Performance Reporting: Rhetoric vs. Reality

Friday, December 18th, 2009 - 23:15

The Transparency and Accountability Challenge in the Subaward of Federal Funds

Tuesday, October 6th, 2009 - 16:17
Posted by: 
Transparency is one of the current buzzwords, which is notnecessarily bad. A keystone of democracy is accountabilityand transparency, i.e., providing information is one way forthe government to be accountable. Since no one wants tolook bad, transparency can be a major impetus for programimprovement.

Transparency For What?

Tuesday, October 6th, 2009 - 16:08
The most effective way to access an agency’s accountability is with information about the performance of its programs: whether and how the agency is managing its resources to avoid waste, fraud, and abuse; the important amounts in its financial statements, their significance to the agency’s programs, whether and why these amounts have changed from the prior year; and conditions, trends, events, both existing today or likely in the future.

John Ely interview

Friday, August 7th, 2009 - 20:00
Mr. Ely's organization is a core component in supporting the CBP mission of ensuring the security of our nation's borders.
Radio show date: 
Sat, 08/08/2009
Intro text: 
Mr. Ely's organization is a core component in supporting the CBP mission of ensuring the security of our nation's borders.
Complete transcript: 

Originally Broadcast August 8, 2009

Washington, DC

Mr. Morales: Welcome to another edition of The Business of Government Hour. I'm Albert Morales, your host and managing partner of the IBM Center for the Business of Government. One of today's greatest challenges is protecting the country from terrorists and the instruments of terror, while at the same time, fostering the country's economic security through lawful travel and trade. U.S. Customs and Border Protection operates at the nexus of national security and American economic security. In meeting this challenge, CBP has unique challenges and requires a focused procurement and acquisition strategy. With us this morning to discuss his efforts in making this happen is our special guest, John Ely, Executive Director of Procurement at the U.S. Customs and Border Protection. John, welcome to our show. It's a pleasure having you.

Mr. Ely: Thank you. It's great to be here.

Mr. Morales: Also joining our conversation is Solly Thomas, associate partner in IBM's public sector consulting practice. Solly, good to have you as always.

Mr. Thomas: Good morning Al and good to see you again John.

Mr. Morales: John, let's start by providing our listeners some context around your organization. Can you tell us a little about the mission and this history of the U.S. Customs and Border Protection, otherwise known as CBP?

Mr. Ely: Yeah, I'd be glad to. I think that the best way that I can articulate that is just to read the CBP mission statement because it's very well-crafted and I believe it says everything that CBP needs to say in a statement. The mission statements goes like this: "We are the guardians of our nation's borders. We are America's frontline. We safeguard the homeland at and beyond our borders. We protect the American public against terrorists and the instruments of terror. We steadfastly enforce the laws of the United States while fostering our nation's economic security through lawful international trade and travel. We serve the American public with vigilance, integrity and professionalism."

A little bit of history about Customs and Border Protection, I'm going to keep it really brief. The customs component of CBP was created in 1789. It is extremely old organization. The U.S. Border Patrol was created originally under the Department of Labor back in 1924 and then INS, Immigration and Naturalization Service was created in 1933. And customs, border patrol and some component of INS was pulled together in 2003 when CBP was created as a component of the Department of Homeland Security.

Mr. Morales: So John, obviously a very powerful mission and a very broad mission. Can you put a finer point on the scale of operations over at CBP? Perhaps you could tell us a little about, you mentioned border protection, how many miles of borders are covered? How many ports of entry might exist? And how many people and items pass in and out of these borders?

Mr. Ely: I've got some statistics and some information that I find fascinating. I look at this information quite regularly because it amazes me when I see the mission the CBP undertakes everyday. And I've got some statistics. We protect 1,900 miles of border with Mexico. We protect 5,000 miles of border with Canada. We have 327 official entry ports and we have 144 CBP border patrol stations. In terms of what we process daily, and this is a daily set of numbers, 1.09 million passengers daily. We process 70,451 truck, rail and sea containers. We execute 2,895 apprehensions between the ports for illegal entry and 73 arrests of criminals at ports of entry.

Our seizures, 7,621 pounds of narcotics and seizures of 4,125 agricultural items and 435 pests at ports of entry. And again, those are daily figures.

Mr. Morales: That's certainly a heck of a day. (Laughter--)

Mr. Ely: Sure is.

Mr. Thomas: John, would this description of the agency and its incredible responsibilities, perhaps you could tell our listeners a little bit more about the specific mission and scope of your office. I'm curious to hear what the size of your budget is and how many employees work in your organization to support the agency.

Mr. Ely: First of all, I'm absolutely thrilled to be part of this organization and the important mission that they have been entrusted with and I feel that our acquisition procurement organization is truly a big part of bringing success to that mission. We are in the acquisition business and that is our job. We acquire the products and services to continuously improve the operations of U.S. Customs and Border Protection.

I have about 177 employees. They're located all over the country. I have people strewn along the southern border co-located with border patrol stations. I have people on the northern border. I have a fairly large office in Indianapolis, Indiana and a large office in the Washington D.C. area. Our annual spend is approximately $3.3 billion dollars and that's the money that comes through my procurement organization. That's pretty much a summary of the operation.

Mr. Thomas: And John, continuing to drill down on the responsibilities, talk to us a little bit about your role as CBP's Executive Director of Procurement. What are your official responsibilities and how do you support the mission of CBP?

Mr. Ely: While it doesn't sound official, my belief that my primary role is a facilitator to the employees, customers and the commercial business partners that are all involved in the procurement area and supporting the mission of customs and border protection. I'm responsible for managing the spend that supports our organization as efficiently, as effectively as possible and representing our American taxpayer by being prudent in the way that I spend their dollars; yet being effective in supporting the mission of the organization.

With that said, I'd like to emphasize that this is the operating principles for all of the heads of contracting activities in the Department of Homeland Security components. We all have the focus and we all have that function. I, as a senior procurement professional, I'm very familiar with CBP's mission and I understand the challenges that my customers face and it makes my organization better in terms of standing up the support that they need to be successful in their operations.

As a strategic leader, my goal is to full integrate the procurement process with a customer environment that delivers the required results while complying with law regulation and ensuring prudent expenditure of taxpayer's money. The point there is my goal is to continuously make our process, which at times can be viewed as a bureaucratic process, transparent to my customers so that they don't see the things that aren't really pertinent to them getting the goods and services that they need.

Mr. Morales: Now John I understand that you have some 30 years with the U.S. Federal government. Tell me a little bit about your career path. And how'd you get started?

Mr. Ely: Started very early in my life. I've got 34 years as a federal employee. Pretty much all of my 34 years has been in the procurement or acquisitions environments. I actually started as a summer hire when I was in college. I worked for the Department of the Army. And when I got out of school, I became an Army intern in a contracting shop and I stayed in that contracting shop at the Pentagon for 15 years.

Mr. Morales: That's a long summer.

Mr. Ely: It was a long summer.

Mr. Ely: It was an incredible place to learn procurement. It was an incredible mission supporting the Department of Defense. After that, I moved on to the Internal Revenue Service which was a very different environment where I started off as a branch chief; basically, my first significant supervisory experience. I was promoted later to Division Director and then Deputy Head of Contracting Activity. And I was there for 12 years mostly engaged in the information technology acquisition business, which while it might sound kind of mundane, is a very exciting field because it's very competitive and the technologies that we used and that were acquiring are very important, especially in the tax collection business.

Now I'm at CBP as the Head of Contracting Activity and I've been there for 5 years and I'm absolutely thrilled in this position and very much challenged and excited every day that I come to work.

Mr. Morales: So, John as you reflect back on your 15 years with the Army and the 12 years over at IRS, how have these experiences prepared for you for your current leadership role and perhaps have shaped your management approach and your leadership style over the years?

Mr. Ely: I want to start off with the very beginning. I'm an Army brat. My dad was an Army officer. My grandfather was an army officer. My father was very much loved by his troops and I watched him and I tried to emulate a lot about him that I saw as driving his success. And his success was in genuinely caring about his people and they in turn, delivered for him. He saw himself as facilitator to the success of others and I try to emulate that style.

When I first started working in procurement, I learned the business first. And I always work with the goal of balancing the customers' needs along with properly managing taxpayer dollars. During my career, I worked with a wide range of managers and executives and I tried to develop my style as a combination of what I saw as the best of both. During the latter part of my federal career, I spent lots of time with people who were experts in continuous improvement. And above and beyond the procurement field, I started getting into the concept of continuous process improvement.

I'm not the most organized person in the world but I do recognize the value that predictable processes, improvement processes, being imbedded in organizations and I try to capture that through a process improvement program. So, I worked with process improvement experts that have helped me get in place documented repeatable processes that make my organization extremely efficient and effective.

Mr. Morales: What is CBP's acquisition and improvement initiative? We will ask John Ely, Executive Director of Procurement at the U.S. Customs and Border Protection, to share with us when the conversation about management continues on The Business of Government Hour.


Mr. Morales: Welcome back to The Business of Government Hour. I'm your host, Albert Morales, and today's conversation is with John Ely, Executive Director of Procurement at U.S. Customs and Border Protection. Also, joining us from IBM is Solly Thomas. John, much like finance or information technology or human resources, you lead one of CBP's core business functions. Could you take a moment to describe in a bit more detail the procurement function? And tell us a bit about some of the key elements of acquisition management.

Mr. Ely: I'll give you the basic process. It involves early definition of requirements by the customer. That's a little more complicated than it sounds because articulating what your needs are for a government customer sometimes can be difficult. But, we seek to get a good solid definition of the outcomes or the products that our customers are looking for. And then we secure the funding associated with those requirements. There's a collaboration between the procurement organization, the contracting officer and the customer over a strategy for acquisition. There are multiple ways to acquire things and the best fit for the customer and the particular product is something that we arrive at in collaborative way.

At some point, we release a solicitation or a request for proposals for pricing and descriptions on supplies and services that we're looking for. We take those products and we give them to our customers to do an evaluation. And evaluations are either for compliance and award to the lowest cost or we also have what's known as best value awards, where there is technical merit associated with an offer's proposal and those technical merits are evaluated. And then a balance is drawn between the offered price and the technical merit and what we call a best value acquisition can be awarded.

That is very much different than a low cost award because you can actually pay more for something if the government team's perception of the value warrants that extra payment. Then comes the notice to the contractors and the debriefing of unsuccessful offers. What I think is really important is that debriefings to unsuccessful offers are not just I'm sorry, you didn't get the job. We are required to give meaningful, helpful information to companies as to why they did not receive the award of the contract without giving away proprietary or trade secrets for the winning offer.

Finally, we initiate contract performance and contract management activities that in and of itself, is a very important complex process. And then at the end of contract performance, or delivery period, there's a contract closeout where we double check and make sure everything was provided to the satisfaction of the government customer, the contractor's been paid and then at some point we close the contract out completely.

In terms of success in procurement function, I'll give you some ideas about what I view as steps in ensuring procurement success. That mutual understanding between the customer and procurement personnel regarding the procurement process, the roles and responsibilities of the different parties and building a solid, trusting, working relationship between the government procurement personnel and the mission individuals that are representing the customer needs is absolutely critical.

Good contracting organizations have people that are not just buyers, but they're good business specialists. They understand their customers. They seek to engage both the customer and ideas from contractors throughout the lifecycle of whatever product or service is being ordered. Good procurement organizations are involved in all aspects of the lifecycle. We know about our customer. My border patrol buyers are very familiar with the border patrol function. My legacy customs support buyers, they know customs; they know what custom officers do. And all of our buyers are very close to the functional needs of our components and it makes them very good at what they do because they're continuously involved in the mission and the needs of the organization.

In most organizations, weaknesses are found in contract management. And to be honest with you, I think that's a problem with government contracting in general. There aren't the people out there and the emphasis. Even though we've been trying to place the emphasis, it's still not there in terms of what happens once the contract is signed. The government in general needs to be more attentive to what happens after the contract's signed because you've only just begun. But shortage of federal contracting personnel still keeps us in the hole that we're in and not as able to manage contracts after they're awarded.

Mr. Morales: Now John, on that note, in our earlier segment, you made a reference to continuous improvement and you used the word repeatable. So, tell us a little about CBP's acquisition improvement initiative. Where does it focus and how is this program defined, developed and deployed these customer-focused solutions that you reference?

Mr. Ely: When I first started working at IRS, I ended up working with some information technology specialists who were focused on software development and one of the people that I worked very closely with was a certified process improvement expert. And I soon came to find out that these people are out there and they're very good at articulating and stringing together processes so people understand how you get from point a to point z when you're trying to develop and build an end product. In this case, it was software, which is pretty complex. But, the concept behind these process improvement experts is they articulate the process, they make it as efficient and effective as possible and they stick to standards where they repeat the process and you should be able to get the same exact outcomes in terms of your desired results.

In meeting and getting engaged with people like that, I started realizing we could apply this to the procurement process. And I eventually hired a process improvement expert and brought them on as senior staff in looking at the procurement process. One of the problems that we had is our customers felt that every process or every procurement was run differently. And what I basically did is I implemented a very structured environment where we very clearly outlined the process, outlined the outcomes and the roles and responsibilities of all the people that were involved in the procurement process.

It's actually done a lot for me in terms of being able to be predictable in terms of results to my customers. In terms of the acquisition improvement initiative, that is what we've stood up at customs and border protection procurement. And again, I have a full-time process improvement expert responsible for that. In CBP's AI2 program, we focus on four broad areas: assets, business, customer and data. We call it the ABCD model. The asset piece is our people, it's our systems. The business piece is our customers; what they do, what they acquire to achieve. The customer is our customer themselves, you know, who is that customer? What is it that they're looking for? What do they stand for? And then data, which to us, is probably one of the most important things. We strive to collect and understand data relative to what our customers need, what we've bought in the past. And that data helps us optimize how well we do in the future in terms of performing the acquisition function.

The bottom line is all of our efforts in AI2 are geared to supporting customer's needs and mission success in creating a work environment where people can grow and thrive. AI2 generates improvement opportunities from both top down and bottom up. And what is real exciting to me is that with a lot of the new entry-level people we have working in the procurement organization, we have some people that have just walked in the door and they have been with us more than a year, that are coming up with some fabulous ideas because of their fresh perspective. They're not mired in the federal process. And we're starting to listen to those ideas and actually build some improvements in the program based upon somebody who's just walked through the door saying, hey, why not? And that's been very, very good for us.

