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Ken Blackwell
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Friday, October 31, 2003

Arlington, Virginia

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

The Business of Government Hour features a conversation about management with a government executive who is changing the way government does business. Our special guest this morning is Ken Blackwell, Ohio secretary of state. Good morning, Ken.

Mr. Blackwell: Good morning.

Mr. Lawrence: And joining us in our conversation is Glen Graham. Good morning, Glen.

Mr. Graham: Good morning.

Mr. Lawrence: Well, Ken, you’re almost a year into your second term as the secretary of state of Ohio. Can you describe your roles and responsibilities for us?

Mr. Blackwell: The secretary of state is the chief election officer of the state, and he or she is also the primary keeper of business records and the protector of intellectual property in the state of Ohio. So we -- the secretary of state protects corporate identities, makes sure that corporate histories and records are properly maintained, and is generally the person that is responsible on the -- in a broader sense, for encouraging civic engagement in our state community.

Mr. Lawrence: How big is your team? Could you describe what it takes to get all those done?

Mr. Blackwell: We have a team of about 160 employees and the majority of those employees are assigned to our business services sector. And so it’s where I spend most of my time concentrating on the reinvention of how we did business in that area.

Mr. Graham: And since you became Ohio secretary of state one of your projects was starting the Ohio Center for Civic Character. Can you share with us the mission of the project and describe for us the history behind the inception of the project?

Mr. Blackwell: Well, the history is -- it sort of transcends my tenure as secretary of state. I started to conceptualize this notion of using character development in a way that not only enhanced the everyday life of a citizen in his or her community, but how we could apply the a character development strategy as a way of transforming the culture of the workplace where we could improve the way people communicated and related to one another as a way of building a team and building a common language of respect. And so we hit the ground running when I became secretary of state in January of 1999. And we pulled together the entire workforce and said we want to really begin to build a true community and it started with a common language. We said we want to take some words that are frequently used, like “fidelity” and “honesty” and “trustworthiness,” and to make sure that we all had a shared sense of what these concepts and these principles were in our everyday life.

And so we developed what was called uncommon sense and it’s 20 character-building principles that sort of evolved from the workplace and out of genuine dialogue with one another so that we began by creating that language. And we started out with the assumption that character was the cornerstone of citizenship. A free people, a self-governing people had to have internal compasses by which to govern themselves if they didn’t want big government on the outside external to their family, their community governing their lives. And so we went back to some basic understandings.

You know, James Madison, the chief architect of the U.S. Constitution, was fond of saying that American civilization didn’t turn on the power and reach of political institutions. Instead, he thought that the future of American civilization rests, and these are his words, on the capacity of each and every one of us to live in accordance with the Ten Commandments of God, you know. So as far as Jefferson was concerned, the ground rules, the protocol of good living took place when Moses received the Decalogue at Mount Sinai. And so we started to build from this concept that the character was, you know, essential not only to a self-governing people, but to a free people and that applied to the workforce, you know. You had genuine relationships and you had genuine belief in the workers that they were the driving force behind an enterprise, an organization, or a workplace, that you probably were going to get better performance from that community of workers.

Mr. Lawrence: You’re the 51st Ohio secretary of state, as I understand it, and you have a long history of public service. Could you tell us more about the previous positions you held in Ohio before your current one?

Mr. Blackwell: Well, I grew up in Cincinnati, and I grew up in a public housing community. When my father came back from World War II there were still vestiges of segregation. There was a housing shortage and so we first lived in some old Army barracks and then we moved into the Laurel Homes, which was a public housing community.

Coming up through the Cincinnati public schools I went to Xavier University on a football scholarship, graduated from Xavier, and got involved more deeply in my community. My first effort was to become a member of the Cincinnati School Board; lost on my first time out. I was, you know, in my mid-20s and I missed by 500 votes, but I captured about 58,000 votes. And lo and behold, folks thought, hey, there might be a political future with this young man. And so 2 years out, I ran for city council and won on my first race for city council. And I served 12 years at the local government level, years as -- terms as city council member, vice mayor, and ultimately the mayor of my hometown, which was just quite a privilege and honor for me, you know, someone who had grown up in a public housing community that was literally no more than 6 blocks from city hall to ascend to being able to be mayor of my town.

And I tell people all the time I was mayor of Cincinnati after Jerry Springer. (Laughter) You know, and so I kid Jerry all the time. I say, Jerry, you know, that goes to prove that sometimes the sublime does follow the ridiculous. (Laughter) And so we both get a big kick out of that.

I then went on to HUD. I was the undersecretary of HUD with Jack Kemp, who was a long-time friend. And we went into HUD in an interesting period when we were coming in after HUD had been in the headlines for some suspected and some actual scandals. And so as we used to say we had to go in and sort of drain the swamp.

I moved over from HUD after being with Jack Kemp to the State Department where, in working with Jim Baker, I was the U.S. ambassador to the United Nations and I handled the human rights portfolio. I was the U.S. representative to the Human Rights Commission and did most of its business in Geneva. And it gave me an opportunity to travel the world and go into some of the human rights hotspots across the globe.

After doing that and doing that for a bit into the Clinton Administration, I had been working in Somalia, working in Bosnia, and I had led the U.S. delegation to four preparatory meetings for the 1993 Human Rights World Meeting in Vienna that year. I moved on to the University of Cincinnati where former Governor John Gilligan and I were the only two non-lawyers teaching at the University of Cincinnati Law School. When one day I got a call from a friend of mine, George Voinovich, who had -- he was the present and seated governor at that time, but he had been the mayor of Cleveland when I had been the mayor of Cincinnati. And George asked me if I would take an appointment to the post as treasurer of the state of Ohio and then stand for election in November of 1994.

So I took about a year’s appointment, became the chief fiduciary of the state of Ohio. We had under management in terms of custodial work and direct investment work, about $122 billion of assets, which included the assets of the five state pension funds. I did that for -- because I won election in 1994, so I did that for a full term.

And then 1998, I was asked to -- by the Republican Party to run for secretary of state because every 10 years the secretary of state takes on an added dimension of importance. The secretary of state is a member of the Apportionment Board that redraws the legislative map. And in Ohio, the Apportionment Board is controlled by the party that has either the governor, the auditor, or secretary of state, two of those three offices. And in this case, Republicans won all three offices. And so we redrew the maps and those maps met the constitutional test and challenge.

And it brings us up to my second term that I ran for in 2002. So I’ve had an interesting run at local, international, and state governance.

Mr. Lawrence: That’s an interesting point. Why should citizens care so much about character and what should government’s role be in its development? We’ll find out more as we continue our conversation with Ken Blackwell, Ohio secretary of state, when The Business of Government Hour returns.

(Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I’m Paul Lawrence and this morning’s conversation is with Ken Blackwell, Ohio secretary of state. And joining us in our conversation is Glen Graham.

Mr. Graham: Good morning. Ken, you had the extraordinary opportunity to serve at the federal, state, and local level as well as diplomat. Can you tell for us a little -- can you explain for us a little bit about the difference you’ve seen in management styles and culture and personnel on those different areas?

Mr. Blackwell: The difference is generally driven by scale in terms of not only the size of the organization, but the comprehensiveness and depth of the constituency or constituencies that are served. In local politics a mayor, you can feel him, touch him, get at him, so accessibility is much more a dominant factor in local governance and management and leadership considerations. When you’re a governor, when you’re a secretary of state, or a treasurer and you’re in Columbus and you’re, you know, in a huge state, constituents have considerably less access to you. And so you don’t have that same relationship feel as a mayor or county commissioner or a township trustee might have.

One of the things that runs through all of those levels of government and affects management and leadership style is the ability to communicate and the ability to not only communicate a vision, but an ability to communicate the essential results that the organization must achieve. Let me just give you an example. Max Kappelman (phonetic) was one of my mentors at the U.N. and at the U.S. State Department. And, you know, I told Max I was thrown into the United Nations and he told me don’t worry about it. He said let me just explain something to you. The U.N. is, the United Nations, a city hall with interpreters. (Laughter) You have to have the same sort of communication ability. You have to be able to knock on doors. You have to be able to sit down and engage people in conversation. You have to be able to articulate what it is that you want to achieve. And then you have to be able to get people -- you have to be able to pull people together with sometimes conflicting interests to get something done. And he made a connection for me. You know, I could take my skills as a negotiator in labor management issues at the local level and sort of scale up to the international level, but it was those same basic skills.

When we were at HUD it was fascinating to me because we went in and what we had to do was sort of rationalize the system. Within that organization there were probably 77 different and often confusing management systems. And so the big challenge within that bureaucracy and given the scale was to get in and try to rationalize a system, a system that was operated and influenced by two personnel systems. For instance, you had the career civil servant and you had the political appointees. And when I was there, and I’m not sure that it’s not unchanged today, the average shelf life of a political appointee was 18 months. And so the career, you know, civil servants used to say and they shoot and they, too, shall pass, you know.

So it was -- and that was complicated when you went over to the State Department and you saw not only career civil servants, political appointees, but career diplomats, folks who were in the foreign service professionally and it just made for interesting interrelations and interaction. And the key management strategy and feel was still communication and being able to pull people together. And so what I’ve found at all levels of government is that an effective leader, an effective manager has to be able to, you know, inspire with their -- through their personal example of people can’t see a hypocrite, they can’t see duplicity. They have to see you walking the talk and not just talking the talk.

The second thing is that you have to have an agenda, an action agenda that creates results and creates opportunity or that inspiration has a short shelf life. But the big challenge in the workplace today at all levels is to be able -- is the ability to pull together a diverse workforce, to pull people of divergent interests and backgrounds into a team. And I think that those things are all related. And it’s been interesting to see, you know, just how as time and technology has influenced -- sort of reduced the time flow on how those things sort of impact you on a day-to-day basis.

Mr. Lawrence: Well, it’s interesting you mentioned an agenda because in our last segment you talked about the Center for Civic Character and you described the Guide to Uncommon Sense. Could you tell us more about this guide? And as you were describing it briefly in the last segment I was wondering after I read it what do I do?

Mr. Blackwell: Well, after you read it we have a constant internal discussion and feedback mechanism where we not only work it at our staff meetings across the agency, we evaluate it in our annual performance evaluations. Are people actually living it or are they just giving lip service to it?

On the outsides of the organization we have the Better Business Bureau of Central Ohio that uses Uncommon Sense as a way of measuring effectiveness and performance. And they actually use it as a criteria upon which they judge the awards that they give called the Integrity Awards to businesses. We have about 18 universities that use it in their student development programs. And so for all of those external groups it’s a customized mechanism.

