavoy: Without question. Of course, we have to be very careful of the data and we want to make sure that all the particular applicable laws are applied in terms of privacy, et cetera. Barbara touched upon one that really points this out, income verification. There are 6 million families living in HUD housing and those people are deemed eligible by a congressional formula.

One of the things that's been problematic in the past is being able to determine on the front end that they are eligible and that they're paying the right rent. So, we want to make sure that when we use the information provided to us by the Internal Revenue Service and the Social Security Administration we're protecting the rights of the individuals and getting to that end point.

Now, that's kind of round circle to your question, what does the future show. As I said in an earlier comment, working with three agencies already, they are looking at these same models of taking data and using it to be proactive in making sure that we are accomplishing the intent of the Congress. From the business perspective E-commerce side, the private sector, we are in frequent conversation with the lender industry, with the mortgage bankers, with the inspection industry and with the appraisal industry. For the first time we have put electronic inspections together and now the entire industry is going in that direction and using our model unique for government, but it's good for HUD and I it's to show that we are a benchmark organization.

The appraisal industry, we're getting ready to go the same direction where we're going to be developing an electronic appraisal that will be then used in value estimations and conditions of the property and going the same direction with it. So there's a lot of future to this and it's once again collecting data in an effective way so that we can utilize it.

Ms. Burkhalter: We have lots of claims on our data. Everybody wants it, and we have to constantly balance that with Privacy Act issues as well as just pre-decisional. Not everything is releasable as raw data until it's been through all the process for follow-up refinement, quality assurance. We don't just release raw data to the public or even to our partners.

Mr. Lawrence: In an earlier segment we talked about REAC being an E-business. Seems to me, that everybody would say that all government would be an E-business one-day. But I'm curious, from your perspective, what are the special challenges the government faces in this area?

Mr. Lavoy: Many. The ability to exchange information and, more importantly, to provide to the public that information in a timely basis. Let's just use what's happening with the IRS right now with filing taxes. The IRS has seen, I think, a tripling of the amount of people electronically filing.

What does that mean? That means that our country is becoming much more E-commerce aware. Look at our ability to share with a reporting entity the results of their financial physical analysis giving them the remedy electronically, and then in a real-time fashion being able to monitor that. It portends much more efficiency. It portends better communication. It portends a government that is truly responsive to what individual taxpayers and regulated people and entities are expecting from government.

Mr. Lawrence: How about the special challenges to government managers?

Ms. Burkhalter: I think the special challenge with anything electronic is technical support.

Mr. Lavoy: Amen.

Ms. Burkhalter: We all have really lofty ideas. In fact, we haven't even tapped some of the things that we want to do. We have backlogs of ideas. What is holding us back is technical support and the infrastructure and the attitude toward making technology efficient, fast, and user friendly. It has to be easy for the users on all ends to get at it, and reliable. If it's not reliable, I think we're going to have more problems than we need. So, we're held back at the moment from all the things we want to do by the technical support that we need to keep it moving.

Mr. Lawrence: If it's challenging to get good employees, it's even more challenging to get good technology employees. So I'm curious, how do you get around that, or what special challenge does that pose to the government?

Ms. Burkhalter: We advertise in the Wall Street Journal. We do the best we can to hire and tempt people to come. I think we have to be more innovative though just like everybody and perhaps even provide our own training. We might have to train and grow some of our own people in that area.

Mr. Lavoy: We do face challenges just like everybody. The fastest-growing segment I think in the job market is probably people who are technologically proficient and have people skills. That's quite a combination.

We have been very fortunate in that we have acquired as part of our team, some key individuals who bring that to the table. But in the end, most people will tell you and I think most studies will carry out, that it's not so much the dollar that an individual receives because the private sector can reward more in terms of dollars. I think the big thing that brings everybody and keeps him or her there is job satisfaction.

As I think you can tell by our tone, is that the REAC is about job satisfaction. The environment, the way that we treat people, the ways that we team build. It really pays off for us because we have a lot of individuals who give us 110 percent, are always there, and provide incredibly good advice, and their credibility in the industry is such that it gives us a very strong position.

Mr. Lawrence: I'm afraid we're out of time. So, I want to thank you very much, D.J. and Barbara for joining us. Barry and I have very much enjoyed our conversation. This has been The Business of Government Hour, conversations with government leaders. To learn more about the Endowment's programs and research into new approaches to improving government effectiveness, visit is on the Web at