We have participation goals in acquisition improvement. I have expectations of all my directors on their folks and what percentage of those people will continuously be involved. That hasn't been a problem because what has happened is when people in my organization see that they really can change the direction that we're taking and deliver better results for our customers as a result of their efforts, they participate. And they don't have to be asked to participate because they see that they're making a difference.

I'll give you an example of some of the teams we have because AI2 is broken down into some teams, different teams, and that's how we control memberships and outcomes. We have the quality of life team. The quality of life team really does focus on how are things going for the people in the organization. What's the work life like? What do people like, don't like? How can we make the quality of life from 9-5 better for our people and therefore, make them more productive and effective as federal employees.

We have a contract administration team. Again, federal procurement organizations tend to sometimes award the contract, walk away from them because they've got the next thing they've got to focus on. When we, in fact, with our contract administration team are looking for ways to stay there with our customer, administer the contracts and assure them that they receive the desired products or services.

And then, my data and spend analysis team is probably one of the ones I'm really the most proud of. Although, I really shouldn't say anything about being the most proud. But, our ability to slice and dice the data has been one of the most rewarding things for me. You can ask me how many light bulbs we bought last year and I can tell you. You ask me how many mainframe computers we bought, I will tell you. If you ask me how many detainee meals we bought and where they went, I can tell you. What that has done for us is it gives us the opportunity to sift through our spend data and look for low hanging fruit or even high hanging fruit for our strategic sourcing initiatives. When we decided that we needed to start hitting strategic sourcing, we looked at the spend and it gave us a profile of where our CBP money is going all the way down to the day to day subsistent level.

And then, the strategic sourcing teams. And I also have a mentoring team which is a very structured program around bringing our entry-level people up faster up into operational mode.

Mr. Thomas: Now John, it's been my experience that agencies need to have an effective strategy for organizing and retaining its intellectual resources and its institutional memory. So, to that end, can you elaborate on your efforts to implement an effective knowledge management system. And I'm particularly interested in hearing more about your Acquisition Resource Management System and how it factors into this efforts and provides the one-stop shopping capabilities.

Mr. Ely: We have implemented ARMS. And ARMS is something I'm extremely proud of because we do have, in the organization, a fairly mature knowledge management system. With our aging workforce and the expansion of our headcount, it's imperative that we have that knowledge and that we share the information and this ARMS is a repository for information and also for exchanging ideas, communications across a large, geographically diverse work environment.

And really, one of the most important things that has come of our knowledge management system is connecting our broad customer base and a youthful workforce. We have people now that are attracted to technology and the ARMS system is something people tend to move towards and use because it's got data in it, it's got communications in it; and those are the things people need to communicate effectively.

ARMS is a way to both get knowledge into the repository and a better way to use and improve the knowledge and our collaboration for the betterment of the mission. Our documents, our announcements, our regulations, our memorandum are all posted through ARMS. And probably one of the most interesting things is the discussion threads. We have chat rooms and discussion threads where people can talk about the collaboration of improving a contract document or how to manage a contract better. We have a birds of a feather area in ARMS where people can gather and talk about areas that are of common interest. And we also have a message center and I have a blog now that helps me connect to a very geographically diverse organization. I log in and I can just say hello and talk to my people without ever having to worry about dialing or being in any physical place. And that's been a wonderful, wonderful benefit for me.

Mr. Thomas: Now John, you eluded to strategic sourcing a little bit earlier and of course, that's typically defined as a means to achieve benefits through an organized, systematic and collaborative approach, to acquire goods and services. Could you elaborate more on your strategic sourcing program? What types of opportunities have been identified and to what extent has it enhanced your coordination in strategic thinking across the department?

Mr. Ely: What I'd like to do before I get into the rest of that question, I'd like to talk a little bit about how I got into strategic sourcing in the first place because I think it's a fairly interesting story. When I was at IRS, I signed up for a course, and it had some mundane title and I don't even remember what that course was -

Mr. Ely: -- but a gentleman that I worked with and I went to this course. I believe it was in Dallas, and we ended up in this room full of people and not one of them was a government employee. And it turned out what this group was, and it had something to do with sourcing, sourcing was in the title. Basically, what it was, was a group of people who were part of the sourcing organizations for very large companies. If I'm not mistaken, TI was there, Ford Industries was there, IBM was there. Several other major companies were there. And all of these people had one thing in common and it struck us very quickly that this was going to be an interesting environment.

Every one of those companies were at one point on the brink of going out of business. And what those people in that room had done is through the sourcing of supplies and services into their production process or their delivery process in a service environment they turned to strategic sourcing and said, if we do business the old way we will be out of business. What is the new way of doing business? And I spent about three or four days with those people and I learned a whole lot about how you can adopt that mindset, the stay in business mindset. Even if we're government, let's pretend we could be sent home and fired tomorrow. Let's get lean and mean and look at ways we can be effective, efficient and save money all at the same time.

We came back to IRS and that's when we started realizing our capability in spend analysis; knowing where the IRS dollar was going. And knowing where that dollar was going, we started targeting commodity and service groupings and looking at how can we do business better. We brought in some people that consulted with us to talk to us about smarter ways of doing business and we took on strategic sourcing initiatives for cell phones, guard services, copiers, faxes and printers. And to give you a little bit of insight into the true strategic sourcing concept; copiers, faxes and printers, the idea to strategic sourcing those is not to get economy of scale on contracts. That's one objective. But the perception that we had was that there might be a better way to deal with copiers, faxes and printers.

Now, in a federal environment, a lot of times you'll see a copier, a fax and a printer. And in some cases, you'll see all three of those around an individual's desk and you'll see those all over the place around different individual desks. We started talking about multi-function machines, acquiring multi-function machines. A single machine that copies, faxes, prints. And having those machines in a central environment rather than dedicated to a given workstation. So, you think about how often your printer's humming or fax is humming on your desk dedicated to your work, you can start seeing how a multi-function machine might actually be economical and provide the services that everybody else needs at a significantly lower cost. That's where strategic sourcing comes in.

We changed the way we were doing business. We saved money, yet we delivered the same results. So, when I got to CBP after IRS, I instantly knew that I had to make a difference by standing up a very similar program at CBP and that is our acquisition improvement initiative. And that is the same process. It has a very similar approach where we want to stay in business. We want to take the stay in business mindset as a government entity.

I've already stood up a team that now has the spend analysis capability. I can look at any, every piece of everything CBP has bought and we're now focusing on how products and services are acquired. We've had a few near term hits on strategic sourcing. One of them is body armor. In the old days, we bought body armor, the body armor would be shipped, the employee would put the body armor on, measure his specific fit and then send it out to be tailored to fit him or her. We now have awarded a contract for body armor that has a film clip in the website where you're shown how to measure yourself for body armor ahead of time before you order it. So, you ship the order, you ship the measurements, the body armor's delivered and it goes right out of the box and onto your back saving your life sooner. That is a real good example of how strategic sourcing works.

Again, economy's a scale but also a significant improvements in how we utilize the commodities of services. We are looking at canines. We've had some success with puppies. We do a lot of buying of puppies. They're really cute and even when you buy them in quantity, they're really cute. But, we're looking at strategic sourcing of canines, industrial laundry and we're also looking now at our spend on detainee meals. An early glance tells us that there are different kinds of detainee meals that are being served up all over the southwest and actually in all the detention areas. And while they're all fairly low cost, we think that if we standardize that and bought large quantities of detainee meals that were not perishable or could be used over long periods of time, we could save significant amounts of money. So, there's just a few examples of that strategic sourcing environment.

Mr. Ely: Sure. We have an overwhelming workload as most procurement organizations do. We also have a young emerging professional workforce. Those two have come together for us when we started looking at technology. And there are reverse auctioning tools. We use a tool called FedBid, and basically, what tools do is it allows your contracting officials to post their requirements on an electronic forum and bidders will bid on the requirements electronically and then the buying activity can come back to the end of the day and look at the bidding history and make an award.

Basically, it is a seamless, automated process for running our competitions. Its usually done for commercially available items, but we've had a lot of success in the post and go. And again, we post it, we come back, we see what the natural bidding process that occurs through the system and we make awards to the low, responsible offers. Reverse auctioning has done so much in terms of our ability to load those smaller requirements, while we work on the more sophisticated requirements that require attention; where our employees need to develop their skills. At the same time, we're saving lots of money. And I have some statistics about what that automated reverse auctioning process has done for us.

Basically, it is a seamless, automated process for running our competitions. Its usually done for commercially available items, but we've had a lot of success in the post and go. And again, we post it, we come back, we see what the natural bidding process that occurs through the system and we make awards to the low, responsible offers. Reverse auctioning has done so much in terms of our ability to load those smaller requirements, while we work on the more sophisticated requirements that require attention; where our employees need to develop their skills. At the same time, we're saving lots of money. And I have some statistics about what that automated reverse auctioning process has done for us.

Mr. Morales: What about CBP's acquisition workforce management strategy? We will ask John Ely, Executive Director of Procurement at the U.S. Customs and Border Protection, to share with us as the conversation continues on The Business of Government Hour.


Mr. Morales: Welcome back to The Business of Government Hour. I'm your host, Albert Morales, and with us today is John Ely, Executive Director of Procurement at the U.S. Customs and Border Protection. Also, joining us from IBM is Solly Thomas. John, the American Recovery and Reinvestment Act of 2009, otherwise known as the Recovery Act, provides some $680 million dollars to CBP for investment in aging infrastructure. First, could you tell us more about your procurement strategy and how the money will be spent. But, more importantly, what role does your office play in this area and how are you managing the procurements associated specifically with the Recovery Act funding?

Mr. Ely: Much of the ARRA funding is targeted for port modernization in both the northern and southern borders. We are very much engaged in writing contracts and facilitating that modernization effort. Our goal is to make awards in a timely manner while competing contracts as much as possible. We've stood up an FM&E facilities management and engineering contracting organization to meet this challenge we're working hand in glove with the CBP FM&E organization to implement. We're competing requirements for technology and construction directly with commercial sources, but we're also utilizing the services of the Corps of Engineers and GSA for construction contracting requirements.

Mr. Morales: It strikes me that balancing the appropriate number of CBP contracting officials with the growth of your portfolio is perhaps a challenging task. What changes have you made to your recruitment process and does CBP use flexible compensation strategies to attract and retain employees who possess what you would deem as critical skills?

Mr. Ely: Excellent question. Initially, when I first came to CBP, we focused on recruiting higher-grade personnel; but, it's really hard to find them. It's really very difficult to find them across government. So, we've moved to entry-level hires and we're supporting the rapid growth through mentoring, training and phased-in levels of contracting sophistication. So, we're trying to bring them up fairly quickly, but we are making sure they're ready for each phase. We think we've got a good plan for getting the entry-level hires up to speed faster than people were ever before by using technology, mentors, etc.

The DHS Chief Procurement Officer supports us through their Acquisition Career Program. They have a very sophisticated program and we are on the recipient list for the ACP interns. And that's born out well for us as well. We're still hiring higher-grade personnel for complex and critical procurements. And if any of you out there are the higher-graded, highly capable contracting types, just let us know.

Actually, on USAjobs, we have a great video clip from one of our CBP contracting officers and some information on job announcements. So, if you go to USAjobs, you'll probably find that icon to click on and see one of my folks with a lot of the products and services in the backdrop giving you some information about working for me. CBP offers flexible work schedules, tuition reimbursement for permanent status employees and in some cases, recruitment bonuses and/or payment of relocation services.

Mr. Thomas: John, staying on that topic, in recent years the size of the acquisition workforce has remained relatively the same while procurement spending has pretty much skyrocketed. For over a year, agencies have had the ability to re-hire the retired acquisition personnel, but only a few agencies have sought to formally use this authority. Could you talk a little bit about the benefits, as well as the possible limitations, of this particular strategy? And more importantly, what are your plans to use this authority as a tool to fulfill staffing needs?

Mr. Ely: Sure. Good contracting people are, as I've said before, are always in high demand both in government and industry. DHS has been successful in implementing authority to hire retired procurement personnel, known as retired annuitants. And we are pursuing the hiring of retired annuitants who offer a wealth of knowledge, skills and abilities and we're seeking to take as much advantage of that as we can. That is still a fairly small number, relatively speaking, of potential resources.

And the flipside of the benefits of that is also that these people will re-retire as some point in time. So, you can't really stake your future on retired annuitants, however, they do help in the near term.

Mr. Thomas: Now shifting from the recruitment discussion to developmental, what are you doing to ensure that your staff has the appropriate training and skills and how are you leveraging the resources from organizations like the Federal Acquisition Institute?

Mr. Ely: I'm very proud of our training program. It's extremely important in our line of business. Our training program is fairly well funded and we have a specific training curriculum in place. Employees can count on receiving specific, substantial training in the procurement business area. And there are training tracks associated with each level of procurement professional. We have a fully funded training. Each employee receives a minimum of forty hours per year. And we utilize FAI for both classroom and online training. And the DHS Chief Procurement Officers Organization has entered into an agreement with DAU to reserve seats in their classes for DHS procurement personnel, and that includes my folks as well.

Mr. Thomas: Now John, at last count, the federal government spends approximately $140 billion dollars on services to meet agency needs and the use of performance-based acquisition is the federal government's preferred approach for acquiring these services. Tell us about CBP's efforts in implementing performance-based acquisition strategies.

Mr. Ely: First, to comment, a personal comment on PBAs. I agree that they are the desired vehicle, but there is something complex about them that needs to be understood and that is that it is an outcomes-oriented acquisition approach. That's where we truly have to get away from the nuts and bolts of how you get from point a to point b when the outcome is articulated get me to point b. And you don't spend a lot of time talking about how you get there. It's the outcomes that drive a performance-based contract to success.

So, in this environment, the government personnel serve as facilitators for contractor success, which is a little different than some government folks you are used to, where they believe that they are supposed to be directing the activities of the contractor. In performance-based acquisitions, they're facilitators. They help the contractor get to the successful end. Again, acting as facilitators versus directors. In CBP procurement, performance-based acquisitions are now automatically the first consideration for service contracts. Every service requirement that we get in, we look for the applicability of performance-based contracting as a solution.