The center’s actually a virtual center, you know. There are about four or five employees that are dedicated to it and these are folks who are expert at training and communicating and facilitating group discussion. And they will go in and they will sit down and they will -- whether you’re talking about a business leader, a leader of a student group at the university, or folks that also use it are Jim Trusso and the Ohio State Buckeyes, they use it in terms of their leadership and team-building process -- we go in and we customize for them and help them facilitate their own game plan around these principles. There is no cookie-cutter approach here. We tell people that they have to get their own buy-in and then work their own strategy. Because what’s really key is the authenticity, the sense of genuineness that people perceive in the operation.

About 18 years ago, I read a book called Habits of the Heart, written by Robert Bellah and three or four other people, and in that book they advance a principle called moral coherence. And moral coherence is when you get your behavior to line up with those things you profess to believe. You have moral incoherence when you talk one way, but you walk another. And so we try to tell people that what’s essential to a culture of an effective organization is that sort of moral coherence within the organization and particularly moral coherence in how the leadership is perceived. You can’t, you know, say do what I say, not as I do in the world today because people take their key off of the leader’s behavior.

So we go in and we go in and we preach and teach, you know, that sort of principle. Because what is at risk today in business organizations, government organizations, higher education, people believe that there is a disconnect, that there is a bankruptcy of ethics. And so we go in and say the key to making this work in any culture is leaders how live it and believe it and pass it on.

Mr. Graham: Ken, what are you -- what’s the feedback you’ve received from other public officials?

Mr. Blackwell: It’s been fascinating. We now use it in our effort to tell people how important it is that their campaigns be guided by these uncommon sense principles. People are looking for character-based leadership. But from my standpoint as the state’s chief election officer, I want to give people a renewed sense of faith in the dignity and the integrity of the political process. And it’s an easier sell for me today because, you know, ranked below politicians today are corporate leaders, you know. (Laughter) And so now I have corporate leaders’ attention. You have college coaches who are coming in and saying, you know, this is important to the character development of my teams. And so we believe that it is building the moral authority to lead that is so essential in transforming or for leaders or managers to transform their organization.

Mr. Lawrence: That’s an interesting point. In Ohio, the secretary of state is also responsible for running elections. What’s the state of election administration in Ohio now? We’ll ask Ken Blackwell, the Ohio secretary of state, to tell us more about this when The Business of Government Hour returns.

(Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I’m Paul Lawrence and this morning’s conversation is with Ken Blackwell, the Ohio secretary of state. And joining us in our conversation is Glen Graham.

Mr. Graham: Ken, during the 2000 presidential election there were many questions regarding the voting system and election process. What do you think of the Florida recount and what are your thoughts on the punch card ballots that were used?

Mr. Blackwell: I was in Florida for the controversial 35, 36 days where, you know, things were going back and forth around the final tally of votes. And I was there and I watched in an up close and personal way the tables where the recount were taking place. And so you could see somebody at one table, you know, holding a ballot up to the light and saying, oh, I see light around this chad so, therefore, that’s a ballot -- I mean, that’s a vote. And then you had the pregnant chad, the hanging chad, the dimpled chad, you know, you-name-it chad. And there were no statewide standards that said that no matter where you are in Florida, if you use a punch card system this is what constitutes a legitimate vote.

Contrast that with Ohio. We had statewide standards and so we have -- at that time, we had 70 counties that were using the punch card system of our 88 counties. And so whether you were in the Northeastern corridor or the Southwestern corridor, if you were voting on a punch card machine in Ohio, you didn’t have a question about what constituted a vote because you had the statewide standard.

So it was the absence of a statewide standard which drove the whole notion of equal protection under the law that opened the door for federal intervention and consideration there was a problem. So you saw a lot of focus on the punch card system as being the culprit in that situation. It probably was a combination of an antiquated and outdated technology and the breakdown of architecture built around that technology that would have included standards and a professional oversight that would have eliminated some of the controversy.

But we did focus on the punch card system. And recently the -- well, last year, in October, the President signed the Help America Vote Act, which basically targeted the punch card system for elimination across the country. In Ohio, we have started to implement the Help America Vote Act and we are now waiting on the flow of federal dollars to be complete so that we, in the next year, can eliminate the punch card system. What we’re looking for is a system that is more reliable, more accurate, and easier to use, and this new technology provides us with that capability.

Now we’ve had a hiccup in July of this year. Johns Hopkins University researchers started to raise some serious questions about the vulnerability of electronic touch pad systems, which are the dominant systems in the new technology. And that has caused us to have to construct a very robust security validation testing and evaluation process, which we’re now running the vendors who have made it through our process, we’re running them through this robust validation, the security validation process. We think that by the end of the year we will have sufficiently kicked the tires on the new technology and then we know that it’s very, very important to protect against and give people the full confidence that they are protected against voter fraud and that the final counts actually reflect the voters’ will. We will have to make sure that our architecture around this new technology, the procedures, policies, and personnel are tight and well-trained.

Mr. Graham: Ken, you mentioned the Help America Vote Act. Were you involved in any of the legislative discussions around that and do you think that that sweeping reform was necessary?

Mr. Blackwell: I was deeply involved. Luckily for me, the chairman of the committee on the House side that dealt with election reform was Bob Ney. Bob Ney is not only a colleague and an outstanding leader, he’s a friend. And so I was intricately involved in working with Congressman Ney and his staff. And then Steny Hoyer on the House side, but on the other side of the aisle, and I worked -- and his staff worked many hours together. On the Senate side, Congressman Dodd and his staff worked tirelessly and we also worked with Senator Mitch McConnell. So I was involved.

I went up and I spoke to the committees on both the Senate and the House side about what I thought had to be in this bill. And I’m deeply appreciative that some of my ideas were incorporated in the final bill that was passed.

Mr. Graham: Ohio recently approved a list of vendors to supply Ohio counties with new voting machinery. Can you talk about the process and the challenges that the Help America Vote Act provides your office?

Mr. Blackwell: Unlike some other states, like Georgia, our state legislature said that we could only embrace this election reform if the federal government was going to pay for it. And so the Help America Vote Act became essential to us in Ohio. And the dollars associated with it became even more essential because without those dollars we can’t get it done. But we set up a very elaborate evaluation process of the vendors that wanted to supply this service to the people of Ohio. And we ended up with four vendors and we ended up with them initialing preliminary contracts, which would provide Ohio with not only four providers, but two systems: the electronic touch pad system; and what is called the optical scan precinct count system, which is the optical scan is like the old SAT test where you color in the oval and then it’s electronically scanned and gives you quick results.

But the difference is, one, there is less paper involved with the voter and the optical scan still involves paper. And a lot of people feel just more comfortable with being able to see how they’re voting as opposed to this or the electronic touch pad system.

We feel real good about our ability to deliver. We got the best price in the country. We brought in a team of experts, computer science experts, and trained negotiators to complement my internal staff and we negotiated the best price in the country. One of the deals that we were able to negotiate is that if, in fact, these companies go out and give any other state a better deal, we get their price. So we feel real good about what we were able to do and the comprehensiveness of our package in terms of training, of election officials, of public education component, the maintenance and warranty components, and Election Day service.

We have one of the best packages ever put together. And the National Association of Secretaries of State and other election -- associations of elected officials have used this and actually made sure that these -- our plan was -- and contracts were distributed to others so they could use them as models.

Mr. Graham: What type of changed management processes are the vendors suggesting that you put in place to help voters use these new machines?

Mr. Blackwell: The first and more interesting thing is that we had to make sure that people understood that you can have all the modern technology that you want, if, in fact, the election officials didn’t understand it and couldn’t convey confidence to the voting public, then there was going to be a breakdown. And the essential ingredient in the election process in a free democracy is the belief that the final vote actually reflects the will of the people. And so it is understanding that you can’t manage elections from -- and administer elections from Columbus, Ohio, or any state capital, that you’re still dependent on the execution of a well-managed election at the local level.

And so that goes back to setting objectives, making sure that people understand the anticipated results, and then making sure that they are sufficiently educated at the local level. It doesn’t do me any good to be able to be the world’s most articulate secretary of the state on these matters and I haven’t been able to communicate that at the point of execution, and that’s the local level. So we put a lot of emphasis on working with our 88 county boards of elections, making sure that they are well trained and most -- and well equipped.

You’d be surprised at the politics of it all. And I say that in a sense that county boards of elections have to get most of their resources from county commissioners. And these county commissioners in Ohio basically are saying, look, we were not Florida. We didn’t have a fiasco and what is this new technology going to cost us, you know? And so you only have -- you just don’t have the confidence issues, you have the cost issues that people perceive as being problematic.

But when -- my job as a person who has been in the position of being a fiduciary and a locally elected official, I had to go down and talk to those county commissioners and say, look, just basically understand something. We now have a punch card system and we have a rule in Ohio that says each election you have to print up 102 percent of the number of registered voters in your county. And when you have elections for only 19 percent, 36 percent, you have enormous waste of printing and paper costs. With these new technologies you don’t have that waste. And so there are repurposed dollars that you can put against the maintenance, professional training, public education. And once you sit and work people through it they begin to get a better understanding and they embrace the technology. People resist change and, unfortunately, a lot of people, you know, are 21st century Luddites. (Laughter) They want to just smash the new technology before they tackle it and attain it.

Mr. Lawrence: What does E-government mean in Ohio? We’ll ask Ken Blackwell, Ohio secretary of state, to give us his perspective when The Business of Government Hour returns.

(Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I’m Paul Lawrence and this morning’s conversation is with Ken Blackwell, Ohio secretary of state. And joining us in our conversation is Glen Graham.

Well, Ken, in the last segment we talked a lot about the logistics of elections, but you’ve also been outspoken about the need for campaign finance reform. Could you describe your thoughts and also tell us about campaign finance reform efforts in Ohio?

Mr. Blackwell: People understand that money is the mother’s milk of campaigns. But the question that always arises is what is the influence of money and can you follow the money? And so transparency becomes a driving issue in all campaign finance reform discussions. And in Ohio, we’ve placed a priority on moving towards full disclosure.

I happen to believe that every dollar that’s involved in the political process should be fully disclosed. I don’t get so caught up on how much money one contributor or a group of contributors contributes if I, in fact, as a voter and as a taxpayer can understand how much money they’re giving. But when they can hide that money and have an impact that is not fully disclosed I think what you do is you drive voter confidence down because they begin to believe that that money has a greater influence than their particular level of participation. And so you’ve seen a tremendous falloff in civic engagement and voter participation not only across the state of Ohio, but across the nation.

And so campaign finance reform, driving for full disclosure, is a way of making that whole process more transparent for the purpose of building voter confidence and encouraging broader participation.