All of my people receive training in performance-based acquisitions and our CBP Acting Commissioner supports performance-based acquisitions, and has asked his assistant commissioners to develop metrics and measures for their contracts to make sure they're receiving value for their dollars. We have a long way to go to reach our PBA goals, but we're working hard and I think we're doing a pretty good job learning more and more as we move along about the unique method of contracting.

Mr. Morales: John, I talk with many of my guests about collaboration. And certainly, procurements and acquisitions are perhaps some of the more complex business processes within a large entity such as CBP. What kinds of partnerships are you developing now to improve operations or outcomes at CBP and how many of these partnerships change over time?

Mr. Ely: That's an excellent question. I think acquisition by definition is a collaborative process. If you're not collaborating with your customers or your contractors who are helping you deliver results, you're going to be surprised by what happens at the end of the day. Procurement's close relationship with our parent organization, which is the Office of Finance, has helped us become very collaborative in terms of working with the components of finance which is budget, asset management, facilities, management and engineering and our financial operations organization.

We work together with them to make sure that CBP's needs are met at a fair and reasonable cost and that taxpayer dollars are properly expended. Our partnerships within the parent Office of Finance have enabled us to leverage our financial management capability. And our relationships with the customers and industry help bring best value for the taxpayer dollars that are entrusted to CBP. I see the further positive change, we build a greater capability in the big A, acquisition arena. The big A, which is acquisition, will bring us closer to being worldclass acquisition organization that's forward-thinking and focused on return investment for the mission and the American taxpayer.

Mr. Morales: Now, since its inception, DHS has had some very large and complex procurements such as, the Coastguard's Deepwater Program and CBP's SBInet. What are some of the key lessons learned from these large acquisitions and how are they shaping and informing your operations today?

Mr. Ely: I'm going to give you a generic answer on that, because I'm not as specifically familiar with Deepwater. I have some familiar, but with CBP's SBInet program, but I'd like to keep it generic because it does apply I guarantee to both programs and probably other, most complex government programs. The key to success with these procurements is planning, proper planning. The formulation of strong acquisitions teams and efficient, effective and responsible source selection process. And most importantly, properly staffed and managed postwar program and contract management organizations.

Too often, we think we've hit the home run. The ball is out the park once the contract's signed, when in fact you haven't even swung yet. I think it's also essential that when managing programs, one must realize that detractors are natural and important part of a balanced government business environment. And while these detractors may be disheartening at times, their presence can help keep acquisition personnel focused on the proper outcomes of their programs.

Mr. Morales: So John, you've eluded a couple times to CBP's acquisition function and its relationship to the broader DHS organization. How does this alignment benefit CBP and DHS' overall acquisition strategy and do you think that DHS will be adopting a more centralized model going beyond just mere oversight?

Mr. Ely: That's an excellent question. I've felt this issue going back and forth. Naturally, the components would like to retain control over their procurement organizations. And it's understandable that DHS would like to centralize, capitalizing on economies of scale, ensuring a consistency in the way that we spend the DHS dollar. But actually, there is a dual accountability role right now at DHS. While, I report to Customs and Border Protections Chief Financial Officer, I have very specific responsibilities for which I'm accountable to the DHS Chief Procurement Officer. And the same holds true for the procurement executives and the other DHS components. They also have that dual accountability.

I would also like to state that the DHS Head of Contracting Activities Organization, that is all the HCAs for the DHS components, are a group that works collaboratively and embraces the authority and leadership of the DHS Chief Procurement Officer. We meet on a regular basis and are actually quite effective in helping make DHS procurement functions as efficient and effective as possible.

Mr. Morales: So what does the future hold for CBP procurement? We will ask John Ely, Executive Director of Procurement at the U.S. Customs and Border Protection, to share with us as the conversation continues on The Business of Government Hour.


Mr. Morales: Welcome back to our final segment of The Business of Government Hour. I'm your host, Albert Morales, and with today's conversation is with John Ely, Executive Director of Procurement at U.S. Customs and Border Protection. Also, joining us from IBM is Solly Thomas. John, CBP's experience in applying innovative solutions to help address agency procurement issues has provided some valuable lessons and insights, many of which we've talked about. But, could you summarize some of these key lessons and some of these critical insights?

Mr. Ely: I'd be glad to. Number one, continuously improve. The American taxpayer deserves it. Secondly, get people involved in creating solutions. The old saying, two heads are better than one, holds true. Groups of individuals working with common goals will get you there a lot faster than individuals who are spinning off on their own path. Constantly seek to improve and get industry input on a regular basis. Industry must succeed or die and they're a good model to look at when you're looking at the best way to run your own government operation. Finally, communication is key. When you think you've done it or done enough, do more because trust me, you probably haven't.

Mr. Thomas: Now John, since acquisition is a fiduciary responsibility, the business of government must be conducted with complete impartiality. Could you elaborate on efforts being pursued to ensure procurement integrity, making sure the proper standards of conduct, both ethical and legal requirements are being followed by the Federal Acquisition staff?

Mr. Ely: Sure. First, I'd like to start by saying that I'm very proud to be a federal procurement professional. We've all seen situations where integrity has been an issue in procurements and it's inexcusable. And people that don't use integrity will get caught. But, I have faith in the federal procurement process. The vast majority of people that work in that environment are honest, hard working public servants that want to do good. Furthermore, all federal agencies have programs that emphasize standards of conduct and provide continuous training in the areas of procurement integrity.

Mr. Morales: John, I'd like to transition to now to the future. Could you give us a sense of some of the key issues that will affect acquisition and procurement offices government-wide over the next few years?

Mr. Ely: Sure. Shortages of contracting and program management personnel is a huge challenge. Balancing highly innovative ways of doing procurements within a highly regulated environment is another. Increased oversight and the need for transparency for large scale programs with congressional and public and customer scrutiny in how we do business is again, another. The constant pace of change and the scale of procurements that we're seeing as it continues to grow. And finally, the time constraints for planning large major acquisition initiatives.

Mr. Morales: So, then more locally, what are some of the major opportunities and challenges that your organization will encounter in the future and how do you envision your area will evolve over the next say three to five years?

Mr. Ely: I see significant opportunities in the future as CBP becomes more and more sophisticated in its view and management of investments for the good of its mission. I see an organization that's becoming more and more enlightened in ways to efficiently and effectively invest its resources. And I see my procurement organization as one of the best in government; fully integrated with the CBP customer and delivering the best value for the taxpayers' dollars.

Mr. Morales: So, John you've had a very extensive career with the federal government and you just had a wonderful story of how you got started. So, I'm curious what advice might you give someone who's out there thinking about a career in public service and maybe even perhaps a career in the acquisition community?

Mr. Ely: I've been there. I was there on the brink trying to decide which way to go and I will tell you that serving the American public is an honor and a privilege and has significant financial and personal rewards. The government pays well and the work is rewarding. There is an incredible satisfaction delivering good things to the American public. And our government works hard to take care of its people and public service is an incredible opportunity to be a part of that important task.

Mr. Morales: That's just great. Unfortunately John, we have reached the end of our time. I want to thank you for fitting us into your busy schedule, but more importantly, Solly and I would like to thank you for your dedicated service to our country across your 34 years of federal government service.

Mr. Ely: Thank you so much for having me both of you.

Mr. Morales: This has been The Business of Government Hour featuring a conversation with John Ely, Executive Director of Procurement at U.S. Customs and Border Protection. My co-host has been Solly Thomas, associate partner in IBM's public sector consulting practice.

As you enjoy the rest of your day, please take time to remember the men and women of our armed and civil services abroad who may not be able to hear this morning's show on how we're improving their government, but who deserve our unconditional respect and support.

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

Announcer: This has been The Business of Government Hour. Be sure to join us every Saturday at 9:00 a.m. And visit us on the web at There you can learn more about our programs, and get a transcript of today's conversation. Until next week, it's

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Tom Allen interview

Friday, May 1st, 2009 - 20:00
Tom Allen
Radio show date: 
Sat, 05/02/2009
Intro text: 
Tom Allen
Magazine profile: 

Tom Allen: Improving Federal Financial Reporting

Tuesday, April 7th, 2009 - 10:40
Posted by: 
Annually, some $2.7 trillion of taxpayer money flows through the accounts of the U.S. federal government. Article 1 Section 9 of the U.S.

Mitchell Glassman interview

Friday, October 17th, 2008 - 20:00
"The FDIC never closes at bank -- it is the primary regulator that actually has the ability to pull the charter.. By law, if the charter is pulled, then the FDIC becomes the receiver and as receiver we have multiple functions, but one of the primary roles we have is the deposit insurer."
Radio show date: 
Sat, 10/18/2008
Intro text: 
Mitchell Glassman
Magazine profile: 
Complete transcript: 

Originally Broadcast June 21, 2008

Washington, D.C.

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

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

Bank failures, more so than any other corporate collapse, directly undermines the stability and public confidence in the nation's financial system. As a result, preventing and mitigating bank failures is major public policy concern and goes right to the core of the mission of the Federal Deposit Insurance Corporation, the FDIC.

Through its various programs, the FDIC seeks to mitigate and limit the ripple-effect bank failures have on the U.S. economy while maintaining the stability and public confidence in our national financial system.

With us this morning to discuss his office's effort in this area is our special guest, Mr. Mitchell Glassman, director of the Division of Resolutions and Receiverships at Federal Deposit Insurance Corporation.

Good morning, Mitchell.

Mr. Glassman: Morning.

Mr. Morales: Also joining us in our conversation, from IBM, is Dennis Kaizer, partner in IBM's federal civilian programs.

Good Morning, Dennis.

Mr. Kaizer: Good morning, Al.

Mr. Morales: Mitchell, we all see the FDIC moniker on the doors, teller windows and ATM machines across the country, but perhaps you can set some context by starting with the history and the mission of the FDIC.

Can you tell us when it was created and a bit about its mission today?

Mr. Glassman: The Federal Deposit Insurance Corporation was organized and created in 1933, so we are having our 75th anniversary this year. Its function and its creation was based on maintaining stability and public confidence in the nation's financial system, and we do that really in three different ways, and that mission is still the same as it was back in 1933, it's by insuring deposits in the institutions that belong to the FDIC through our examination function, but also in managing receiverships.

Mr. Morales: So with that mission, can you tell us a bit about how the FDIC is organized, perhaps tell us a little bit about the budget, number of employees, and how you're organized across the country?

Mr. Glassman: The FDIC is not a very large organization, but it does have 4,500 employees. We're organized really in three major driver divisions. This is our Supervision and Consumer Protection, our insurance and research and the division that I'm over, in Resolutions and Receiverships.

We do have other divisions and offices that supply vital services whether it's in information technology, or administration, finance, legal and we have a corporate university which provides the, you know, the amount of our training that is necessary.

We're located not only in Washington, but we also have six regional offices -- but also we have 85 offices throughout the country, where our examiners also reside; and our budget right now is, you know, approximately $1.1 billion.

Mr. Kaizer: Mitchell, now that you've provided us a sense of the larger organization, perhaps you can give us some more specifics about your division and your role as a director there?

Mr. Glassman: Well, as director, I wear multiple hats. As I was saying before, I'm also the chief claim agent. In other words, as institutions become insolvent, we're very much concerned about the payment of insured deposits back to those particular depositors, but also as we manage the bank's receiverships, we also manage those receiverships.

So we're basically serving as the deposit insurer, but also in the liquidation of the bank for the benefit of the claimants, including that of the FDIC's.

Mr. Kaizer: So regarding your specific duties, can you tell me what you're, maybe, top three challenges might be in your role, and how you're addressing those?

Mr. Glassman: Well, my number one priority is readiness. One thing that the FDIC has to be prepared is to handle any particular institution, insured institution that may have its charter removed by the primary regulator.

That requires me to be not only to be on standby, but to have teams of people ready to move at a moment's notice. For us that is absolutely critical, that we meet the needs of the depositor, but also get into those communities as quickly as possible.

My second priority is that in our management of the receiverships, we want to use the best business judgment, but in particular, we're very much interested in customer service. You know, we believe that providing good customer service is also something that is a depositor not only deserves, but also the creditors who we may have to deal with.

And I would say the third, which is not as -- is part of the top three and could be considered the number one, is employee development. One of the things we work through is our people, and we're very robust in not only in developing our people, but also making sure we have a succession.

You know, as many agencies, you know, we do have an aging workforce. We want to make sure we got well-trained people ready to take over and to continue the function of the FDIC for the next 75 years.

Mr. Morales: Mitchell, I wanted to just go back for a moment about something you said earlier, about the 4,500 employees. Roughly, about how many of those employees reside within your organization?

Mr. Glassman: Well, I'm very -- leveraged quite a bit. I have approximately 250 currently, but you know, we're going to be adding some additional resources. We really try not to get a very large number because we're more of a think-tank kind of organization, you know, one that organizes resources, so that's all we have as now, but we have the ability to expand our resources on an as-needed basis, either through contracting or through, you know, leveraging bank employees if we need them.

Mr. Morales: Great, so you mentioned the 75th anniversary of the FDIC. I also understand that you've now spent some 35 years in the business, and with this organization. Could you describe your career path for our listeners? How did you get started?

Mr. Glassman: Well, I can honestly say my family got me started. My mother was a career banker. My wife's family owned the bank, so I got started off with banking in my blood. I actually worked at a community bank, not my family's, where I really got the taste of what banking is all about, and just what a great career path.

Eventually I did get recruited by the FDIC. At the time I was the youngest employee to have been recruited at the time, and actually joined what used to be called the Division of Liquidation, which is now the division, you know, we're running and that we're calling Resolutions and Receiverships.

So from that aspect, I have moved to various management and leadership jobs throughout the country, and basically whenever there was a crisis, I was able to move in and to be able to organize around it. So eventually they asked me to come to Washington, D.C., and I'm here before you now.

Mr. Morales: That's great. So, Mitchell, as you reflect upon these experiences both in the industry and now on the government side, how have these experiences in various roles prepared you for your current leadership role and have they sort of shaped your leadership style?

Mr. Glassman: Well, I learned early on, just the way we operated that you know, you have to work in a team environment. You have to work where cooperation was of the essence. You had to work in a way that was smart.

You had to work in a way that if there was technology you needed to leverage that technology but also to be absolutely open and honest and to be certain that -- that you were taking certain actions with your employees that they would trust, because when you're operating in a very stressed environment, which a lot of us we do, you're very dependent on your employees, and you have to have a trusting relationship with them.

So over time, I tried to view not only my employees but you know, really the rest of my colleagues at the FDIC as family, and just like in family, you need to communicate, you need to be able to give them responsibility, but also be able to criticize in such a way that it adds value, not takes away.

Mr. Morales: It's interesting you use the word trust. This obviously also gets to the core of your business. It's about trust and the trust that people have in the financial system and the banking system of this country.

What happens when a bank fails and goes into receivership? We will ask Mitchell Glassman, director of the Division of Resolutions and Receiverships at the FDIC to share with us, when the conversation about management continues on The Business of Government Hour.


Mr. Morales: Welcome back to The Business of Government Hour. I'm your host Albert Morales, and this morning's conversation is with Mitchell Glassman, director of the Division of Resolutions and Receiverships at the FDIC.

Also joining us in our conversation from IBM is Dennis Kaizer.

Mitchell, the FDIC examines and supervises more than half of the institutions in the U.S. banking system, if I have my facts correct. Could you tell us a bit more about the characteristics of banks or depository institutions insured by the FDIC?

But more specifically, what's the composition of, say, regional versus large national banks and institutions and how do these insured institutions typically belong to the Federal Reserve System?

Mr. Glassman: Well, first of all there, you know, insured institutions have to be chartered and it could be under a state charter, it could be chartered by our Office of the Comptroller of the Currency or the Office of Thrift Supervision.

Currently there's about 8,500 insured depository institutions. There's about 7,200 that are commercial banks and approximately 1,200 that are what you would consider thrifts. Of that number, you know, the FDIC regulates 5,100 of them and the banks that we regulate are state non-member banks of the Federal Reserve System.

As far as size, you know, you could have a large regional bank that may cover a multi-state area, or you can have a very, very large bank that may be the top three or four in the country.

But overall, we have about approximately a 160 banks that are over $2 billion. That only represents about 2 percent of the total banks. The vast majority of the banks that the FDIC insure are small community banks, so you know the numbers aren't -- are more in the favor of the community banks.

As far as the Federal Reserve System, if the charter is the national bank, and it automatically becomes under the Federal Reserve System. State banks have a choice, either they are state member banks, in other words, state charters who belong to the Federal Reserve System and they are regulated by the Federal Reserve.

If they are non-members, as I was mentioning before, then the FDIC would be the primary insurer, then you have the Federal Thrifts and those are also not members of the Federal Reserve System, but they are you know, regulated by the Office of Thrift Supervision.

Mr. Morales: So there's really different flavors of banks out there depending on who charters them, size, those are a couple of different dimensions of how you would categorize banks or depository institutions?

Mr. Glassman: That's correct. It provides great diversity in the financial system and that's probably one of the, you know, one of the best things about our current -- not only our current regulatory system but also the strength of our financial system.

Mr. Morales: So, Mitchell, we've been using the term bank failure. What constitutes a bank failure, and could you give us a historical perspective on the history and trends of bank failures in the U.S., since the inception of the FDIC program 75 years ago?

Mr. Glassman: Well, first of all the FDIC never closes a bank. It's usually -- it is the primary regulator that actually has the ability to pull the charter. But by law, if the charter is pulled, then the FDIC becomes the receiver and as receiver we have multiple functions, but one of the primary roles we have is the deposit insurer.

That's one of our first priorities, it is to take care of depositors. We have to do a determination of the liability side of the balance sheet which is where the depositors accounting is and then determine who is insured and who is uninsured and make sure that that money is provided to the depositors as quickly as possible, whether through another assuming bank or through what we call a payoff.

We also have the role of receiver, which is also very important and this is very unique. No other country in the world has this role as receiver -- what we basically control the liability side of the balance sheet, but also the asset side of the balance sheet.

It's the role where we have to be not only be very careful, but also the way we handle the receivership has to be where it's not only fair and equitable but that we also do it in a least-cost manner. One thing we want to do is very business-like, very customer-service like, but also try to get the best dollars out of the remaining assets, not only for the benefit of the FDIC but for all other creditors that are doing owing.

So it's a huge responsibility, it's very unique and one that we always take very seriously. So we use all means that we can to be able to accomplish that task. So that is something we're very, very crucial and as far as the number of failures, you know, it -- there's peaks and balances with failures.

You know, during tough economic items, you know, failures can go up; you know, in recent history, during the savings and loan crisis during the last, you know, economic disruption, there were thousands of banks that closed, you know, with very large dollar amounts.

But that is sort of an anomaly. On average, from really since the time of the FDIC's existence, there's only been an average of maybe 3 to 12 banks that have actually have failed.

There are some years in past history here where we have no failures. So it's one of those things that depending on the economy, depending upon what would happen at the banks, sometimes failures do not occur because of loan losses, there maybe fraud, so those also would trigger potential failures.

But overall, you know, there's really no magic number, but the idea is the FDIC needs to be prepared whether there's one failure or multiple failures.

Mr. Morales: And this goes back to your point about readiness, that was one of your key concerns?

Mr. Glassman: Readiness is a key concern.

Mr. Kaizer: So Mitchell, you kind of walked us through what happens, you know, after closing and it goes into receivership at a high level. Can you actually maybe provide a little bit more detail?

So I understand the FDIC doesn't actually close the bank, but what happens? How does the FDIC get notified and then what steps do you take to mobilize for managing all those activities in your receivership?

Mr. Glassman: Well, we work pretty closely with our examiners, with our division of supervision and consumer compliance. And then we also have relationships with the office of the comptroller and OTS.

As a mater of fact, both the Comptroller of the Currency, and the director of our Office of Thrift Supervision are actually board members. We also have a very, very strong relationship with the Federal Reserve System, so we basically work very closely together to share information. But in particular, the FDIC collects a lot of information on bank performances.

We also have a very robust examination function so that we have examiners going in including the other regulators. So as information is gathered, as we start to see certain trends, it may be become evident that a bank may be having problems, whether it's loan losses that deplete capital to a certain point, or where they may have a liquidity issue.

When it reaches a certain point, we would be notified, you know, by the primary regulator that they have some deep concerns about a particular institution. We try to get hopefully at least 90 days notice that there is an issue, but there are occasions where we may only get one day's notice.

But regardless of whether it's 90 days or one day, I'm in the role where we have to be able to react quickly, efficiently, and that we're going to try to accomplish the same task whether we had 90 days to prepare versus one day.

So we have five teams of people standing by. I created what they call a "watch commander program," where basically every week somebody is on call. I've got a model where I only make one phone call and we can mobilize a lot of people.

If the bank is large and we need to react quickly our division of supervision and consumer compliance works with us very closely, we can get bank examiners actually to come in and take control while our teams gathers and then gets to the geographic location.

So it's very difficult what we have to do but it's something that we take great pride that if we get notified regardless of where the insured institution is geographically and we're also talking about insured banks in Puerto Rico, and Guam and the Virgin Islands, we handle those as though, you know, they were next door to us.

Mr. Kaizer: So banks through some supervision by one of the regulators ends up on a troubled list, if you will; does getting onto to this list mean that the failure of that institution and subsequent receivership is imminent?

Mr. Glassman: No, far from it. If anything, very few of those banks actually would lead to failure, and historically it's always been less than 10 percent. Being on the list actually means that it's getting more regulatory scrutiny.

I would tell you the majority of those banks that are on the list actually get recapitalized, they get merged, they get handled by the open market where the FDIC does not have to get involved.

But again, we treat any bank that's on this list as ones that we need to pay attention more closely on, but again whether it's on the list or I have to deal with an institution because there was a fraud in the bank, you know, the reaction's the same.

Mr. Kaizer: As I understand it part of the receivership role is to manage and sell the failed institution's assets. Can you tell us a little bit more about what you and your organization does to sell those assets, the strategies you have in place for that, the types of tools you might use?

Mr. Glassman: That is something that -- again, we use our business judgment, but that is something that in order for our insurance fund to stay solvent and also to return money back to the creditors as quickly as possible, we try to market the assets very quickly.

We are a division and an organization that believes in marketing, to try to return the assets, both the good and the problems to the marketplace as quickly as possible. One of the strategies that we use is that lot of times, if a new bank wants to purchase the institution's deposits, we give them options to buy portfolios from the FDIC.

Naturally, those portfolios match up sometimes with the deposits so that they can remain in the community. We also -- if indeed the assuming bank, if we have one, does not want the portfolios that we have, then we very aggressively go out and offer those portfolios to other outside investors.

One of the tools that we've got that I've been very proud of and actually won a presidential award on, was VUC (?) commerce, where very much we practice the idea that placing information on a secured website using the Internet is one of the best ways for us to develop a market and we have been very successful.

We have been doing this since the year 2000, and I always brag to my staff and anybody who'd listen to me, is the fact sometimes I think e-Bay took our idea. I just --


Mr. Glassman: I was just not able to get it franchised fast enough.

Mr. Morales: That's great. It strikes me today, Mitchell, that as we talk about, you know, banks and these large institutions, I mean, these could be very, very complex organizations and I would imagine that this presents a growing challenge for you as you look to prepare for a potential large-bank insurance determination process.

Could you elaborate on perhaps some of the improvements that you're pursuing in this area and how might these changes enable you to better handle or prepare for one of these types of failures?

Mr. Glassman: You know, Al, you're absolutely right. You know, large institutions are a lot more complex, not only what they do in the capital markets, how they deploy their IT strategies to reach out to their customers, but also in particular on the type of systems that they use that we have to draw upon.

One of the things that we try to do is gather as much of information from that institution and that's very critical for us. We currently have a policy out that we hope to make into a regulation where we're asking the very large banks, particularly you know, the top 160 to provide us with a standard data set so that we can quickly deploy that into our own systems to be able to do that deposit insurance determination.

In addition, the ability to place what we call "provisional holds." This is basically a device where a bank automatically can put holds on those depositors that we know have uninsured dollar amounts, but it does allow us to get the bank reopened very quickly, but at least give the depositors with the insured money access to their money very quickly.

And then also to release those holds that if indeed we find they are insured, you know, that we can do it on an automated basis. So we're trying to use the bank's own way of doing business using what I think is a very innovative approach for us to do these determinations using automation versus a lot of staff, and that allows us to be able to do determination, get the bank reopened, but also that's all part of our safe -- not only our safety and soundness, but our confidence in the banking system.

So whether it's a small community bank or one of the largest banks in the country, the ability to get that bank reopened quickly is one of our main mandates and using and leveraging IT systems and the new regulation is I think one of the ways that I think we're going to able to accomplish that.

Mr. Morales: Now the FDIC has an absolutely crystal-clear reputation, but it strikes me that with some of the complexities that you describe in terms of the types of institutions, the complexity of the process that you manage -- and you talked about this earlier as one of your priorities -- how do you ensure that the FDIC has the right number of people with the right qualifications to manage this process?

Specifically, could you tell us a little bit more about initiatives that I understand you manage, such as the Corporate Employee Program and the Resolutions and Receiverships Commissioning Program that assist you in this area?

Mr. Glassman: Yes. You know, we recognized very early first of all, you know, if you were to look at the FDIC budget like many agencies in other companies, you know, human resources is probably one of the largest single items that you would have.

And we are very fortunate at the FDIC that we have a very highly educated and very motivated staff who are very familiar with bank operations.

When you take a look at what I do, we also are involved in bank operations and bank assets. So the way the FDIC is operating is that if we can train -- cross-train our bank examiners and other like staff into how we handle claims and how we handle receivership matters that help us with the actual closing, what that allows us to do is leverage.

The best -- where -- place to start doing this training is when we have new employees come in through the program, is to educate them not just on their primary duties as bank examiners but also to give them the functional training that maybe necessary for them to help us during those peak times where we made a draw upon those resources.

But I tell you the reverse is also true, because I had employees who are in receiverships and claims, who have gone out on bank exams. So in a way from our FDIC board, and from our chairman, you know, basically everybody at the FDIC is prepared to handle bank failures, but then again where bank examination may need help, we're able to swing those resources elsewhere.

So it's a holistic approach to the management of human resources and one that we've been very beneficial. As far as our commissioning, this is something that I have been desiring for some time.

The -- you know, we have commissioning for our bank examiners, it's a highly regarded commissioning. Bank examiners are very proud of it, but I felt in order for knowledge management and for the ability to pass on the unique knowledge that we have in handling what we do which is unique that we credit our own commissioning for the role of resolutions and/or receiverships.

This is a way for me to pass on my knowledge and my experience to the next generation and to also to have a commissioning where they also would be just as prideful of the work that they do in that area, as much as a bank examiner does with their commissioning.

Mr. Morales: So this is a type of a certification type program?

Mr. Glassman: It -- commissioning is little bit more than a certification. We do have certifications for individual functions like what we call franchise and asset marketing. We have certifications for claims, you know, to handle claims determinations and for asset marketing.

But a commissioning is basically a specialist who can handle all parts of the organization and actually go out and run a receivership -- a small receivership on their own without a lot of supervision.

Mr. Morales: So Mitchell, you clearly have this model where at any point in time you can summon vast parts of the organizations to various crises because you've cross-trained people across a variety of different tasks.

But with so few failures in any given year, how do you actually provide the knowledge and the real-world experience of how to manage this process?

Mr. Glassman: Well, I -- there's multiple things that we're doing. First of all, we've highly documented all of our activities, so we have the typical manuals. But we've gone one step further. We have also have created what I call web-based training, what I would call training that you know, if you get called upon and you were going to a particular failure and you had a particular duty you would be able to pull down a CD-ROM or go to a website and be able to get that just in time training.

We also at the FDIC and particularly in our division, we've done a lot of simulations. The fact is that we put people through what would happen and what you would be doing.

We also have -- whenever we do have failures, we allow people to shadow so they not can witness it, but they can also be participatory. And last but not least, we have a very dedicated program with our corporate university, that is finding all different ways to cross-train through people's career on not only our functions but also the functions that, you know, they would need for, you know, their corporate life to make them successful.

Mr. Morales: That's great. How has the subprime mortgage crisis and the resulting credit crunch impacted the FDIC? We will ask Mitchell Glassman, director of the Division of Resolutions and Receiverships at the FDIC to share with us, when the conversation about management continues on The Business of Government Hour.


Mr. Morales: Welcome back to The Business of Government Hour. I'm your host Albert Morales, and this morning's conversation is with Mitchell Glassman, director of the Division of Resolutions & Receiverships at the Federal Deposit Insurance Corporation. Also joining us in our conversation from IBM is Dennis Kaizer.