We in Ohio were recently a part of a study, a joint study done by the California Voter Foundation, the Center for Government Studies, and the UCLA Law School. Ohio ranked as the fourth best state in the Union for campaign finance disclosure laws and practices. And we scored number one for our electronic filing program, which we feel real good about because it allows participants and observers of the political process to get information quickly about the impact of money and who gave what to whom. And then we ranked third for public accessibility to campaign finance data. So we’re going to drive from third to number one there and from fourth to number one in the country.

Mr. Graham: Ken, earlier this morning you mentioned your Business Services Division. Can you detail some of the changes that have taken place since you’ve taken office?

Mr. Blackwell: It’s a great example of how you use modern technology to transform a unit or an organization. When I became secretary of state one of the great challenges was that I understood that my office was sort of the gateway to business opportunity. It all started with our office. That’s where you got your corporate identity and you incorporated your business. And when we took office in 1999, it was taking about 15 weeks to incorporate a business in the state of Ohio. Today, we’ve moved that through the use of E-mail and Internet technology and toll-free telephone numbers and we’ve been able to reduce that to 1 to 3 days and, in most cases, you can get it done in 1 day.

What we had to do there was make some major changes in the infrastructure and in the technology infrastructure. For example, when I went in I sort of managed by walking around. And so I was starting on my first day to get flooded with complaints about how slow the office was moving on incorporations. I asked people some simple questions. How many phone lines do we have? We were getting about 125,000 calls a month and we only had 11 phone lines, you know. And so I knew instantly we had to get more phone lines. And so we instantly moved up and went over and had them make the case to the legislature to get about 102 phone lines.

We then started to look at Internet technology and said how much of this can move towards a 24/7 operation and move to the consumers through the use of the Internet? And then we really found that the people who didn’t like standing in line saw the E-mail communication as a way that they could communicate more effectively with us in a more time-efficient way. So by using these technologies we were able to radically reduce the time that it took to incorporate a business. But we made people understand that we were part of an operation, part of a state that wanted to be more inviting to business and make it easier to start and to do business in the state of Ohio.

But it also had to -- that transformation involved changing the way that we did things with our people. We had a relatively high absentee rate. People were not cross-trained. And so we, in fact, had to create incentives and sanctions and expectations that we expected people on the job and that the job could actually be fun. But what we found out was that it was so taxing and so exhausting because they didn’t have the training and the technology to make it easier, they were swamped and they were burnt out. And instead of, you know, just taking it day-in and day-out, in some units there was an absentee rate of, you know, upward to 20, 25 percent a day. So we changed all of that through our Uncommon Sense Program, making people understand that they matter, that they were part of a team, but that they had to actually live the change that we were advocating from the top of the organization all the way to the base of it, and we were able to get that done. And now people actually feel good about what we’re doing.

We were able to move our entire operation, reduce our dependency on general tax revenue by 64 percent over a 5-year period. We are now operating on an enterprise model where we -- our dominant revenue comes source of revenue comes from user fees that are based on the real cost of delivering a service, not one penny more. People actually, when they can see the value of those user fees, they pay it with a smile. And that’s what we’ve been able to accomplish. We drove a cultural change, which actually changes the way we do business and the way we embrace technology.

Mr. Lawrence: I thought it was interesting as you described that you described both the technology and people. So I’m curious, how would you summarize the lessons learned from that experience for others?

Mr. Blackwell: Any technology in and of itself can give you efficiency, but not necessarily give you effectiveness if you don’t bring people around to, first, embracing the technology and then mastering it, and so that’s been our key. And so in a cultural sense what we say is that competency and character standing alone or good traits in and of themselves, you fuse competency and character. And not only do you get, you know, a better workforce, you get better results and you have people who enjoy delivering those results.

Mr. Lawrence: Ken, you’ve had a very interesting career that’s rich with experiences. What advice would you give to a person interested in a career in public service?

Mr. Blackwell: I think, first, probably would be what I tell people with any professional development aspirations, know yourself. Be comfortable in your own skin. Understand that, you know, if you want to be a self-starter and a self-manager and a leader that it really starts with your internal compass; that people read your behavior more so than they hear your words, you know. So live what you say that you believe. And if you do that you have a chance of inspiring others just through your example. And that applies to anyone in a public service career or a private sector career, people who aspire to be leaders.

And I guess my grandmother gave me some good advice when I was growing up. She said, you know, there are three books that you need to master and if you master them you will have mastered the art of good living. She said the first is your datebook or your calendar. It tells how you spend your time and with whom you spend it. And I found out that effective leaders and effective people tend to spend their time with other effective people and people who are of strong character.

She said the second book is your checkbook. She said how you manage your resources actually will indicate what’s important to you. And in government, you know, we can do a lot of things with the resources that we have, but we can’t do everything. So we have to make some tough public choices about what it is that we do, what our competencies are, and how we do those things well.

She then told me that, you know, in my family we were a strong Christian family, but it could have been a grandmother in a strong Muslim or Jewish family or, you know, Hindu family. My grandmother said it was the Bible. And she said this, in fact, will help you choose the path of conviction over the path of convenience. And for me that’s been the key, to understand that, you know, my leadership is not only character-based, but faith-based and that there is a roadmap for me.

And those three books, you know, how I -- am I a steward of people’s money as if it was my money? Who do I associate myself with? And, you know, what is my internal moral compass, my character development driving force that allows me to live the change that I, in fact, advocate?

Mr. Lawrence: Well, Ken, Glen and I want to thank you very much for joining us. I’m afraid we’re out of time. Thank you for squeezing us in your very busy schedule.

Mr. Blackwell: Well, thank you all. I -- if there are listeners out there that want more information, please go to www.ohiospirit.org.

Mr. Lawrence: Thank you very much.

Mr. Graham: Thank you.

Mr. Lawrence: This has been The Business of Government Hour featuring a conversation with Ken Blackwell, the Ohio secretary of state. Be sure and visit us on the web at businessofgovernment.org. There you can learn more about our programs and research, and also get a transcript of today’s very interesting conversation. Again, that’s businessofgovernment.org.

This is Paul Lawrence. Thank you for listening.

Cameron Findlay interview

Friday, August 15th, 2003 - 20:00
Phrase: 
Mr. Findlay is the Deputy Secretary for the Department of Labor
Radio show date: 
Sat, 08/16/2003
Guest: 
Intro text: 
Mr. Findlay is the Deputy Secretary for the Department of Labor
 
Complete transcript: 

Arlington, Virginia

Tuesday, February 25, 2002

Mr. Lawrence: Welcome to The Business of Government Hour. I'm Paul Lawrence, the co-chairman for the IBM Endowment for The Business of Government. We created The Endowment in 1998 to encourage discussion and research into new approaches to improving government effectiveness. Find out more about The Endowment by visiting us on the web at www.businessofgovernment.org.

The Business of Government Hour features a conversation about management with a government executive who is changing the way government does business. Our conversation is with Cam Findlay. Cam is the deputy secretary of the U.S. Department of Labor. Good morning, Cam.

Mr. Findlay: Good morning.

Mr. Lawrence: Joining us in our conversation is Fred Fagerstrom. Good morning, Fred.

Mr. Fagerstrom: Good morning.

Mr. Lawrence: Cam, let's start by talking about the mission and responsibilities of the department. Can you give us an overview?

Mr. Findlay: The Department of Labor is the principal government agency that is involved with protecting workers in the work place. We have several agencies within the department such as the Occupational Safety and Health Administration which is known as OSHA, the Mine Safety and Health Administration, the Office of Labor and Management Standards which regulates the relationship between union members and their unions, and the Office of Federal Contract Compliance Programs, or OFCCP, which prevents work place discrimination. So with the worker protection focus we have several agencies.

We also are the federal agency, which protects your employee benefits. Your health care benefits if you're in the private sector, of your pension benefits, we regulate those under a law called ERISA.

We operate about $11 billion worth of job training and employment service programs to help get dislocated people back to work. Then finally, we operate the $45 billion a year unemployment insurance system, which helps people when they are between jobs.

Mr. Lawrence: You described some dollar numbers, the size of the budget. What about the number of people in the department?

Mr. Findlay: We have about 17,000 employees at 570-plus locations around the country. Our budget varies considerably year to year because it's dependent quite a bit on the unemployment rate. The budget last year, I believe, ended up being about $70 billion because the unemployment rate was relatively high. The proposed budget for fiscal year 2004 which we've just submitted is for about $56 billion. That's not because we're cutting $14 billion out of our budget, it's just because of projections as to what the unemployment rate will be, which means that there will be fewer unemployment benefits paid.

Mr. Lawrence: You described a wide range of activities going on in the department. Could you give us a sense of the types of skills the employees have?

Mr. Findlay: We have a very highly skilled and well-educated work force. We have agencies like the Bureau of Labor Statistics, which is composed of economists and statisticians. We have what used to be called the Pension and Welfare Benefits Administration and is now called the Employee Benefits Security Administration. This is the agency that protects your pensions and health benefits. That is composed of a lot of actuaries and highly trained professionals as well.

Then, of course, our OSHA inspectors, our inspectors in the Office of Labor Management Standards, and our inspectors in the Wage and Hour Division which I didn't mention before which regulates wages, overtime, and things like that, those tend to be law-enforcement types that get out there in the field and protect workers.

Mr. Fagerstrom: What are your responsibilities and duties as the deputy secretary?

Mr. Findlay: The job of deputy secretary is always a slightly undefined one because it depends somewhat on the relationship with the secretary. I feel like I have a very good relationship with the secretary, and I spend a lot of time dealing with the boring day-to-day issues that we don't want to trouble her with.

But I think formally my role is to run the budget process. As I said, we have a budget in the tens of billions of dollars, and we begin putting that budget together in the early summer, we submit it to OMB in the fall, and then work with OMB from the fall to the introduction of the budget in February.

I am in charge of our regulatory process at our department. We have a body that we call the Policy Planning Board that is all of our agency heads. We bring them together once a week, and every regulation that comes through the department, every major new policy initiative, has to come through this Policy Planning Board. I chair that board along with our assistant secretary for policy.

Then I think broadly I guess I'm in charge of the management of the department. I am the person that is supposed to be watching over the implementation of the President's management agenda, issues like financial management, competitive sourcing, human capital, e-government, those sorts of issues.

Mr. Fagerstrom: As deputy secretary, you are also a member of the President's Management Council. Could you tell us about the council and your role within the council?

Mr. Findlay: Yes. This council was an innovation of President Bush who it's often been said is the first MBA president. It brings together all of the chief operating officers of all of the departments and smaller agencies throughout the government. It's a forum to exchange best practices amongst each other on management issues, to press for management changes on things like e-government, program evaluation, and financial management. It's really been a great catalyst for this administration to take management issues very seriously.