Mitchell, you can't pick up a newspaper today without seeing that the home foreclosure rate has nearly doubled in the past 2 years. I also read that an estimated 1.7 million homeowner-occupied subprime hybrid-adjustable mortgages -- that's sort of a mouthful -- are set to reschedule over the next couple of years. Now, the combination of declining home prices and scarce refinancing options may result in even more foreclosures.

So, how has the subprime mortgage crisis and the resulting credit crunch impacted the FDIC, and what role does the FDIC play in working with the market to develop solutions that might help prevent unnecessary foreclosures and keep homeowners in their home?

Mr. Glassman: Obviously, the FDIC, as we talked about before, has to maintain confidence in the banking system. And one of the things that we have done not only through our chairman but through our board, is to work with the institutions not only for those who have these type of loan products on their books that to be not only cautious, but to be very careful about how they handle them. But also that this is a consumer issue that has, you know, a wide net that it seems to be carrying.

So for the financial institutions that we ensure, you know, we want them to be careful, we want them to do the right thing. But you know, if indeed they need to get more capital, you know, we try to work with them to get more capital to -- also to, you know, handle their servicing in a way that allows borrowers to try to recast their loan so they do not have to go through foreclosure. I would tell you that we're also -- been very proactive in financial literacy and in working with outside groups to try to work with the consumer.

We have a very, very strong belief that foreclosure is not a good option for the banks. We feel working with the borrowers in recasting their loans is the better way to minimize lawsuits and also keep the home prices stable, because foreclosures are not good for the country, they're not going to be good for the banks.

Mr. Morales: So -- we talked earlier about the number of bank failures and enclosures per year. I understand that there were, I think, three FDI-insured banks that failed last year. I'm sure that all three of these pose their unique set of challenges for you. But I understand that one of them was particularly challenging in that it was an Internet bank which did not have any physical branch offices. How do you deal with this, and to what extent did closing such a large Internet bank require you to modify and rethink your receivership processes?

Mr. Glassman: That's a good question. The -- you know, any insured institution we have to be prepared for. And when you speak of an Internet bank, for your listeners who may not know what an Internet bank -- but this is basically an institution where the customer basically deals with that bank either through an Internet portal or through some other means, whether it's an ATM, they do not have a physical branch in many cases, and they do not have a main bank to be able to transact business.

So we're basically dealing with a core base of customers in a virtual world. These type of institutions have a lot of technology that they're deploying sometimes on multiple platforms, sometimes in different locations. And for us to be able to handle that -- and again, this was our preparation, you know, because we had dealt with something similar that we wanted to be certain that we're able to still do our deposit insurance determination, get the money in the hands of depositors.

But we're also very fortunate in the sense that ING Direct, you know, which is also another Internet provider, was able to purchase those particular customers, which then left us with the receivership. But for us to plan such a very difficult type closings, we had to be in the right place with the right people. We had to be certain that a) if you shut down the Internet portal, you know, we had it up and running within 2 hours, and gave access to money to people very, very quickly.

So whether it's a community bank or a virtual bank like this Internet bank, you know, we move very quickly. But you have to plan for it. You cannot just walk in and say, oops, where do I go?

Mr. Kaizer: Mitchell, while the number of bank failures has been quite low in recent years, there's certainly some speculation that the number of failures is going to increase potentially in the relatively near future. Can you tell us what you may be doing to prepare for an increase in bank failures?

Mr. Glassman: Well, Dennis, you know, I have to tell you that, you know, that question comes up quite frequently. But, you know, I sort of ignored, you know, the idea of whether there is one bank or a hundred banks -- it really doesn't matter. You know, the FDIC is going to be ready. It doesn't matter what size, what location. So even though there is a deep concern about the financial health of the industry, I think one thing the consumers and depositors can be reassured they shouldn't worry.

You know, the fact is the FDIC is going to stand by those deposits, they're going to efficiently handle the receiverships, and that we're prepared to go to any lengths to be able to, you know, make sure that we meet our obligations. So, you know, I'm not concerned, and I don't think anybody else should be.

Mr. Kaizer: Great. You know, we've heard you talk about how the FDIC places a high priority rate on getting the deposits back in the consumers' hands in a timely manner. Can you tell us what first are some of the critical reasons that it's so important to get those deposits back into the person's hands so quickly, and then maybe some examples of how by doing that you are supporting that local economy and those depositors and the impact that that has?

Mr. Glassman: The way our financial system works, to be able to have deposits available -- if you think about it, you pay your mortgage, you have to go to the drugstore, you go to the grocery store, you have to pay your doctors, all of this is through the handling of either checks or through cash.

And if you take away the ability of depositors or customers to transact business or to issue checks where they not -- may not be accepted by the merchant or vendor, it starts to create a lack of confidence, because all of a sudden your -- this bank and this community may have failed, but what about my bank down the street?

So our ability to get insured deposits back to consumers is so important, because we want to be able to demonstrate not only to that community, but everybody else that's in that community and throughout the country who have their deposits at banks, that should be the least of their concerns that they're not going to have access. I would tell you that in certain countries, you know, that does not always happen.

I would tell you before the FDIC it took years for people to get their money back. So that is one of the main things that we do is to be able to get money back in their hands so they can be utilized within the local economy.

Mr. Kaizer: So Mitchell, you've talked about how a consumer would get their ensured deposits back in a timely manner. So is there a scenario that you can talk to us about where depositors might not get all of their money back because that's not all an insured deposit?

Mr. Glassman: Unfortunately, that does happen. We do have depositors that have placed money into the institution that was beyond our FDIC insurance limit. You know, currently it's $100,000. There are certain accounts that are, you know, that are retirement accounts that are up to $250,000. But if the customer has excess funds, then what ends up happening they become uninsured depositors, and they would share in the proceeds of any collections that we have out of the receivership.

So we would pay -- later on as we liquidate the assets, we would pay them a dividend for their uninsured portion. For instance, if somebody had $110,000 we would pay them 100,000, we would give them a receiver certificate for 10,000. But because of the efficiency we try to deploy, and you know, the value of the assets, we may be able to return 80 percent of that portion. So we may be able to pay them $8,000 over the time of the receivership. So net net they did lose, but it would be $2,000, not the full 10,000.

Mr. Kaizer: So you're always trying to drive to make people as whole as possible, but folk should realize that there are some limitations.

Mr. Glassman: That's absolutely correct. And that's something that I would encourage, you know, your listeners and anybody else that, you know, that has deposits, that they do check on their insurability. They can check on the FDIC's website --, and they will be able to get help in getting -- answering their questions on -- about insured deposits.

Mr. Kaizer: Great.

Mr. Morales: Mitchell, in the past few years, we've seen a range of natural disasters within our country. Would you tell us about the role FDIC might play in the response to a natural disaster? What about the regulatory relief that FDIC may provide to insured financial institutions in the event they sustain significant damage as a result of a natural disaster, or that may service those affected areas by such an event?

Mr. Glassman: You know, Al, that's probably one that I'm probably the proudest about even though, you know, it's not involving bank failures or supervision. But the fact is the FDIC, because of its experience -- I will give you an example -- during Hurricane Katrina, you know, the FDIC was one of the first to provide call center support for the people who wanted to know if their banks were opened and where they would be able to find an ATM or able to call, you know, the FDIC and actually get people to answer, and to actually direct them to where they can get help.

I would tell you there are supervision people. We're also very much in there. They basically make sure banks were able to reopen, that they had their backup systems, make sure that they had the help. They actually help the banks partner with other banks that had to share lobbies. But also that if there was some kind of relief that needed to be made for the borrowers, you know, we also send out, you know, notices to say, you know, if indeed a borrower has been harmed, that there are certain things that the banks would be allowed to do to work with those borrowers.

So we have a multiple approach, but I think when it comes to disaster, the FDIC has a very good track record of consumer protection, but also being very sensitive to the needs of the bank to get open as quickly as possible. Again, it all stems from our confidence in the banking system that we feel that we are very major players in that.

Mr. Morales: That's great. That's a very significant issue here in our country. So we spent a fair amount of time talking about the financial system here within the U.S. Could you elaborate on perhaps an increasing leadership role that the FDIC is playing on a global scale? To what extent are foreign governments looking to the FDIC as a model for either establishing or strengthening their own system of a deposit insurance and bank supervision?

Mr. Glassman: The FDIC has taken a very, very strong leadership role -- the foreign countries are trying to get their own banking system up and running, because they know that's very much intricately part of their own economic wellbeing. And they look to the FDIC not only to develop their own deposit insurance system, but also our way of regulation but also the way we handle bank failures. We have been very much active in the International Association of Deposit Insurers -- we call it IADI.

Matter of fact, our vice chairman, Marty Gruenberg, is the chairman of this committee. So we do training, we provide folks to help them with -- write -- drafting their own legislation. We help -- actually teach them some of the functions that go along with this activity, and have a lot of what I call "open communication" that goes on constantly. So we're very proud of the fact that we feel that also helping these countries develop their banking system is also good for United States and also for the global economy.

Mr. Morales: That's fantastic. What does the future hold for the FDIC's Division of Resolutions & Receiverships? We will ask Mitchell Glassman, director of the Division of Resolutions and Receiverships at the FDIC to share with us when the conversation about management continues on The Business of Government Hour.


Mr. Morales: Welcome back to our final segment of The Business of Government Hour. I am your host Albert Morales and this morning's conversation is with Mitchell Glassman, director of the Division of Resolutions & Receiverships at the Federal Deposit Insurance Corporation. Also joining us in our conversation from IBM is Dennis Kaizer.

Mitchell, given the interconnected and interdependent nature of the financial systems as we've discussed, could you tell us about the kinds of partnerships you are developing to improve operations or outcomes to sustain the system and how might these partnership change over time?

Mr. Glassman: Well, partnership is very important. Not only do we form partnerships with the other regulatory communities, but also with the banks themselves. You know, we need to stay in-tune with what the banks are doing and how they are operating. I would say that we actually have partnerships with the consumers themselves, you know, reaching out and listening to what's on their minds in some of their issues with local, state, and federal governments are also part of our partnerships.

And then in particular with major companies and contractors, who have inside knowledge and expertise that we may not have, we call them partners. Anything that helps us do our jobs and to do it better, we will enter into the partnership. But also being a partner means also we share, and that we also provide insight.

So we kind of feel like this is a good way of doing business. It's one that keeps us abreast of the issues, but also gets us prepared that if we need to change the way, our thinking, or the way we operate, or possibly to help mitigate risk, this is a good way for us to practice what we do, and partnership, I think, is a good business practice.

Mr. Morales: So it sounds like you also try to operate as open a system as you can?

Mr. Glassman: I firmly believe that that's the way we need to operate. You know, that's one thing, I think, that the FDIC prides is that we have the ability to reach out and touch, but we also want people to reach out and touch us. We have a very active call center.

You know, our website is something that people can derive a lot of information on, whether it's about their FDIC insurance, whether they, you know, through a program we call, "ED." If they want knowledge about how can I better educate myself, my kids, or myself through adult literacy, we have this money smart program that you can download, and look at. We actually have our FDIC employees go out and actually teach it.

Then also the fact is that we are going to let people know who we are. You know, we are going to have our 75-year celebration, where we are going to go out into the communities, and let people know just how important their FDIC insurance is. But in particularly what the role of banking as in our economy, and why they should look to their banks is a place to, you know, conduct their financial affairs.

Mr. Morales: It's perfect timing for that.

Mr. Kaizer: Mitchell, you've mentioned, you know, the Internet and some of the things that you have under, a couple of times now. I believe a Brown University research study released in 2007 ranked the FDIC's website 8th in the federal government, which is just great. Can you tell us a little bit more about how maybe your division actually uses that website or that Internet in an actual bank closing?

Mr. Glassman: Yes, we use it for multiple purposes, you know, one not only to provide information to all of our constituencies to who may have to deal with this. We may have buyers that come looking for real estate or looking for information on how they would be able to connect with us. We also after receivership, after bank failures we post everything that we know about that transaction, but also what is going on in that receivership.

So if you are a creditor, you would have the information readily available to you. One of the things we practice is that if we can answer as many of people's concerns or questions, or provide documents, that's -- and saves them from having to call us, or to write a letter, then we want to do it. So we are always constantly keeping it updated. We are constantly always looking for different kinds of technology to be able to help the customer, but the use of the Internet, I think, is probably one of the best vehicles for communicating with the public.

But also that as things change we can also make sure that information gets there very quickly so that the customer themselves would be able to react to it quickly.

Mr. Kaizer: Speaking of change, I'd like to transition now to talking about the future. You know, as financial institutions grow in both size and complexity, the FDIC is likely to face, you know, some challenges, if one or more might fail simultaneously. Can you give us a sense of maybe some of the key issues that will affect the FDIC, and in particular your division, maybe, over the next few years and how you envision your office might need to evolve in light of these challenges.

Mr. Glassman: It is always something that we constantly keep in our radar. You know, you are correct, the institutions are getting large. They are always merging, they are acquiring, even at the community bank level there's a lot of changes. One thing we try to do is look ahead, where is the industry going, and whether or not our current processes and procedures really match up to what we are going to be doing.

I'll give you a case in point, you know, when we come into a large institution or any institution, they now have the ability of customers to pay bills online. It is very important, so when we come into an institution, we might want to make sure we maintain that type of relationship. We also are very interested in making sure we maintain the core value of the franchise, whether it's the core deposits, the type of loans, the type of technology platforms.

As banks become much larger they also get involved in capital markets-type approaches. Where they get their funding becomes a little bit more diverse. So our ability to understand how the banks operate, and how they are dealing with their customers because what we are trying to do is capture that value, and actually through a merger-acquisition process be able to move it to a new institution, so that the same continuity of services that the customers expect will just flow to the new customer.

So in a way, we have to be prepared to move quickly to understand what's on the balance sheet of the bank, but how does it relates to the FDIC on a least cost manner, but also ultimately to the consumer. And in order to do that you will always have to look ahead. You always have to see what's out there. You have to kind of figure out, a) How am I going to deal with this particular situation?

Example is a lot of the institutions are now getting involved with what they call reverse mortgages. Well, that is something that is very important to the consumer. And we are, you know, working very hard to say, what if we were to receive a portfolio like this, how would we react, or if there is multiple platforms that the bank is working on, for instance, they may have offshore platforms, how would we handle that.

What if certain things weren't to happen, how would we deal with it? So the banks become large, they also become complex and we try to foreshadow what we need to do, and be certain that we are operating in a way that gets us the best results. The least cost result.

Mr. Morales: So this is actually a very critical point here. So it's really more than just insuring the deposits. It's also about preserving the services, that that institution was providing within that community, so that, the consumers to a certain extent will see sort of a seamless transition, should one of these events takes place.

Mr. Glassman: That is very critical for us. But I would also tell you that I am in the business of selling banks. You know, if I can obtain a premium for that franchised value that is in the best interest, not only the FDIC, but all the creditors that may be involved. So by understanding the nature of the bank, its customer base, how it was operating, allows me to be able to transfer that value, and hopefully through an auction process, through a bidding process, we are able to get more value from it, and actually receive more dollars for the benefit of everybody.

That's one thing, that we do have, is we have $52 billion in our insurance fund, and it is not taxpayer driven. Our funds come from the industry, so we have a very strong desire to be certain that we try to minimize the cost not only to the consumers, but ultimately to protect our taxpayers.

Mr. Morales: That's great. We talk a lot to our guests about the pending government retirement wave, which is a big issue for many organizations here in the federal government. How are you handling this issue within your organization, and what are you doing to ensure that you have the right staff mix to meet any of these future challenges?

Mr. Glassman: That is something that we at the FDIC are also facing, we have this bell curve where we've got a lot of new folks that we are bringing in, we've got a lot of people who have the ability to leave under voluntary retirement, and that's like a big bubble right in the middle. So we have got different strategies, as we discussed earlier, we have our Corporate Employee Program, where a lot of the newer folks who are coming in, getting across, you know, understanding of the organization.

But we also have brought back what I consider mid-career hire employees, people who have experience to be able to fill the gap, who in their careers are able to join us. We brought back retirees in certain cases to help, you know, meet the bubble. And last but not least, we are always looking that if indeed we loose certain knowledge, certain key people, who would be in our succession.

So we've developed a program through our corporate university where we identify who are high potentials. We have got a very aggressive leadership program, and I might want to add that I am also dean of the College of Leadership Development, so I am very much into what we are doing organizationally, you know, to provide succession. But what really counts is that it's the knowledge that the folks retained, and you'll be able to pass it on, so that the next generation not only has the ability to provide management and leadership, but also has the technical skill sets that do it successfully.

Mr. Morales: So let's talk about this future generation. As you reflect on your 35 years of experience in the industry and in public service, what advice might you perhaps give a person, who is out there considering a career in the public sector?

Mr. Glassman: Well, I would tell you it wasn't my plan to stay in the public sector more than 5 years, but I have to tell you when you are in the role of helping people, making a difference, and being part of something bigger than you are, it is very easy to catch some passion for it. And I do have a passion for what I do, because I have been in West Kansas, and parts of Iowa, and parts of Texas, where I have met people, who depended upon the FDIC, depended upon their government, to step up and do the right thing.

And I think that gives you a certain amount of satisfaction, so I would encourage anybody, who is seeking a career in the federal sector, in the federal space that is a good career, it is something they can get a lot of satisfaction, and whether they stay one year, or they stay like me 35 years, they are going to gain. It's going to be value added to not only to their own career, but I would also tell something that in lot of families they'll take pride in the fact that they are out helping the public in a service that's desperately needed.

Mr. Morales: That's a great perspective. Thank you. Unfortunately, we have come to the end of our time, so I want to thank you for fitting us into your busy schedule. But importantly, Dennis and I would like to thank you, for your dedicated service to our country across the various roles that you have held at the FDIC.

Mr. Glassman: Well, I'd like to thank you for being invited and sharing. One thing, the FDIC is going to be here for 75 years, it's going to be here for a long time, but I think that's one thing that's consistent that, you know, that we will always try to do the best we can, and frankly take leadership role in all of the federal services, and again we thank you for inviting us to share.

Mr. Morales: Great, thank you.

This has been The Business of Government Hour, featuring a conversation with Mitchell Glassman, director of the Division of Resolutions & Receiverships at the Federal Deposit Insurance Corporation. My co-host has been Dennis Kaizer, partner in IBM's federal civilian practice.

As you enjoy the rest of your day please take time to remember the men and women of our armed and civil services abroad who may not be able to hear this morning show on how we are improving their government, and who deserve our unconditional respect and support.

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

Speaker: This has been The Business of Government Hour. Be sure to join us every Saturday at 9:00 a.m. and visit us on the web at There you can learn more about our programs and get a transcript of today's conversation. Until next week, it's

Honorable Timothy M. Kaine interview

Friday, August 22nd, 2008 - 20:00
Tim Kaine became the 70th Governor of Virginia on January 14, 2006. As Governor, Kaine is focused on areas where progress is needed to keep Virginia leading the way.
Radio show date: 
Sat, 08/23/2008
Intro text: 
Leadership; Managing for Performance and Results; Collaboration: Networks and Partnerships; Technology and E-Government; ...
Leadership; Managing for Performance and Results; Collaboration: Networks and Partnerships; Technology and E-Government;
Complete transcript: 

Originally Broadcast July 28, 2007

Richmond, Virginia

Welcome to The Business of Government Hour, a conversation about management with a government executive who is changing the way government does business.

The Business of Government Hour is produced by The IBM Center for The Business of Government, which was created in 1998 to encourage discussion and research into new approaches to improving government effectiveness. You can find out more about the Center by visiting us on the Web at

And now, The Business of Government Hour.

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

We are here on location this morning in Richmond, Virginia, in the historic old Virginia Supreme Court Chambers of the newly named Patrick Henry Building, named after Virginia's first elected governor.

Recognized as one of the best managed states in the country, the Commonwealth of Virginia continues to build on a centuries-old heritage of leadership, achievement, and commitment.

There is little that the Commonwealth does not do well in terms of good government management. As a recognized leader in business, education, and quality of life, Virginia is marked by an attractive business environment, challenging and rewarding jobs reflective of a changing marketplace, and strong income growth throughout all regions of the Commonwealth.

Today, we are honored to have as our guest the Honorable Timothy M. Kaine, Governor of the Commonwealth of Virginia, to discuss his administration's efforts around government performance, accountability, transparency, and citizen engagement.

Good morning, Governor Kaine, and welcome to our program.

Governor Kaine: Albert, it's great to be with you today.

Mr. Morales: Thank you. Governor, we appreciate you taking time to share with our audience your leadership and management approaches to ensure the Commonwealth of Virginia's future and secure its past.

As an executive in charge of approximately 120,000 employees with a bi-annual budget of $71 billion, you must be kept constantly on the go.

Could you share with us what your past week has been like?

Governor Kaine: Yeah. I am constantly on the go, and I have to, gosh, what did I do last week.

We had a very special day last week, Cabinet Community Day. Four times a year, I take the Cabinet out on the road, and we go to a region of the state and begin with kind of an open Cabinet meeting, where the public is invited.

During the day, we then all fan out. Each Cabinet member works on matters that are kind of critical to their own agencies. And then, at the end of the day, we all come back together for a reception.

And we do this four times a year so that members of the public in all parts of the state kind of get to know us. You know, we need -- we shouldn't just stay in the capital. But we also do it so we can learn things and bring them back. We see best practices wherever we go. We see a -- you know, a city and county that are in an innovative way, you know, combining their social services operations to serve citizens better. Then we bring those items back and try to replicate them here and encourage other parts of the state to think about them. So that was one of the major items of last week.

We're also deeply involved in policy and budget matter preparation. The major budget that I will prepare as governor is one that I'll present to the legislature in December. We started working on it in March, and so we're, you know, we're deeply into that right now.

Mr. Morales: That's fantastic. Now, Governor, so beyond past week, this year is of particular importance to Virginia, as it marks its 400th Anniversary of the Jamestown Settlement.

In celebration of this anniversary, you had the pleasure of hosting Queen Elizabeth --

Governor Kaine: Right.

Mr. Morales: --of England, as well as her husband, Prince Phillip.

Could you tell us more about this visit and how important is this celebration to the Commonwealth?

Governor Kaine: I think the celebration has been extremely important to the Commonwealth for a couple of reasons.

One, you know, anniversaries give you a chance to kind of step back and look at the big picture. I mean all of us can, you know, have the danger of getting sunk into our daily responsibilities and not stepping back and getting the perspective. And the anniversary has been very helpful for us to step back and look at how far the Commonwealth has come, to acknowledge that, you know, it's not all been rosy. There have been some very, very grim times here, and trying to learn the lessons of success and failure; but then, most importantly to say, okay, what have been the key values that have enabled this Commonwealth to be successful for 400 years that we want to carry forward.

So it gives you an opportunity to think about values. That's really important.

It also has given us an opportunity from an economic development and a marketing standpoint to tell the Virginia story. The visits of Queen Elizabeth, and then on the following weekend the President, you know, have a huge upside for us in tourism and other opportunities to tell the Virginia story and attract people and businesses to be interested in us.

So it's been a real fun year so far, and there are going to continue to be, you know, 400th Anniversary events throughout 2007, so, you know, much more in store.

Mr. Morales: That's fantastic. Now can you tell us a little bit about your administration's adopted motto, "Virginia: Leading the Way." What inspired this motto and what aspects of Virginia's tradition of excellence does this model highlight. And, if I may, in what ways does it reflect your governance--your management, and your leadership style?

Governor Kaine: Well, we chose the motto at the beginning of the administration I think probably somewhat because of we knew we would be commemorating the 400th Anniversary, not just of Virginia, but of English-speaking civilization in the New World, of the birthplace of key democratic institutions -- elected legislature, freedom of religious worship, the equality principle.

And so Virginia has been a leader for those 400 years. I just want to make sure that, you know, we continue to see ourselves that way. We don't want to think of our leadership successes as all in the past. We want to think of them going forward. So the notion that we should be at the front, we should be leading in the creation of new opportunities, new institutions, new ideas is a powerful one.

In terms of, you know, what it says about our management philosophy. You know, sometimes you hear about people, they will separate management and leadership, you know. Management is doing things right, and leadership is doing the right things. And management is critical. We valued Governing Magazine's accolade a couple years ago -- we're the best managed state.

But we also want to be leaders. And leadership is a little bit different. I think leadership is often a little bit measured more by kind of the effect that you have on the external world rather than just how you're managing your own little corner of the world. And so I want to make sure that, you know, we hold out before everybody in state government that we're really called to be leaders.

Mr. Morales: Now you mentioned the accolades that you received by Governing Magazine, so how do you keep the level of intensity and leadership in the state after receiving such a prestigious award?

Governor Kaine: Well, it's a challenge. That's a daily challenge in a sizeable organization. And any sizeable organization faces, you know, what do you do to have a culture of continuous improvement, you know, responsiveness, excellence.

And so, you know, we do it in a whole lot of different ways. The way it begins is putting good leadership in place, and so, you know, I spent a lot of time when I came in as governor in January of '06 trying to put great people in leadership positions in the agency head spots in the Cabinet, Secretary, and the Governor's Office. And by great leaders, I tend to think of two main criteria. Not ever having had a management course, my kind of fallback position is success is, you know, goals plus relationships.

So I want people who know how to establish meaningful goals and then are willing to be held accountable and measured against those goals. And I also want people who know that to achieve goals you got to collaborate and that there are some things that a leader can do just by virtue of, hey, we're going to do this, and then it happens. But most things that you want to do really require relationships and collaboration.

So trying to pick a, you know, leaders who understand those two traits and can live them out that is the most important thing I can do to try to keep pressure on for success and improvement.

Mr. Morales: That's great. Governor, as a citizen myself of Virginia, I can vouch that the Commonwealth has earned a strong reputation as a great place to live, great place to get an education, work, and raise a family.

Yet, as with other states, the Commonwealth faces the challenge of how to sustain and improve.

Governor Kaine: Absolutely.

Mr. Morales: Could you tell us a little bit about the Roadmap for Virginia's Future and the vision for Virginia that you have?

Governor Kaine: Mm hmm. Certainly. It is hard to, you know, to maintain that accelerated pace. You know, in the last 50 years, from Queen Elizabeth's 1957 visit to Jamestown to 2007, Virginia has made a tremendous accelerated jump, really. We were at the bottom of the nation in percentage of our kids going to school. Now are public schools are recognized as some of the best in the nation.

Our higher ed attendance was less than half the national average in '57. Now we're significantly above the national average. We were 36th in the nation in per capita income in 1957. We're 9th in the nation now. And in that, no state has made that as big a jump as Virginia has.

So how do we keep it, you know, strong going forward? Our Council on Virginia's Future has worked with us to come up with this roadmap for success really focusing on continuous effort to define long-term goals and then organize our effort around those goals.

One danger we have in Virginia is that we have a one-term governor that can't succeed him or herself, so that's a four-year period. Our legislative terms are either two-years in the House or four-years in the Senate, and you can run into a danger of short-term thinking, of thinking that is only in two- or four-year increments, when to have sustained improvement, you've got to have a longer time horizon.

So the roadmap is about trying to refine and set goals that really go out further than a governor's term or an election cycle so that we can then orient the activities of state government around those longer-term goals.

Mr. Morales: That certainly is a very short time to get a lot accomplished?

Governor Kaine: It is. And, you know, you end up, no matter how much you know about government when you come in, and I was the Lieutenant Governor, so I sat next to a great governor for four years, I didn't have a big learning curve. It's still -- you know, you're just not -- you're not as sharp on your first day as you are once you get about a year and a half into the job.

So that first year, you're kind of feeling your way, and then frankly, the last year, often the legislature will say, well, you know, we're going to have another governor soon, so you start to find some tail off in your power at the end. And so that means that your window to really make a big difference shrinks a little bit from the four years to maybe, you know, two and a half or three, and you really got to push to get things done.

But the roadmap helps in establishing longer-term goals and also with the Council bringing people to the table other than legislatures, and legislatures are included, so is the Executive, but bringing community leaders, business leaders, and others to the table who are going to be here for the long haul and are going to continue to hold us accountable for long-term improvement.

Mr. Morales: That's fantastic. What is the Council on Virginia's Future? We will ask Virginia Governor Tim Kaine to share with us when the conversation about management continues on The Business of Government Hour.


Mr. Morales: Welcome back to The Business of Government Hour on location today in Richmond, Virginia.