As to my own role on the council, I'm one of probably 20 or 30 COOs on the council, but I happen to chair the E-Government Committee of the President's Management Council. What we've tried to do with this committee is to bring some focus and coherence to all of the vast amounts of IT spending and planning that is going on throughout the federal government.

In particular, there are 24 e-gov initiatives, things like govbenefits.gov which is one site where you can go and look up all the benefits that might be applicable to you. There's recreation.gov where you can register to stay at a lodge in Yellowstone, or you can get a permit for some other federal facility some place else in the country.

We have these 24 e-government initiatives, and it frankly was kind of a hodgepodge at the beginning because they were all off doing their own thing. They were being forced to beg departments for money and to plead with departments to shut down duplicative investments. So this committee was formed in order to bring some order to this process.

Mr. Lawrence: Just to follow-up on that, how would they do that? As I understand it, they have no real authority to do the kinds of things. So how would actually some of those things get done?

Mr. Findlay: All we've got is moral suasion backed up by the President's great desire to see this work. It was tricky at the beginning because what happened was that OMBs in past years would approve budgets, and they would say to the Department of Veterans Affairs here is your X million dollars for a project to do this IT investment. Then after we set up the e-government initiative that was supposed to say put all government benefits on the same site, we were in the position of OMB having to go back to the Department of Veterans Affairs and saying, you thought that was your money. It's actually money we're going to use for this e-government initiative. So please give us the money back. And by the way, please stop the spending that you were planning to do. You can imagine that that caused a lot of friction amongst agencies and between the agencies in OMB.

So what we've tried to do is to get all the involved parties in a room together and agree that a cross-agency project is a good one, and then agree as the President's Management Council on how it's going to be funded and how we're going to shut down duplicative investments. So far it's actually worked pretty well.

It is still a work in progress, and I would be lying if I said it's been absolutely smooth sailing, but I think the formation of this E-Government Committee has made a big difference.

Mr. Lawrence: Tell us about your career prior to coming to the department.

Mr. Findlay: Well, I graduated from law school in 1987. I came to Washington to clerk for a judge at the D.C. Circuit, and then I did a second clerkship at the Supreme Court. When I came off that clerkship, all of my colleagues were going off to law firms, and I decided to enter public service. So I went to work as the special assistant to the secretary of transportation who at that time was a guy named Sam Skinner. I was in that job, or actually I became counselor to the secretary. Then in 1991, Sam Skinner was named White House chief of staff, and I went over with him to the White House as deputy assistant to the President and counselor to the chief of staff, thereby proving the rule that the longer the title, the less important your job.

I was at the White House through the very difficult year of 1992 when we were trying to get President Bush reelected. Then like everyone else that worked at the White House, had to look for a job in the private sector in 1992.

So I have been trained as a lawyer, and I went back to Chicago and went to work at the law firm of Sidley & Austin and spent almost 9 year there until I got the call to come out and be deputy secretary of labor.

Mr. Lawrence: It's time for a break. We'll stop on that point. Stick with us through the break and come back as we continue our conversation with Cam Findlay of the U.S. Department of Labor. What are the different programs at the department and how are they changing? We'll ask Cam to tell us about these programs when The Business of Government Hour continues.

(Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, and today's conversation is with Cam Findlay, the deputy secretary of the U.S. Department of Labor. Joining us in our conversation is Fred Fagerstrom.

Cam, let's find out a little bit more about the Department of Labor. We know the department is organized into major program areas. Could you tell us more about the Employment and Training Administration?

Mr. Findlay: The Employment and Training Administration, or ETA as we call it, is our largest agency. Its principal goal is to help dislocated workers. It does this by running $11 billion or so of job training and employment service programs that are operated throughout the country through one-stop employment centers. Then it also runs the unemployment insurance system.

ETA has some dog and cat roles. It also has a role in labor-based employment programs, things like that. But basically it runs our training programs and the unemployment insurance program.

Mr. Fagerstrom: Speaking of that, what about the Employee Benefits Security Administration, what does it do? And why was its named changed recently, last February, from the Pension and Welfare Benefits Administration?

Mr. Findlay: We changed the name of the Pension and Welfare Benefits Administration to better reflect what its actual duties are. When people heard the name welfare, they assumed that it was an agency that somehow dispensed government benefits. But in fact, this is an agency, as I mentioned earlier, that regulates the security of employee benefits, principally pensions, 401(k)s, plans like that, and then also all private-sector employer-provided health plans. So we thought the idea of the Employee Benefits Security Administration better guided what the role of that agency is.

This agency, EBSA as we call it now, is really a terrific agency. They do a great job of protecting Americans' pensions and health care benefits with a fairly lean staff. They routinely recover $6- or $700 million a year in pension benefits for workers, and they are going to be beefed up in the next couple of years to do an even better job. We've asked for a 10 percent increase in their budget for fiscal year 2004 so that they can have more people on the ground investigating pension plans and health plans.

Mr. Lawrence: Are there any management challenges with changing an organization's name?

Mr. Findlay: Principally, business cards and stationery, I think. It was something that we were able to do just a secretarial order, we didn't need legislation to do it, but we were happy to be able to better get the message out about what this agency does.

Mr. Lawrence: In your opening description you talked a lot about what the department does in terms with regards to occupational injury and illness. I wonder if you can take us through the different organizations and how they all work together, how you pull that together.

Mr. Findlay: Yes, there are some synergies, particularly between OSHA and the Mine Safety and Health Administration which regulates employee safety in mines, and both agencies have done very well in the last couple of years.

As for OSHA, the most recent statistics show that employee injuries and fatalities have continued to decline for several years under our stewardship. As for the Mine Safety and Health Administration, or MSHA, we had a record low number of fatalities last year in mines in the United States. And of course, we had that very dramatic rescue of nine miners at Quecreek in Pennsylvania where MSHA really lead the effort along with the Commonwealth of Pennsylvania. So we are very proud of those agencies.

Our other worker protection agencies are perhaps less well know, but we have the Office of Labor Management Standards which enforces requirements that unions file financial statements with the government, and also regulates union elections and has other functions like that. Its basic function is to ensure that union members' rights are fully protected within unions.

Then we have the Wage and Hour Division, which is responsible for ensuring that people are paid the minimum wage and that people are properly paid overtime. Then we have this Office of Federal Contract and Compliance Programs, which enforces the executive order that requires nondiscrimination in the work place of all federal contractors.

Mr. Lawrence: One can't help but think that when you describe those missions of a time in our history, say 50 years ago, when many of these were very pressing and important issues. One senses that over time the work place has gotten safer or there is less effort to bypass the law. Is that perception true, or are these things still aggressively out there?

Mr. Findlay: I think that is true, Paul, and it's one of the things we're trying to do at our department. We have to recognize that our department was established in 1913 and many of the laws that it enforces were enacted in the '30s, '40s, '50s, or '60s. The work place has changed so much since then, so our constant challenge is to update all of our laws, our regulations, our policies, and our programs to take account of the changes in the work place.

You mentioned OSHA. I think it is true that most employes want to protect their employee's safety. It's in their interests to do that. So OSHA wants to add to its enforcement activities what we're calling compliance assistance. We want to get the word out to employers to help them understand how to avoid injuries before they occur rather than fine employers for injuries after they occur. So OSHA has been very aggressive in getting its information up on the web, in holding seminars around the country, in entering into partnerships with trade groups and employers, and the proof is in the pudding: we believe that injuries and fatalities are going down.

Mr. Fagerstrom: Another whole area within the Department of Labor is the Bureau of Labor Statistics. What is that responsible for, and how do those activities fit within the department?

Mr. Findlay: The Bureau of Labor Statistics is one of the jewels of the federal government. It's an agency that is responsible for compiling a whole number of statistics about what is going on out in the work force. Most famously, on the first Friday or every month, the Bureau of Labor Statistics issues the unemployment rate. One of my duties as deputy secretary is to have the Commissioner of the Bureau of Labor Statistics come to my office every first Friday of the month at 8 o'clock and walk me through the latest employment statistics.

Sometimes it's good news as it was this past month, and sometimes it's less good news, but it's always interesting to guess at what the unemployment rate is going to be before everyone else finds out.

The Bureau of Labor Statistics has a whole number of other programs. It measures the consumer price index, the producer price index, productivity, things like that. It's a terrific agency that does excellent work.

Mr. Lawrence: One of the things we noticed when we were studying the department is you have the Center for Faith Based and Community Initiatives. I wonder if you could tell us about that?

Mr. Findlay: Yes, the Department of Labor is one of five or six federal agencies that was required by executive order to set up a Center for Faith Based and Community Initiatives. The mission of this center, which we're very excited about is essentially to remove barriers to faith based and community organizations to participate with the federal government and to participate in the federal government's programs.

At one level, this is just a matter of eliminating unnecessary and artificial restrictions, say, in grant proposals. We don't want to shut out faith based groups simply because they're faith based groups, and we've had a lot of success in that and have been able to get out some grants.

Then the second part of the job of this center is to get out there and gin up interest in the faith based community in our programs. We have a lot of pilot programs around the country. We've got one called Ready for Work in Jacksonville, Florida, that is linking returning offenders coming out of prison with our employment and training system. We've got another program with public-private ventures that teams up with our Job Corps Centers which are job training centers to do mentoring in Job Corps Centers. So we're very excited about the work of this part of our department. And we were very proud that we were the first agency to get out some grants to faith-based organizations.

Mr. Lawrence: When you think about the broad range of programs we've been talking about, how do you manage them all in terms of the scale? Let's take something like communication. How do you get a relevant message out to all of these people?

Mr. Findlay: It is a challenge in a department as big as ours with so many employees and so many locations. One of the things we always hear from our stakeholders is that we may be saying one thing in Washington, but at the district office in Pocatello, Idaho, they're not hearing the message. I'm making that up. I don't want to say anything bad about the district office in Pocatello, if we do have one there.

But we have undertaken a considerable effort to communicate with our employees. The secretary sends e-mail messages all the time to employees on issues of concern, and any major new initiative she'll make sure to announce them to that way. We do web-casts that all of our employees can pick up so that if we're holding an event in the Francis Perkins Building, our headquarters in Washington, many times all of our employees all around the country can log on and watch the event.

Several of our assistant secretaries and deputy assistant secretaries and I have made it a point to try and get out and hit every regional office so that our goal is that every regional office will have a senior department official visiting every quarter.

Mr. Lawrence: It's time for a break. Rejoin us in a few minutes as we continue talking about management with Cam Findlay of the U.S. Department of Labor. How is Labor doing with the President's management agenda? We'll ask Cam for his insights when The Business of Government Hour returns.

(Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, and today's conversation is with Cam Findlay, deputy secretary of the U.S. Department of Labor. Joining us in our conversation is Fred Fagerstrom.

Mr. Fagerstrom: Good morning. Can you tell us about the department's four strategic goals?

Mr. Findlay: Yes. When I arrived at the department we had three strategic goals, a prepared work force which reflected our mission of training dislocated workers, a secure work force which involves our mission of providing unemployment insurance principally to workers, and the third was quality work places. That meant safe work places, work places free from discrimination, work places where you were paid a fair day's wage for a day's work. Those are obviously very important goals, and we are working very hard to achieve them.

But we also decided to take a look when we were required to develop a new strategic plan at a new goal, and the new one we came up with after a lot of semantic back and forth amongst the senior staff of our department was a competitive work force. The idea there is to deal with the changes that are taking place in the global economy.

It's not enough to be trained once, you may have to be retrained to deal with the dynamic global economy. We didn't want to leave in place particular regulations, laws, or policies if they weren't really relevant to the 21st century economy. So the idea of this last goal was to force our department to ask itself on a continual basis, Is this the best way to be carrying out the mission of the department? Could we regulate in a different way? Could we protect employee safety in a different way? Could we protect employee benefits in a different way? So that was the idea behind adding this fourth goal, and we're very with how our strategic plan has worked out, and we intend to vigorously go after all four of our goals.

Mr. Lawrence: Could you tell us more about the department's Management Review Board?

Mr. Findlay: Yes. We set up something we call the Management Review Board soon after I arrived to put in place a sort of coherent and across-the-board approach to the management issues facing our department. The Management Review Board is chaired by our assistant secretary for management, Pat Pizella, and it brings together all the agency heads within our department. We deal with issues like IT, information technology, issues, common human capital issues, competitive sourcing. It's really a department tool to implement the President's management agency and to deal with all the management issues that arise in a department like ours.

Mr. Lawrence: Does it have the authority to make decisions, or is it more of this moral suasion of getting people on the same page?

Mr. Findlay: I think it has the authority to make recommendations to the secretary. Ultimately, the secretary is the final decision maker on all these things. I'll give you an example. We have a variety of e-mail systems at our department, an almost preposterous variety of different systems, different name conventions and so forth. So one of the things we decided to do early was to convert to a single e-mail system that would make it secure, it would make it easier to communicate in the department, and it would take on a name convention so that it will be easy to figure out what someone's e-mail address is.

A part of our department, the Employment Standards Administration, which has the Office of Labor Management Standards and a couple of other departments, Wage and Hour, and they have this hilarious name convention, that you use the initials plus the word fenex2 (phonetic) at dol.com or something. So you could never figure out how to e-mail somebody in that part of our department.

So we took the issue to the Management Review Board after a lot of vigorous discussion, a lot of very interesting issues, for instance, BLS, the Bureau of Labor Statistics, wanted to keep its own separate e-mail system because it used it to collect information from the field. After all that discussion, we decided to go with a common e-mail system and we made the recommendation to the secretary to essentially implement it throughout the whole department.

There were, frankly, parts of our department that did not want to implement a common e-mail system even after the discussion was over. But imprimatur of the Management Review Board really did help seal the deal.

Mr. Fagerstrom: You mentioned the President's management agency. How has the department done in achieving the goals of the President's management agenda?

Mr. Findlay: I'm proud to report that the Department of Labor has the best scores in the federal government on the President's management agency. There are five initiatives under the President's management agency, and on status we have got yellows on four and red on one. On progress we have green on four and yellow on one. The outlier in each case is competitive sourcing. It is an area where no department in the entire federal government has gotten a yellow score for status. So we're in good company on that area, but we still want to do better.

Mr. Lawrence: Any particular highlights or things of note through the scorecard?

Mr. Findlay: Yes, I think the places where we made improvements are worth mentioning. In financial management, we had had a red score when the OMB management scorecard was first developed. We asked OMB why did we have red, and they said you don't have a good plan in place for preventing erroneous payments in the unemployment insurance system and it's costing the federal government billions of dollars a year.

So I came back to our CFO, Sam Mock (phonetic) and our head of the Employment and Training Administration, Emily Deroko (phonetic), and said let's put together a plan for dealing with this erroneous payment problem. We were able to put together a plan that assisted states in ferreting our erroneous payments by getting access to various databases, and with that improvement, OMB took us from a red to a yellow.

We've had similar successes in some of the other areas. We're one of the leaders in e-gov because we have been the managing partner of perhaps the most successful e-gov initiative, govbenefits.gov. I would encourage all our listeners to log on. It's a really great site. It is a citizen-centered site in the sense that you don't have to guess at what government department to go to find out what benefits you're eligible for. What you do is you go to the site, it asks a series of questions about you, and then after you've gone through three screens, it will tell you all the government benefit programs that you might be eligible for, how to apply, and who to contact.

That was one initiative that we led, and we were very proud of it. So we've made a lot of progress in the e-gov area as well.

Mr. Lawrence: When you think about moving the scores from red to yellow, what are the management lessons learned in terms of the energy needed to effect those changes?

Mr. Findlay: I think it varies. There are some problems that are almost insoluble in the short-run. We have financial systems that were developed many years ago and really are past their prime. So if we decide today we want to upgrade those financial management systems - or a better way to put it is we decided last summer to do that when we were putting together the fiscal year 2004 budget. So we sought $20 million in the fiscal year 2004 budget to get that work done.

It will be a 3-year project, so it's something that will not be done until 2006, 3 or 4 years from now, and only then will we really have the financial system that we need to manage the department the way the private-sector enterprise might be managed. There are real obstacles in that area.

As I mentioned, the erroneous payment issue under UI was just a matter of asking the question, How can we solve this problem? They came up with some fairly simple fixes pretty quickly. I think it varies initiative to initiative.

Mr. Lawrence: One of the things we were noticing in the department is the Center for Program Planning and Results. I'm curious about that, especially as you think about performance-based management initiatives.

Mr. Findlay: In this past year we set up this new Center for Program Planning and Results in the office of the assistant secretary for management. This center is in charge essentially of two things, the GPRA process, the Government Performance and Results Act, and then also our progress on the President's management agency. This is the part of our department that goes out to the agencies and encourages them to make their GPRA goals much more outcome oriented as opposed to input oriented. It's the part of the department that tries to come up with good information and good measures for all of these metrics.

Then it's also the part of the department that puts out our annual report. Every 6 months or so I work with that center to sit down with each of our agency heads and assess their progress towards their GPRA goals and their President's management agency initiatives. I think it's been a very useful thing to do because in the day-to-day work of government, it's very easy to get fixated in what was in the "Washington Post" that morning, and you need to have the long-term focus on management issues.

Mr. Lawrence: That's a good stopping point. Some back in a few minutes as we continue our conversation about management with Cam Findlay of the U.S. Department of Labor. What does the future hold for the department? We'll ask Cam for his perspective when The Business of Government Hour continues.

(Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, and today's conversation is with Cam Findlay. Cam is the deputy secretary of the U.S. Department of Labor. Joining us in our conversation is Fred Fagerstrom.

Cam, can you tell us more about the mission of the secretary's 21st Century Work Force Initiative?

Mr. Findlay: Yes. One of President Bush's and Secretary Chou's biggest initiatives since we arrived at the Department of Labor is to focus all of our efforts on the work force of today rather than the work force of the past.

I mentioned earlier that our department is almost 100 years old, and many of the statutes that we administer are decades old. Many of the things that we do have not fully taken account of the way the work place has changed in recent decades. The work place is much more diverse than it used to be. We have a different workday, a much more 24/7 orientation. As I mentioned before, many employers have stepped up to the plate already and begun to protect their workers on their own, so we wanted to take a look at everything we do and see whether it's relevant to the 21st century.

So President Bush's executive order set up in our department an Office of the 21st Century Work Force to focus a spotlight on these kinds of trends, and it has done a great job in highlighting some of the trends out there. I mentioned before that there is diversity in the work force.

Another thing is that there's a skills gap out there. There are a lot of people out of work still, but there are a lot of jobs that are being advertised in the paper every day that there aren't enough good people to apply for, so we want to close that skills gap. So this 21st century office has held a number of events such as a 21st Century Summit that the President and Alan Greenspan and a number of leaders came to address. It sponsored the Saver Summit, which was intended to focus on the need for all employees to begin think about. And it held a Women Entrepreneurship Conference last year at which the President spoke that was intended to focus on the issues that face women small-business owners, which are an increasing segment of the economy.

More recently, the office in conjunction with the American Enterprise Institute held a conference on productivity and how we can increase productivity. This is in line with that final strategic goal that I mentioned, a competitive work force, because ultimately the way we increase our incomes and we increase jobs is to make workers more productive.

So this 21st century office has really been there to act as a catalyst for us to all examine our premises as to whether we're doing our jobs in a way that's relevant to today's workers.

Mr. Fagerstrom: Would you reflect on the recent rescue of the nine miners and any lessons learned from that?

Mr. Findlay: That was probably the most emotionally satisfying thing that's happened since I came to the Department of Labor. I got a call from the head of the Mine Safety and Health Administration late one night and was told that nine miners were trapped underground, and while he was optimistic as one should always be, he made clear that this was a very difficult situation.

Then we got about 50 people from the Mine Safety and Health Administration out there to Pennsylvania very quickly. They were able to move very unique equipment out there very quickly. But even with all that effort, I think there was always some doubt that we would get those people out alive.

When I woke up that weekend morning and saw the pictures of the miners being hauled out of their mine in that yellow capsule, I was happy as I can remember being since my marriage or the birth of my children. It was very exciting.

We've had the miners and their families to our department, we brought the yellow capsule that you saw on TV in for the event, and it was very, very special. I think what it does show is that the sort of partnerships that MSHA was able to form with the states can be very effective. MSHA provides grants to states for training, and then it has this operational role of miners. Ou people really came through, and we were as proud of them as we could possibly be.

Mr. Lawrence: When you look out to the future, what are the next challenges on the horizon for the department?

Mr. Findlay: I think out biggest legislative challenge is to obtain reauthorization of the Work Force Investment Act. This is the law that authorizes all of our training programs. It expires this year, so we've got to reauthorize it.

The President has just put forward his proposal which would eliminate some of the silos in the programs, change the governance structure that has prevented money from getting to people that need it, and try to increase the role of employers in the work force investment system. We think that latter point is very important. Employers are the people that provide jobs. That's a tautology, but we have to always remember that because if employers are not part of the system, then we're not necessarily training people for the right things, we're not aware of what jobs are out there, and we're not making the connection between employers and dislocated workers.

Regulatorily, we have a very full regulatory agenda. We are updating the white color exemption rules under the Fair Labor Standards Act. These are the rules that determine whether you're a blue collar worker that gets paid overtime or a white collar worker that doesn't. These regs were last significantly changed in the '40s and early '50s, and so they're badly in need of change. They still provide detailed guidance on jobs like Linotype operators, straw bosses, gang leaders, and leg men. I don't know what any of those things are, but we don't need rules that apply to them anymore.

Then we have several other regulations. We have proposed to update the forms that unions use to file their financial statements with us. We have put out a rule that would enhance the integrity of the unemployment insurance system by withdrawing permission that was given out a few years ago that states could use money from their unemployment trust funds to pay maternity leave, and we've got a couple of other major rules out as well.

Then I think more broadly, we want to continue the management reforms we've been pursuing at the Department of Labor. We have a lot of work to do in the financial management area, a lot of work to do in competitive sourcing, and still a lot of work to do in human resources. We we'll be pursuing those things.

Mr. Fagerstrom: You've talked about a number of things and challenges for the next few years. What's your vision for the agency over the longer term, the 5- and 10-year horizon?

Mr. Findlay: I hope that we will be very bold in terms of thinking about how our agency relates to the 21st century work force. I know I've said it a couple of times, but this is a very old agency. Unlike most of the other domestic agencies, we are not a "Great Society" agency. We're not even a "New Deal" agency. We're really a turn-of-the-century agency. Many of our laws, the Fair Labor Standards Act was passed in 1938, even recent laws like the Occupational Safety and Health Act are a generation old now. I hope we will be bold in terms of looking to see if there are any changes that need to be made to those laws, to the regulations under the laws, to opinion letters and things like that, so that we can really make our department relevant.

I've often remarked that the Department of Labor seal reflects the anachronism of some of our programs and policies. It shows as the symbols of our work force an anvil, a plow, a mill wheel, and a steamship, and those are really 19th century symbols, they're not 21st century symbols. We've got to make sure that our department is more up to date than its seal is.

Mr. Lawrence: I'm curious, as you think about your career, what advice would you give to a person interested in a career in public service?

Mr. Findlay: I think the main advice I'd give people is that it's important to be nimble and flexible, and that it's impossible to plan your career in a linear way. I think my career offers a good example of that in that I started out of law school as a law clerk, and it's the sort of job where typically would go be an appellate lawyer some place, and found myself with a great opportunity to work for a cabinet department that I didn't know much about. I went there, and then through pure chance found myself at the White House.

I couldn't have planned that progression, but I just did things that were interesting to me, and somehow things have worked out reasonably well. I guess I would just say to people don't try to look 25 years ahead and plan everything out. Be flexible, because in today's economy people don't stay in jobs for their lifetimes anymore.

Mr. Lawrence: Cam, I'm afraid we're out of time. Fred and I want to thank you for being with us. Throughout the conversation you mentioned a couple websites. Did you want to remind the audience?

Mr. Findlay: Yes, let me first give the Department of Labor's website which is www.dol.gov. That would be a good place to learn more about our department. But I also mentioned the govbenefits.gov website. It's just as it sounds, it's www dot g-o-v-b-e-n-e-f-i-t-s dot gov.

Mr. Lawrence: Thank you. This has been The Business of Government Hour featuring a conversation with Cam Findlay, the deputy secretary of the U.S. Department of Labor. Be sure to visit us on the web at businessofgovernment.org. There you can learn more about our programs and get a transcript of today's conversation. Once again, that's businessofgovernment.org. This is Paul Lawrence. Thank you for listening.

Karen Alderman interview

Friday, November 23rd, 2001 - 20:00
Phrase: 
"My role is to lead and coordinate the services and components with leading the transformation to e-business, because it is about delivering technological solutions to our people, men and women, and t
Radio show date: 
Sat, 11/24/2001
Guest: 
Intro text: 
Karen Alderman
Magazine profile: 
Complete transcript: 

Arlington, Virginia

Thursday, August 9, 2001

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

The Business of Government Hour features a conversation about management with a government executive who is changing the way government does business. Our conversation this morning is with Karen Cleary Alderman, executive director of the Joint Financial Management Improvement Program. Welcome, Karen.

Ms. Alderman: Pleased to be here.

Mr. Lawrence: And joining us in our conversation is Ken Breznahan (phonetic), the director of PWCs ECFO practice. Welcome, Ken.

Mr. Breznahan: Good morning, Paul.

Mr. Lawrence: Well, Karen, let's start by finding out more about JFMIP. Could you tell us about its history and its activities?

Ms. Alderman: Well, the Joint Financial Management Improvement Program was established about a half century ago with the passage of the Budget and Accounting Procedures Act of 1950. At that time, it was known as the Joint Program for Improving Accounting in the Federal Government. The sponsors included the General Accounting Office, the Bureau of the Budget, and the Treasury. And the focus was on streamlining and improving accounting operations, which at the time were choked with even more red tape and conflicting requirements than they are today.

Over time, JFMIP has been called upon to facilitate solutions to a host of financial management challenges, particularly in while we're transitioning to new technology and processes to help facilitate that process.

Mr. Lawrence: Could you give us a sense of how many people are in the program and the types of people?

Ms. Alderman: Well, it's a very small program. Right now we have nine full-time, permanent employees. We have a number of folks who rotate through on developmental assignments. I'm very proud to say we've had -- hosted a CFO fellow for every year that that program has been in existence. But basically our ability to get work done is because we are enabled to work throughout -- bring teams from throughout the federal government to participate on projects. We do our projects jointly.

Mr. Lawrence: And what are the skills of these people? I imagine they're all accountants from the description.

Ms. Alderman: They're not. I'm not an accountant myself, actually. We do have systems accountants, basically. The folks we have there today are a mixture of skills, heavily in accounting backgrounds, but I think we have -- I'm an economist by training, frankly. So a mixture of folks.

Mr. Breznahan: Karen, you mentioned something about GAO in your opening remarks. Could you tell us a little bit about the relationship JFMIP has with GAO, other central agencies, governmentwide councils, and the like?

Ms. Alderman: Well, the JMFIP principals, currently include the comptroller general, David Walker; the Secretary of the Treasury, Paul O'Neill; the director of OMB, Mitch Daniels; and the director of OPM, Kay Cole James (phonetic). The JMFIP steering committee, which runs the day-to-day operations, is chaired by Jeff Steinhoff (phonetic), and he is the managing director for GAO's Financial Management and Assurance Organization. It also includes the chief financial officers from OPM, Cathy McGedigan (phonetic), and GSA, Bill Early (phonetic). And the fiscal assistant secretary of the Treasury, Don Hammond (phonetic) and Joe Cowell (phonetic), who is the OMB deputy controller.

The steering committee sets the major milestones and agenda items for JMFIP. But since the inception of the CFO Council in 1990, we work closely with the CFO Council and very closely, particularly, with the Financial Systems Committee and the HR committees to help bring about governmentwide policies and studies.

We also, in the conduct of our organization's mission, for instance, in setting systems requirements, we work with the other related committees, like, the Human Resources Technology Committee and the personnel payroll requirements process and the Procurement Executive Council in establishing acquisition system financial requirements.

So we work with everybody who will work with us.

Mr. Breznahan: Keeps nine people pretty busy, doesn't it?

Ms. Alderman: Yes, it does.

Mr. Lawrence: Well, you intrigued me, because you said you were an economist. I'm also an economist. Tell us about your career.

Ms. Alderman: Well, I became the executive director for JMFIP in 1998, but that was after I had served about 20 years in the Department of Defense at the Office of the Secretary. But even before that, I served a number of years at the Center for Manpower Policy Studies, working for a gentlemen called Sar Levitan (phonetic), where I co-authored books on veterans policy, the transition to the old volunteer force, and women in the labor force, at that time transitioning to continue working even though they were having children. That was in the early seventies.

Since 1983, I've been in the Senior Executive Service. so I've had a long career and served in a variety of different areas manpower, productivity programs, civilian personnel policy, and financial management.

Mr. Lawrence: Was there a plan to connect those things? Such a wide range. How did it all end up this way?

Ms. Alderman: I can't say that when I started I had a plan. When I started, I was just so grateful to be employed, but I happen to work for great teachers and mentors who, I guess, brought me along in my career. It wasn't always an easy process because they set very expectations, but every position I was in, I learned a lot and built on it, built networks and found new opportunities as a result of it.

I can remember going from the Center from Manpower Policy Studies in 1976, having finished a book on the all-volunteer service and looking in the newspaper about a presidential commission on military compensation. And I called up people I knew and said, do they need staff. And then was hired by Charlie Zwick (phonetic), who was the ex-director of the Bureau of the Budget, who was the head of that commission to work on that commission. So it's those type of opportunities that arose in my career by simply working very hard, but keeping my eyes open for other opportunities.

Mr. Lawrence: I heard a rumor and I wonder if you can confirm it. I understand one of the -- you're one of the youngest members of the SES?

Ms. Alderman: Well, in 1983, I was 33, and at that time, I was a woman in the Department of Defense, who became a member of the Senior Executive Service. There was a very few women and very few senior executives under the age of 40. So yes, I was very young. Sort of -- if I had thought about it a lot, I probably would have felt very uncomfortable.

Mr. Breznahan: It's good that you didn't.

Ms. Alderman: Yes, it was.

Mr. Breznahan: Along the way, was there any particular job or challenge that you faced that you think best prepared you to be executive director of JMFIP?

Ms. Alderman: Well, every position has been an education. I would say in the early seventies, the opportunity to write about child care and women in the labor force and the transition to the all-volunteer force, these two areas were, you know, basically analysis of major institutional changes in how government deals with institutional changes of that magnitude.

In the Department of Defense, there's two types of positions or experiences that I draw upon every day, continuously. One, part of my portfolio for 10 years was managing the productivity in enhancing the Capital Investment Fund. That was a fund of about $100 to $200 million -- it varied year to year. But it financed high payoff capital investments that we selected through a competition for -- based on return on investment, discounted return on investment, total return on investment and manpower savings. The projects allowed -- the management of that process gave a real good education on the cost of current processes and the potential for reducing costs and improving mission capability through doing things differently.

Examples, things that we funded through that pot of money included bar-coding, the introduction of bar-coding for logistics in the Department of Defense; chip-based technology to track transactions -- this was back in the eighties, when this was just cutting-edge desktop computing, even such things as tank washers, which allowed -- those gadgets reduced the time to task the manual labor, the water usage and pollution. Something, you know, that's vitally important to the troops on the ground who are mucking around with these tanks.