I'm your host, Albert Morales, and this morning's conversation is with Virginia Governor Tim Kaine.

Governor Kaine, what is the Council on Virginia's Future? Could you tell us about its purpose, how it's organized, and what role it plays in executing the Roadmap for Virginia's future?

Governor Kaine: Certainly. The Council on Virginia's Future is an organization that was created by legislative mandate with the support of then Governor Warner to bring together around a table key stakeholders who want Virginia to be successful, to really look at what are the elements that we really need to focus on to ensure long-term success, not short-term within an election cycle, but long-term success.

The idea was that we didn't have in state government that kind of long-term planning; that there wasn't a clear bull's eye for state government. You know, a business has a bull's eye usually and bottom line most organizations have a bull's eye, but the state is so large and complex with so many agencies trying to do so many things, what's the bull's eye? What are we really trying to aim towards?

And so that realization through the powerful lobbying of some private citizens who wanted Virginia to adopt these long-term management practices led to the formation of the Council.

The Council is composed of private sector leaders, from the non-profit world, from the business world. The Governor is always, you know, kind of the chair of the Council. And then there's key representation from the legislature as well. And that Council is a forum for dialogue, again about a couple of different things.

What does it mean for us to be successful? How do we define success? How do we set long-term goals for success?

The Council has some other work as well. I view the long-term goal setting as the most critical, 'cause it doesn't really happen anywhere else.

But the Council has some other important work as well. They push us toward better accountability and trying to find efficiencies and improvements to government with private sector expertise around the table. There's a lot of great ideas that come out around that.

They work with reminding us in a very helpful way that success that you might see at the state-wide level, so low unemployment rate. Virginia's unemployment rate is one of the lowest in the nation. You can't be complacent about that because there are regions where the unemployment rate is too high. So the Council helps us remember that averages can mask some --

Mr. Morales: Sure.

Governor Kaine: --challenges. And so they serve a very valuable role in helping us set goals, but then really giving us a real-world reality check about how we're doing.

Mr. Morales: Great. Now earlier you spent some time talking about leadership. Could you elaborate and describe Virginia's performance leadership model? How does such a model address challenges that are unique to state government?

Governor Kaine: We focus on performance leadership in budgeting and policy development in a couple of different ways.

First, we try to define what success is, you know, what are the areas where we want to succeed. So often in organizations, you'll define success by, like, how hard you're trying; how many meetings you're having, you know. And we try to break out of that and define success by external indicators. What's the state's median income? What's the state's unemployment rate? What percentage of our kids take and pass AP exams when they're in high school?

We want to use measures that really define, you know, real-world success, not internal process --

Mr. Morales: So real outcome measures?

Governor Kaine: --measures of success. Outcome measures.

That's where the, you know, kind of performance leadership begins. The Council's been enormously helpful on this in working with something called Virginia performs trying to put information, you know, put the key indicators out there that define what success is.

So that's where it begins. At a societal level, what do we want to see at the state level to know whether we're succeeding and also where we're weak. You know, there are areas where you want to be successful and you find out you're not. That then becomes a magnet for your attention and energy so that you can try to improve.

So there is the macro level societal success and performance. Then there's also the performance within each state agency.

And so what I've done with my Cabinet Secretary and with my agency heads in my first year as Governor, I spent a lot of time with them on what are your goals, you know? Remember I go back to my goals plus relationships. I said we'll spend the first year on defining goals, and then we'll spend three years enhancing collaboration, the relationships needed to accomplish the goals.

And so we spent a lot of time at the agency level so that the agencies can try to express their missions in a set of few focused goals with here's where we are today and here's where we ought to be in the next few years so that then I can measure their performance against those key goals. When they give me budget submissions, I can look at the budget submissions and say, well, that doesn't really seem to be -- you told me what was important to you in your goals. This budget submission doesn't seem to be advancing that goal. Tell me how it is.

And so the second kind of key level on the performance leadership side is working with agencies and Cabinet Secretaries on goal setting for their own functions.

Mr. Morales: Now, Governor, driving collaboration sounds very fundamental, but how do you do that within such a large organization?

Governor Kaine: Well, it's hard. I think that is in some ways one of the hardest things because, you know, just again, you get -- people get sunk into the challenge of doing their day-to-day work, which is plentiful, and the opportunities, you know, to -- well, let's see; let me get on the phone with a guy in another agency and figure out if we can do it better together. I'd like to do that. I just got to get done with all my work and then I'll find time to do it.

So it's pushing the collaboration has proven to be a real challenge. But one of the ways you do it is you reward collaboration where it exists. So there's great examples of collaboration all throughout state government -- people working on joint projects. And I always try to, you know, I don't -- just in a kind of an enthusiasm and cheerleading way gives those a little bit of a higher profile and recognize them to encourage others to do the same.

We also need to examine state policies and things like that. There are state policies that prohibit or discourage collaboration. Two of my social service agencies, Martinsville and Henry County in Southside, Virginia, combined because they realized in that small metropolitan area, there wasn't a real functional difference between the needs of the population depending upon the dotted line and where the jurisdictions were. And I remember saying to them, wow, you're doing this in a collaborative way. You've combined. I bet the state was really happy of that. And they said, no, to the contrary. The state made it hard for us to do it. We still have to kind of keep two sets of books, but we did it anyway because we thought it was important to do.

Well, we have to find examples like that in state government. We have to put financial incentives in place that reward collaboration, and that's, as I'm working on the budget for next year, one of the things I've charged my agency heads as we're going to give a -- you know, we're going to give a premium to those of you that are bringing forward collaborative projects.

Mr. Morales: So it's not only encouraging collaboration, but it's also breaking down the barriers that inhibit collaboration within --

Governor Kaine: Right.

Mr. Morales: --the organization?

Governor Kaine: Yeah. I think there's, you know, there are sticks that we got to move out, and then there are carrots that we have to provide. And both of those I think, you know, there's a lot of work to be done.

Mr. Morales: That's a great analogy. Now you've inherited some transformational initiatives that began during previous administrations, which either employed the advantages of information technology --

Governor Kaine: Right.

Mr. Morales: --or will need information technology to be successful.

Governor Kaine: Mm hmm.

Mr. Morales: Could you tell us about the role IT advances play in the success of your performance management efforts? And to what extent does IT enhance or enable performance management efforts?

Governor Kaine: Well, it enhances and enables them to a high degree. And you're right. You know, one of the interesting things about a single four-year term is you're always inheriting a lot of things from your predecessor, and hopefully leaving some things to your successor.

Governor Warner did a really good job on many of these management areas, a number of them, but in particular Governor Warner realized that technology was very diffuse across state government and so you had a common feature would often be an agency that had a lot of money at year end because maybe they had saved money or had been efficient with it. Boy, year end, let's buy some technology.

And so you would have uncoordinated technology purchases occurring that might suit the particular agency but wouldn't necessarily communicate well or match with other agencies were doing. It might or might not be the best deal for that particular technology solution.

So Governor Warner decided he really needed to move toward a centralized assessment of technology to make sure that we were building a platform that was somewhat consistent. He created a Virginia Information Technology Agency, VITA, pulled a lot of the technology resources into a more central form. And then, through an innovative partnership with a private company, Northrop Grumman, by the way Virginia's largest employer, a lot of the VITA employees have now transitioned to private employment, and they are serving the state from the platform of the private sector using the innovations that the private sector can provide.

As you might imagine, this hasn't just, you know, moved completely seamlessly and easily. There's been some bumps along the way, but we feel like we're getting the advantage of kind of a private sector analysis of what the right technology solutions are, which enable us to be again more standardized and hopefully serve our citizens better.

And technology the way we look at it it's sort of -- it's three things. It's one, serving citizens better; enabling agencies within state government to work better together. And then, if you -- doing both of those things, we also feel like if we do those things, we can elevate Virginia's profile as a technology state for economic development purposes. We got some great technology companies here -- information technology, communications technology, you know, biotechnology. The higher profile we have as a technology success, the better I can be a salesman to get other technology businesses to locate in Virginia.

So we're doing it for a lot of different reasons.

Mr. Morales: That's fantastic. So you're really taking a holistic view of technology as an enabler both in terms of how you serve your citizens, in terms of how you manage your organization, and as well as a way of attracting more business to the state?

Governor Kaine: Yeah. Creating technology opportunities for our citizens. We're one of the -- we are, if not, the highest, certainly one of the highest states in the nation in terms of the percentage of employment in Virginia that is in the technology sector. That's the right bet, you know, to be making for tomorrow, and we want to continue that trend and using technology in some innovative ways in state government helps build that, you know, overall capacity.

Mr. Morales: That's fantastic. I want to go back to the Council. Could you elaborate on the purpose of the Council's results teams? How will these teams be used to drive strategic change in state government operations and in the Commonwealth's quality of life?

Governor Kaine: You know, back to the discussion about the Council, we set -- we list the goals that we think are the, you know, big picture goals that measure the state of the Commonwealth and the Council has been very key in choosing those goals, trying to summarize success on one page, basically the lead page of the Council's Virginia Performs web site. But we're also aware that just setting a goal and saying, okay, let's see how we do against the goal that might not be enough to really progress toward the goal.

So one of the things that the Council has had the idea is results teams in a few of the key indicators. So we might not put a results team together on all of them, but let's pick a few. I'm really fond of third-grade reading scores as a spectacular indicator, because it tells you something about today, but it also tells you something about tomorrow and what you're going to be experiencing down the road.

The idea of a results team would be let's pull together again public and private sector resources around a key indicator like that and say if we really wanted to -- when I began as governor, for example, 26 percent of Virginia third-graders failed our third-grade reading exam. Last year, that dropped to 17 percent, which was great. We're not sure whether that was a -- just a one-year aberration or whether it's, you know, a meaningful trend, and we'll see that this year.

But I've told my Superintendent of Public Instruction, I want you to drop that to under 10 percent by the time I leave the Governor's office, which is a huge thing to move that far.

We -- we're not going to be able to get from 26 percent to under 10 without some organized brain power around just that issue: what do you do to really drive that number? That's the idea of results teams -- pulling brain power together around the real key indicators.

We've talked about -- another one that we've talked about is recidivism and maybe particularly recidivism for juvenile offenders. We know what the rates are now. We know that if we can drop the recidivism rate now, that's probably not only a good strategy for individuals leading more satisfactory lives, but it's probably the best thing we could do for future public safety success.

So again, pulling a results team together around that challenge using public and private sector expertise that's what the results team concept is for.

Mr. Morales: So as well as driving a wide set of issues, you've chosen to dive very deeply on some core issues?

Governor Kaine: Yeah. That is --

Mr. Morales: And it sounds like some of these issues are in areas that are going to have future impact, so there's a multiplier effect to that?

Governor Kaine: Right. Yeah, that -- yeah, that would be the goal is that we can't go deep on every indicator that would tell you what success, but if we can, you know, choose a couple and really go deep on those, the ones that are really likely to have a future effect are the ones that, you know, we're most interested in.

Mr. Morales: Fantastic. Now annually, the Council submits two distinct reports. One is the Virginia Scorecard. And the second is the Virginia Report?

Governor Kaine: Right.

Mr. Morales: Could you tell us more about each of these two key reports and how do you know if you're making progress towards your longer term goals?

Governor Kaine: The Virginia Report is really the annual report of all of the Council's activities, and so it would be kind of the equivalent of the annual report of the organization itself. What did the organization do? Who was engaged, you know, on the results teams? What are the areas we're looking at? They would give the kind of narrative report of their activities for the past year.

The report card is not a report on the Council. It's a report on the state. And again, let's go back to we're not successful based on how hard we're working. We're successful based on what are the societal measures -- you know, unemployment rate. Where's it gone in the last year? Tax burden. Where's it gone in the last year? Reading scores. Where's it gone? You know, our bond rating. Where's it gone?

So the report card really looks at these, you know, external measures that really show are we moving the needle in the real world. In that sense, that report card is incredibly valuable, because, again, we see areas where we are moving the needle and we feel good about that. We also see areas where we're not or maybe we're not to the degree that we want to, and then those areas become kind of again, kind of a magnet for our attention and hopefully, you know, kind of brain power and resources.

Mr. Morales: So it lets you focus your precious few resources on areas where you know that they need more attention?

Governor Kaine: Yeah. There's a great, you know, great Thomas Edison quote: "discontent is the first sign of progress." And, you know, if something isn't bugging you, like, why this -- you know, this should be better, that's kind of where a lot of progress starts is that something -- you look at something and it's not where you think it ought to be, and then that kind of encourages you then to spend more time in that area.

Mr. Morales: Fantastic. What is the Governor's Management Scorecard and how does it foster accountability. We will ask Virginia Governor Tim Kaine to share with us when the conversation about management continues on The Business of Government Hour.


Mr. Morales: Welcome back to The Business of Government Hour on location today in Richmond, Virginia, in the Old Supreme Court Chambers in the Patrick Henry Building.

I am your host, Albert Morales, and this morning's conversation is with Virginia Governor Tim Kaine.

Governor, the Virginia legislature has adopted a state version of the Federal Government Performance and Results Act. Could you tell us a little bit about your efforts to work closely during your first year as governor with the state agencies to more clearly define goals for the Commonwealth?

Governor Kaine: Sure. When I was elected governor, I had a series of meetings with each Cabinet Secretary, and they brought all their agency heads in, and so we would actually in this very room we would sit around and we would talk about previous efforts to define goals. And at the time, there had been goal setting efforts that weren't particularly linked to budgeting, and also a weakness I thought of the goal-setting efforts was each agency had too many goals, and, you know, if you're trying to shoot at too many targets at once, it's hard to have the sustained progress for the ones that are most critical.

So I spent time with all of the agencies trying to get them to take the numerous goals and just, you know, give me what you think -- you know, no more than five and hopefully no more than three what you think are the key goals that express the core mission of your agency and what is the appropriate measure for that goal. Where are you now? Where do you want to be in three or four years?

That was enormously helpful because, you know, some agencies did that and did it very well. Some, you know, frankly would give me goals that were much more internal process goals rather than outcome goals. Some gave me goals that I would look at and think, well, gosh, I don't really think that's the core mission of your agency. I mean, I could see that you would have that as a goal, but that doesn't really -- if a citizen saw that goal, they wouldn't say well, that's the core mission of, you know, this or that agency.