Another type of experience that, I guess, was a real stretching experience was heading up the Defense Travel Re-engineering Initiative in the Department of Defense. Now, that was more recent. That was under the leadership of Dr. Don Hammery (phonetic), who was the comptroller. In that project, I was responsible for making it all happen, and it required identifying a vision, changing basic business practice, partnering with industry, using electronic commerce principles, when they weren't really commonplace -- this was in '94 through '97.

So we also had to change rules and regulations, and that sort of reintroduced me to the Joint Financial Management Improvement Program, because we went to Virginia Robinson (phonetic), my predecessor, and said, help us get these laws changed, things like Telephone Act Requirements of 1939, that were still in place that said you had to authorize every long-distance telephone call, even though the authorization process cost more than the call.

Mr. Lawrence: That's a good stopping point, because it's time for a break. But stick with us, because when we come back, we'll ask Karen Cleary Alderman of the JMFIP to update us on the latest from the current financial modernization projects.

This is The Business of Government Hour. (Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers, and today's conversation is with Karen Cleary Alderman, executive director of the Joint Financial Management Improvement Program. And joining us in our conversation is Ken Breznahan, PWC director of our ECFO practice.

Ken?

Mr. Breznahan: Thank you, Paul.

Well, Karen, you know, financial management continues to be a pretty high-profile issue around town here. Can you tell us a little bit about your take on the current financial management environment in the federal government?

Ms. Alderman: Well, I think the financial management environment and the priorities are continuing to evolve. For a number of years, the agencies have focused and made significant progress in -- on achieving timely, clean audit opinions on their financial statements, "timely" meaning 5 or 6 months after the close of the fiscal year.

The goal has been shifting to improving the value and utility of financial information. Specific goals outlined in this Administration's draft for and content have accelerated reporting deadlines, established interim reporting on a quarterly basis, comparative reporting focused on program performance.

The goal has also been established for us getting clean opinions for all civilian agencies by 2003, and a government-wide clean opinion by 2005.

I would say right now, the focus is shifting more to getting timely information for management in performance, though.

Mr. Lawrence: In the first segment, you talked about the steering committee and the relationships at JMFIP. How does JMFIP develop priorities?

Ms. Alderman: Well, the JMFIP priorities are established through consensus of the steering committee and reflect JMFIP responsibilities that are in statute and regulations. We also work closely with the CFO Council to help facilitate their governmentwide priorities for financial management. We are in a very good position to deal across agencies and work on these governmentwide issues.

And the current priorities? Those include finishing up the systems requirements documents that we've been developing, issuing those; updating core financial system testing and qualification process; and also, as of the last year, we've been asked to focus on trying to come up with a strategy and recommendations on how to reduce the unreconciled differences in intergovernmental transactions. And that's -- there's about $250 billion worth of those in the last governmentwide financial statement. It's too big a pot to dismiss -- you won't get a government-wide, clean opinion unless we figure out how to reconcile buying and selling activity between agencies.

Mr. Lawrence: Now, when you're updating these documents, is it a matter of pulling things together and standardizing them or is it a matter of clarifying and expanding the body of knowledge? What takes place?

Ms. Alderman: Well, for the functional system requirements, those really are getting together the affinity groups, whether it's direct loans or core financial system or personnel payroll, and defining what is the minimum mandatory functionality to operate a system and to comply with the laws and regulations.

And it's really just pulling information that's distributed in a whole variety of different sources together in a manner that communicates effectively to government systems folks and to the private sector, who is now principal source of our software and applications to support these functions. What it is that the government operations have to be able to perform to do their jobs.

Mr. Breznahan: We hear a lot about the need to modernize financial systems to meet some of the requirements that JFMIP is articulating. What is the current landscape for financial systems modernization? What kind of work needs to be done?

Ms. Alderman: Well, there's a lot of activity in that area. A lot of agencies currently rely on very old systems. There has been a tremendous wave of system replacement effort since 1999. Right now, we do an annual survey and publish who is in the market to buy new -- or replace their systems. And since 1999, 20 of the 24 CFO agencies, '99 to 2006, indicate that they are replacing their core financial system in some or all of their organizations.

Comparable numbers are replacing feeder systems. These are things like property systems and direct-line systems. So there's a tremendous wave of activity, and they are replacing home-grown or highly customized systems with commercial products, or they're trying to. So that's a great -- great deal different approach to the issue.

Some of them are actually looking for application service providers for certain areas.

Mr. Lawrence: What's the main reason these are all being replaced?

Ms. Alderman: Well, some of them were built in the sixties and the seventies using system language that there isn't anybody left in colleges or anybody else who understands it. Some of them actually have language that predates COBOL, and COBOL isn't even taught anymore in U.S. colleges.

I think, you know, the old systems, a lot of them are stove-piped and inefficient. But I think the principal reason there's a wave of replacements is because agencies are concerned that the stuff that they have today will totally break down by the time they -- you know, unless they act and it takes several years to get a new system in place.

Mr. Lawrence: Ms. Daniels, the Director of the Office of Management and Budget recently spoke to an Endowment sponsor luncheon and told us that clean opinions are a means to a means to an end, where the end is good financial management information. What advice would you give to your listeners about both the means and the end?

Ms. Alderman: Well, I think a clean opinion is a -- indicates a baseline level of financial discipline and accountability. It's good to have. It's a -- it communicates responsibility to the American public about stewardship of funds. But I think it's important to get to that step for timely consistent information that supports decisionmakers in everyday management. That's where action can be taken based on financial information and performance information.

Mr. Breznahan: I want to come back to a point you were discussing a couple of minutes ago about the systems modernization efforts that agencies are undertaking.

Some of our other guests have mentioned that they're looking to partner across agencies or even with the private sector to build systems, including financial systems, when they have similar business processes. Does JMFIP have a role in this kind of endeavor? And how would you -- how would you see to facilitate these kinds of partnerships?

Ms. Alderman: Well, basically, the JMFIP requirements documents and the testing and qualification process have helped communicate standard functionality. And that provides private sector companies critical information that allows them to develop administrative systems that will work in the federal environment and meet requirements. And will allow federal agencies to take advantage of commercial off-the-shelf offerings without having to customize, which is expensive and risky, you know, will undermine the system if you change a lot of the code.

We also have facilitated cross-servicing. Most of the cross-servicing occurred -- well, most of the cross-servicing is now using federal agency systems. But I see a future where there will be opportunities to use application service providers that are commercial offerings in the future.

And I would have to say that there are examples of using commercial infrastructure every day in federal processes. Think about all the transactions that are now handled through charge cards. That was not the case 10 years ago.

Mr. Lawrence: It's interesting you mention the possibility of commercial application service providers. Is financial management something that should always be run by government employees?

Ms. Alderman: Well, there are certain aspects of financial management that's important that the government control -- just basically stewardship. But in terms of the infrastructure that runs it? I -- there's going to be different models emerging over time. Part of the challenge has been that the government requirements were sufficiently different that there weren't commercial providers that could provide that type of service.

And the whole model of application service provider, actually, is a relatively recent model. With the exception of transaction processing through electronic fund transfers, the banking infrastructure, and charge-card transactions. But the applications, even in the private sector, largely have been run by in-house operations.

Mr. Lawrence: Okay. It's a good stopping point. Come back with us after the break. We'll ask Karen Cleary Alderman about how one buys a financial system.

This is The Business of Government Hour. (Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers, and today's conversation is with Karen Cleary Alderman, executive director of the Joint Financial Management Improvement Program. Joining us in our conversation is Ken Breznahan, PWC Director of our ECFO, practice.

Mr. Breznahan: Thank you, Paul.

Karen, you talked a little bit earlier about the role JMFIP plays in developing functional requirements that agencies can use for financial systems.

Can you tell us a little more about the process that you use for developing those cross-agency requirements?

Ms. Alderman: Well, we look for a senior-level team leader from an agency with a strong incentive to develop system requirements. For instance, the Department of Education led the process to update the direct loan system's requirements document. They manage a huge direct-loan portfolio and they also were looking to replace their direct loan system. So they were a strong advocate of doing that. The Department of Defense led the development of the property system requirements.

After identifying a leader from an agency, we organize representation from all around the federal government -- who has an interest. We get work teams together. JMFIP staff facilitates the process. We don't consider ourselves the expert in every area. We are the facilitator to bring the experts together. We develop the document. We vet it around within the federal environment first, to the interest groups and to the organizations -- make sure we haven't said anything really dumb.

And then after the steering committee is satisfied that the document is reasonably complete, we put it out through a formal exposure draft process. We put it in the Federal Register, we put it out for open comment, and we get thousands of comments on these documents. And we resolve every comment before it's issued in final.

That's basically the process and we've done it about 12 times in the last 3 years.

Mr. Lawrence: I was going to say, how long does the whole cycle take?

Ms. Alderman: Depending on the difficulty -- when it's a update of an existing document, it usually takes, maybe 6 to 8 months. The development of a new document that's never been done before -- grants, property, we're currently doing benefit systems. That may take a year to 18 months.

Mr. Lawrence: How should we measure how well our financial systems are doing? What indicators should we be looking at?

Ms. Alderman: Well, the high-order measure is whether an agency can get a clean opinion. On that measure, 18 agencies succeeded in 2000. There are a variety of debates about how to measure the goodness of your financial systems. In addition to clean opinions, there has been whether the systems support the requirements of the Federal Financial Management Improvement Act, and those high-level requirements or whether the systems comply with the U.S. Standard General Ledger; whether they support federal accounting standards; and whether they comply with systems requirements.

Based on those measures, the -- I will tell you that auditors and agency heads disagree, but agency heads said that nine agencies complied with the requirements of the Federal Financial Management Improvement Act in 19- -- no, in 2000. And the General Accounting Office has a somewhat lower number, about half that number.

But those reviews do suggest that many agencies do not have integrated systems. They -- their systems do not support accounting standards. In some cases, they do not apply or use the U.S. Standard General Ledger. Many organizations have trouble fully complying with security requirements associated with systems. So based on those types of measures, they paint a little less optimistic picture than the clean opinions.

And then finally there's other types of benchmarks you might want to look at for systems. How -- what is the process cost? The process is the system support. What's the cycle time? What's the access to information by managers? These types of benchmarks are not audited for, but I think they're very important.

Mr. Breznahan: Karen, can you tell us a bit about JMFIP's role in redesigning the procurement process for financial systems?

Ms. Alderman: Well, when I came to JMFIP in 1998, I knew that a principal job I had to do was to facilitate the transition from the existing mandatory FMSS schedule. That was the mandatory schedule where agencies who wanted to buy a commercial core accounting system had to buy it from a specific schedule that GSA managed.

The vendor offerings on that schedule were tested as part of the procurement process, but because the testing and procurement were linked, agencies did not know what was tested, how it was tested. Vendors did not know what was on the test until they walked into the test. The testers were volunteers. The test itself was not comprehensive. They didn't really find that out until after they acquired their system off of this and found that out.

So basically the -- and a study called the Joint System Solution Team Study had made a series of recommendations to separate the procurement and the testing process for core financial systems provide a mechanism to provide a lot more information about what these systems entailed and how it was tested. Get rid of the mandatory schedule and JMFIP was tagged to facilitate this transition process. So that's how we got into the business of testing and qualifying a core financial systems.

Mr. Breznahan: What about your role in actually doing the testing of vendor systems?

Ms. Alderman: Well, what we do, we issue the core financial system requirements document. That's part of that series of documents that I talked about. Then we develop a functional test that the goal was to test 100 percent of the mandatory requirements. We hit about 91 percent the first time we managed this test. And to do an end-to-end functional test that tests each requirement and tested whether the accounting calculations were done and the general ledger effects were appropriate and so forth.

We built that test and we started testing software in 1999. In 2000, a major new requirement came out, FACTS 2 (phonetic), so we did an incremental test on that software. The impact on the community, I think, it's a very effective communication device to industry that, unless they pass this test, they can't -- their products can't be used by the federal government. So they got a lot more interested in finding out what the federal requirements were.

And I think on balance, the federal agencies got much better products than they would have had absent this process. We published the test. We published expected results. It's an open-book test. Federal agencies can have full disclosure about how we test, what we test.

Now, the testing process has helped organize the market; helped get better products available to federal agencies, but it doesn't do the whole thing. Federal agencies still have to do a selection of what best fits their environment. They have to figure out how this product fits with their legacy systems, their feeder systems. So there's still a lot of work on the agencies in terms of getting these products to work in their environment.

Mr. Lawrence: How difficult was it to organize this process? What was the feedback from the agencies?

Ms. Alderman: From the numbers that I told you before, all these agencies that were replacing their systems -- the agencies were very anxious to have a better process than what was available to them prior to 1999.

The agencies would have liked, I think, even more centralized quality assurance, because it's a -- it's a very tough business replacing systems. The type of feedback that I've had generally is great acceptance of what we've been doing; they just wish that we could actually do more in terms of mitigating risk. It's still a very tough business, getting -- successfully transitioning to new systems.

Mr. Lawrence: We know that more and more agencies are moving towards using COTS (phonetic) packages. Could you describe the challenges and the benefits of this approach?

Ms. Alderman: Well, basically, for COTS, you have to look at what the economics of software is these days -- the economics of administrative systems. Agencies are moving from a period where they built their own systems, basically, back in the seventies and eighties or, in some cases, they acquired products from commercial vendors, but those products were actually almost custom-built for the federal environment.

The current environment is that the agencies are taking advantage of products that are built for mass markets, in many cases -- the Oracle, Enterprise Resource Suite, the SAP, the -- even the AMS has a fairly broad marketbase. The benefit, I guess, of commercial, off-the-shelf software is that companies which are expert in building these systems and also are investing significantly in R&D are supplying products that the government sector can use.

Our core competency is not building administrative systems. It shouldn't be. We should try and take advantage of this when it's available in the commercial place.

Mr. Lawrence: It's a good stopping point, and it's time for a break. Stick with us. When we're back, we'll ask Karen Cleary Alderman of JMFIP about the effects all these planed retirements will have on financial management.

This is The Business of Government Hour. (Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers, and today's conversation is with Karen Cleary Alderman, executive director of the Joint Financial Management Improvement Program. Joining us in our conversation is Ken Breznahan, PWC director of our ECFO practice.

Well, Karen, as we finished the last segment, you were talking about COTS packages. I wonder if you could tell us some lessons learned for people who are considering a COTS approach?

Ms. Alderman: Well, one of the things that JMFIP has done at the behest of the CFO Council is that we've created a section on our website, and that's -- www.jfmip.gov is our website, called the Road Map, and that is on systems planning, selections, implementation issues. There are many challenges in implementing a new system. They're not all technical. Some of them are change management and things of that nature, but we've tried to organize information so it's readily available to the community, so everybody doesn't have to do all their own original research.

Mr. Breznahan: Well, Karen, let's shift our attention now to human capital issues. How do you think the financial management community in the federal government will be affected by the impending retirement wave that we keep hearing about?

Ms. Alderman: Well, I think the retirement wave is a challenge and an opportunity. Agencies will not have the resources in the future to do business the way they've done in the past. I expect for agencies to look for ways to consolidate, streamline, simplify, automate, and use commercial infrastructure.

The shear competition for resources will foster cross-servicing and, perhaps, use of application service providers in the future. Think about the use of charge cards. If we were not using charge cards to serve all these transactions, we'd have people doing it the old way. I expect we'll be taking advantage of different ways of doing business, simply as a result of not having the resources to do it the way we did it in the past.

I think the future workforce will have different tools, and I think that critical capability for the future workforce will be analysis and advice, rather than transaction processing.

Mr. Breznahan: What's JMFIP's role going to be in this?

Ms. Alderman: In human resources in general, we have tried to serve the community by defining the core competencies in the different business areas. Most recently, we issued a core competency document for project managers implementing financial systems, simply because there was a huge demand in the community and they need to know what skills they need to have.

Mr. Lawrence: What advice would you give to a young person who's perhaps interested in a career in public service, and maybe even who is interested in financial management?

Ms. Alderman: Well, I think there's lots of interesting opportunities in the federal government. I've loved my federal services. I've had opportunities to work with some of the best. Come in for a while and just look around. There's many different areas in the federal arena that I think will teach you a lot. It's taught me a lot.

Mr. Breznahan: Looking down the road a bit, what do you see as the future demands for financial management in the federal government? And what will users of that information need to be successful?

Ms. Alderman: I believe that the managers of the future, the financial managers, will not be -- I mentioned this before -- will not be responsible for transaction processing shops. A lot of the manual integration work that people cut their teeth on in the past, that's going to be automated in the future.

They will be responsible for understanding what all that information means and providing advice on how to use that information in better managing government operations.

Mr. Lawrence: How in terms of technological changes for the workplace? To do this kind of activity you're talking about, what changes might you foresee?

Ms. Alderman: You know, one of the questions here was, how will technology change the workplace in the next 10 years, and how will it impact financial management? And I thought about that question. And I said, you know, if my colleagues -- if I had said to my colleagues in 1990 that by 2000, we would be routinely using the Internet to order our supplies and access our retirement information, and file our taxes, folks would have figured I needed a rest, you know, I was breaking up.

The basic technology that's common in our lives today, really wasn't that accessible in 1990. It was there, but it wasn't widely used. So basically I think we've lived in the last 10 years through an information revolution, even though we haven't fully digested the impact of that. And that revolution is not complete.

I expect that there's going to be a shake-out in the industry that drives this. I think there's going to be consolidation of information technology with some dominant players in networking and databases and application development and service providers.

And I think, as a result, I think the industry will move more towards standards and seamless integration. I think they recognize opportunities for end-to-end integration.

Government will have to find ways to use industry standards to conduct their business, because government will not be able to afford to have unique infrastructures for administrative purposes. I think that's one thing that'll happen.

I expect electronic processes will become the norm for transaction processing. I think the mantra of enter the data once and reuse it will become a reality in the next 10 years. The source of that data, I think, is largely going to be customers and front-line workers with managers electronically approving these types of things. The specialists who were in the middle of those processes in the past, I think will be replaced by electronic edit checks built into the systems. Self-service without intervention by financial personnel and other specialists, I think, will become a norm.

So that also has implications for how the business gets done. I think brick-and-mortar will disappear, you know, installations. I think there will be a lot more consolidation of processing centers. And there'll be more end-to-end integration of systems, supply-chain management all the way back into financial management.

So I think the emphasis in financial specialists will change from interpreting information put into the system, which is where we have specialized in the past, to interpreting the information that results from the process.

Mr. Breznahan: You mentioned at the outset that JFMIP has a 50-year history in its existence. How would you -- how would you think ahead in terms of how JFMIP will evolve over the next 10 years?

Ms. Alderman: That's a really hard question. As I said, you know, 10 years ago, if I had thought all the things that would have occurred -- if I had seen it and pressing, people would have thought I was nuts.

Basically, the JFMIP vision really is shaped by the steering committee. I anticipate that we're going to continue as an organization to be a cross-agency facilitator, a facilitator for change, and a barrier-removal agent. I think we've played that role in the past, and I think we'll play that role in the future. We're specifically chartered to enable collaboration across government entities, and particularly for cross-cutting issues. In a network world, where resources are tight, I see demand for both those roles increasing over time.

Mr. Lawrence: You did a very interesting job a question back of describing sort of the future in the different roles, and I want to take you back to that and maybe work through the employees at different levels.

It seemed as though, in the description, you envision that there will be many fewer employees, certainly, doing the work as we know it. They'll be much more specialized and much less general, is that -- did I get that right?

Ms. Alderman: I don't know that they'll be more specialized. I think right now we have a system that's built on a tailor model, where you have work breakdown and specialization and people who do vouchers and people who do specific types of functions and lots of data entry associated with those functions. I actually think that there will be demand for much general analytic capability. I think there will be fewer personnel. And I think that stove-pipe -- you know, if you expect to stay in a narrow functional stove-pipe as to progress in your career, I don't think that model's going to be there in the future. I think that people are going to have to be broader and more analytic.

Mr. Lawrence: And how about the managers? Your tailor analogy, perhaps, is apt, because I imagine what you describe, those type of activities, a certain management style. And now if that work changes, what skills will the managers need?

Ms. Alderman: Well, I think that managers in general -- well, leaders, specifically, are going to have to be able to establish a vision, organize work around that vision. They're going to have to reach across functional boundaries, facilitate partnering, both within organizations and externally. And their skills are going to be more broad. They'll have a technical component to it, but I think managerial breadth is, I hope, what gets rewarded in the future, because I certainly see, with technology, you're going to, you know, look more broadly.

Mr. Lawrence: Karen, Ken and I want to thank you very much for joining us today.

Ms. Alderman: Well, it's been my pleasure. Thank you very much.

Mr. Lawrence: This has been The Business of Government Hour featuring a conversation with Karen Cleary Alderman, executive director of the Joint Financial Management Improvement Program.

Be sure and visit us on the Web at www.endowment.pwcglobal.com. There, you can learn more about our programs in research into new approaches to improving government effectiveness. You can also find a transcript of today's interesting conversation. Once again, that's endowment.pwcglobal.com.

This is Paul Lawrence. See you next week.

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