So it was a very helpful kind of dialogue and a reiterative process as we kind of improved, adjusted, modified. But again, the purpose of it all is to have each agency kind of express its core mission and express it in a way where I can use it to manage and the citizens can use it to determine kind of accountability and how we're succeeding.

Mr. Morales: That's fantastic. I mean, so many times organizations have a multitude of goals that at the end of the day really don't tell you a whole lot about the organization, much less to an outside constituent who is critical about what the organization is doing.

Governor Kaine: When I got elected to the City Council of Richmond in 1994, I realized that, with some other Council members who were really smart at this stuff, who were coming in new, that there was no strategic plan.

So we started to do strategic planning, and the first few were kind of laughable because there'd be nine City Council members. They would each have 10 goals and so we'd have 90 goals in the strategic plan.

Well, we laugh at that now. What we realized over the course of time that 90 goals was no strategic plan.

By the time I finished my time in local government as mayor, you know, we would have a strategic plan over not a one-year, but a two-year cycle. It would just have, you know, three or four goals to it.

And again, focusing on the areas where we most needed improvement. And we put good people in place to try to run everything, but the areas where we most needed improvement, we would really set strategic goals, and there's been some of that same effort with our agencies.

Mr. Morales: Great. Now the Council is undertaking initiatives to promote citizen engagement. One step is to make information highly transparent --

Governor Kaine: Yeah.

Mr. Morales: --and visible.

Governor Kaine: Mm hmm.

Mr. Morales: To that end, you created a website called Virginia Performs.

Governor Kaine: Right.

Mr. Morales: Could you elaborate on your efforts to engage citizens, and what additional steps do you envision to foster more citizen participation?

Governor Kaine: This is a very critical thing, so I'll talk a minute about Virginia performs and then this effort to create civic engagement.

Virginia Performs is an effort to make all this information about are we succeeding or aren't we, where are we weak, where are we strong, what are the goals we're shooting for to make it all available to every citizen, every, you know, newspaper reporter, anybody writing a class report about, you know, performance in a public administration class on a campus, to make it all available and easy for citizens to understand.

And so the Virginia Performs website, and you can just, you know, Google Virginia Performs, and you'll find it, is a great website that puts all this information about state government in real-time right in your hands.

It divides the functions of state government into, you know, a set number of categories, six or seven. Within each category, there's a few data indicators that show what -- here's why we think this is important. Here's what this particular measure will tell us. Here's where we are right now in each measure. It shows where Virginia is against surrounding states, where Virginia is against the leading state in the nation. The data then will separate Virginia into regions to show the disparities among regions in that particular area.

And so it's a very, very powerful website in giving information about whether we're successful or not.

The website also links into all these agency goals that I mentioned. So you want to know something about a particular agency, great. You can get into that agency, see what their goals are, see how they're doing. Say you don't know what the agencies' names are, but you want to know well, are their goals dealing workforce development. You punch in workforce development, and it will pull up the different agencies that do workforce development as part of their key goal and how they're doing.

So there's a variety of ways to search for information and get answers. But it's all designed to hold out this notion of, you know, performance matters to all citizens so that they can use it and they can hold us accountable.

Mr. Morales: Great. Now what about citizen participation?

Governor Kaine: Citizen participation. We all have a feeling that the decline in citizen participation poses a real threat to being successful.

I mean, just a little illustration: my father-in-law was governor of Virginia. He was elected in 1969. And when he was elected, in that election, about 67 or 68 percent of registered voters in Virginia turned out to vote.

Now I was elected governor in 2005. By the time I was elected, about 46 percent of registered voters turned out to vote. If that continues to erode, I was giving a graduation speech recently to a high school, and I said, we will have to create a new word because there have been governments throughout time where a few people have run things without any input, but there's never been a system of government where there was near universal ability to participate, but the vast majority of people said, I can't be bothered with that, and chose not to participate.

So we'll have invented a new form of government, and I hope we don't get to that point. So we have a sense that decline in citizen involvement is a threat to democracy, you know, bluntly.

And so the idea of a Virginia Performs is one way to engage people is to let them have information so that they don't feel like the state government is this big monolithic thing, and in a bunch of big buildings down in Richmond, and not accessible to them.

If we can give them information, that will be one way to engage them. There's also an effort underway by the Council to, you know, go out into the regions, share the story about the Virginia Performs, share the story in the region about it, and you can get regional data, too, that will help your local officials make good policy decisions; and to get just was we're setting goals for the -- you know, we have a results team for these state goals that we want to hit. Well maybe in the region you ought to pick a couple of things that are really important to your region and try to, again, in a collaborative way, pull people around the table to go after improvements.

Mr. Morales: That's great. What is the Governor's Management Scorecard or the GMS? Could you describe the scorecard performance categories and the scorecard process? And how does it foster a culture of accountability?

Governor Kaine: Yeah. The Governor's Management Scorecard is another innovation that I've got to give credit to Governor Warner for, who came before me.

His sense was let's put in a fairly clear format, standard expectations of agencies on what I would call the internal procedural goals; you know, are you managing your finances well? Do you have good human resources systems? How about other, you know, internal controls?

And so these are largely internal measures of the management of an agency. These are not the external measures. Are you changing the third-grade reading scores? Are you reducing the recidivism rate? But it is, are you, you know, managing these agencies, which are funded by, you know, people's tax dollars in a smart way.

And so we assess each agency on these criteria, and use that, usually with quarterly data, to try to decide, you know, what agencies are doing well and where are the places where we need to come in and try to help.

Mr. Morales: Great. So could you tell us about your efforts to better link budget with performance? How does the introduction of the service area structure to the state budget assist you in this effort? And what are other plans being pursued to better link the state budget with government?

Governor Kaine: Well, you're asking a very timely question, because I'm working on this right now. And just -- a little bit for listeners. The Virginia governorship is a little odd on budgeting. So we do a two-year budget.

When a governor gets elected, you know, I came into office and a two-year budget had just been prepared and presented to the legislature by my predecessor.

So for my first two years in office, I'm basically dealing with a budget that was prepared by a predecessor, and I have the ability to suggest amendments, et cetera, but it's not really my budget.

Then, beginning of my third year in office, I prepare a two-year budget that is really fully mine, with my agency heads to present to the legislature. And then I prepare one more two-year budget on my way out the door and hand it to the next guy.

So I am right now working on my -- the two-year budget that I will control. And I'm trying to do that in a way that really focuses upon these performance measures and goals that I've had the agencies work on in my first year plus in office.

I've used some of the performance measures already in amending the budget that Governor Warner handed over to me. So, for example, this year, we're in year two, the second year of the biennial budget. Agencies would come in with requests for adjustments and modifications because we had some extra dollars, and I would be able to look at their requests and then look at, well, you just told me these were your main goals. Now I don't see how this request matches up with one of your main goals, so I'm not going to fund it.

Now this request, on the other hand, it does really match up with one of your main goals, and I see how it advances the cause, so I will fund that.

So we use the performance measures that the agencies and their own kind of goals to help make budgetary decisions in amendments to the biennial budget.

But now, I'm really working with agencies over the course of the summer, you know, not really kind of zero-based budgeting, but I want to see -- I don't want to just take what we've done and then try to decide how much we should add or subtract to it based on how much revenue we have. I want you to tell me how what you are doing in each programmatic area advances the goals that you told me were the most important things about your agency.

And if either they don't advance those goals, because they're kind of unrelated to the goals, or you're doing things that, you know, they might be in the same ballpark, but they're not really succeeding; we're not moving the needle the right way; then that gives us ideas about ways we could hopefully redeploy resources to areas that will move the needle more toward the long-term goals that the Council and, you know, and others are, you know, are convinced is the right way for the state to go.

Mr. Morales: Now is this helping to drive culture change within the organization?

Governor Kaine: I think -- it's starting to. I mean, I think there will not be a budget that has been as performance-driven as the budget that I will be introducing to the legislature this December.

And I think people are kind of waking up to the notion. You know, in some ways, until you really link it to budget, people wonder if you're serious or not.

Mr. Morales: Right.

Governor Kaine: And so we're serious this time, and I think people are kind of waking up to that and it's exciting.

Mr. Morales: That's fantastic. Now in recent years, government interest in internal control and enhanced disclosure has obviously grown. Could you tell us about Virginia's efforts to ensure fiscal accountability and safeguard the Commonwealth's assets?

Governor Kaine: The management scorecard that I talked about earlier is driven not completely by that, but certainly that that is one of its key functions, so in those internal yardsticks that the management scorecard looks at. The financial controls and -- of agencies are looked at very carefully.

We also have an auditor, you know, who is involved with the agencies and oversight also by the legislature looking at agencies and so there's quite a few eyes, you know, looking at what we do to try to make sure that, you know, we're not making mistakes or things aren't going awry, but certainly from an administrative management standpoint, the management scorecard really is trying to get at that issue of internal financial performance.

Mr. Morales: Now earlier we talked a little bit about societal indicators. And though it's critical to link budget to performance, have you explored leveraging agency performance to make progress against the outcomes for those societal indicators reported on the Virginia Performs website? And, if I may, using your no wrong door initiative --

Mr. Morales: --could you illustrate a direct link between societal based indicators, state agency objectives, and the service area performance measures?

Governor Kaine: Complicated question. So using that as an example, we have a department of state government, the Department of Aging, that, you know, does what it says. It's working with local-based agencies all around the state to try to make sure that we're doing right by our elderly citizens.

One of the agency goals that they have is putting programs in place that will increase the number of older Virginians who are able to live healthy, successful lives in their own homes, so not to have to go to nursing homes or assisted living facilities until really their health needs mandate that they do.

So can we help people live healthily in their own longer in life? And that obviously has huge budgetary ramifications. It has ramifications for people's happiness and life expectancy.

Mr. Morales: Sure.

Governor Kaine: And so that is a goal of a particular agency that obviously ties into a real-world kind of a success, set of success indicators.

The no wrong door initiative is an initiative to try to kind of break through a lot of the silos that exist in state government so that if somebody who's an elderly citizen or a disabled adult accesses the social services network anywhere, that they're not just going to get served in a little way, but they're going to be able to get comprehensive services. Whatever door they come into, they're going to be able to get comprehensive services.

We feel like that kind of a service model will help more people get the services they need, for example, to live healthily in their homes, which will make them happier, which will be budgetarily smart, which will -- you know, increase Virginia's quality of life.

So there's an example of how an agency's particular goal, you know, touches upon real-world phenomenon and a programmatic strategy, the no wrong door effort, which we would need to fund, can advance both the agency goal and the real-world outcome that we want to see.

Mr. Morales: Great. And it also sounds like it brings you back to this theme of collaboration.

Governor Kaine: Absolutely.

Mr. Morales: In the sense that agencies need to collaborate together to provide a very positive experience for the citizens.

Governor Kaine: Right. We, you know, we have a lot of different agencies in the social services world, you know, dealing with bits and pieces of people rather than the whole person. And so that's -- it's a whole person initiative. You're right.

Mr. Morales: It is a very complicated equation.

What about governing in the 21st century? We will ask Virginia Governor Tim Kaine to share with us when the conversation about management continues on The Business of Government Hour."


Mr. Morales: Welcome back to The Business of Government Hour on location today in Richmond, Virginia in the old Supreme Court Chambers in the Patrick Henry Building.

I am your host, Albert Morales, and this morning's conversation is with Virginia Governor Tim Kaine.

Governor, building a new performance leadership system for governing in the 21st century is not an easy task. It requires thinking beyond the traditions and habits that characterize how we work today.

Would you tell us about your efforts to improve leaders and employees with the knowledge, skills, and tools that will help them succeed tomorrow? And how do you reward agencies and individuals for performance

Governor Kaine: Well, that's a real good question, and that's something that the question of rewards for performance is something that I feel like we've just started to talk about, but we need to do a lot more work on.

You know, again, the way you make this work is you try to hire people who you think kind of get it and already are really passionate about it, and I've been fortunate to be able to convince a lot of great people to come into state government who think this way, who want to do this. And the great news is they were already an awful lot of people in state government who were doing this in their own way, willing to embrace it. That's been exciting.

I would say this: that some of the traditional human resource systems you have in public employment need to be rethought along these lines. And, you know, 16 months into the job, I really haven't started doing that yet. I think that's something that we ought to, you know, really contemplate.

When I was in local government and city council and mayor, we put in a performance budgeting system where there were individual bonus potentials for agencies that were high performers, but then there was a separate bonus pool for city employees. If the city achieved its three or four top goals, everybody received an equal share of that bonus pool.

And I really liked that strategy. I will say that the -- it was abandoned when I was no longer mayor, so somebody else didn't like it.

But trying to figure out ways to build in positive incentives, certainly awards and recognition, we're getting good at that. We don't take people for granted so much anymore, and so we do annual -- a really moving annual ceremony to recognize high performers.

But I think our human relations systems and compensation systems still need some, you know, fresh analysis to determine if it really matches up with a performance-based government.

So there's work to be done.

Mr. Morales: Sounds like a -- some challenges for the next few years?

Governor Kaine: Yeah.

Mr. Morales: So along those lines, and we talked about this earlier, the Virginia State Constitution does limit you to one four-year --

Governor Kaine: Right.

Mr. Morales: --term. So how do you hope to institutionalize some of these management reforms beyond your term as governor?

Governor Kaine: That is really a concern. You know, I hope one day Virginia will abandon and go to a two-term governor. That will not happen to affect me, and it'll happen sometime. We're the last state in the nation that does not allow a governor to run for reelection, but it might be a while.

So, right. How do you institutionalize it?

Well, one, the Council is an institutional voice for again long-term planning. That -- the Council has the governor and has legislators, but it also has business sector and other leaders -- private sector leaders who are at the table demanding that we perform.

And so the Council was maybe more needed in Virginia than other states because of the one-term governor to help us focus on the long term. That's one way to try to drive consistency and continuity.

The other way is, you know, everybody in a leadership position has the -- in any organization, has the opportunity to do some things that people will see and say, wow, that's so good. Why would we ever do it any other way?

And if what you do has merit, it will win the converts who will make sure that you don't backslide. If it doesn't have enough merit to win converts, then there might be backsliding, but if it does have enough merit to get people on board, then you won't backslide. And so that's -- you know, that's what I hope to do as governor is just do some things that are so compelling that after they're done, people would look at it and say why would we ever do it any differently?

Mr. Morales: Right. Right. Great. Well, you're clearly tackling some very, very big issues and making tremendous progress.

I'm curious. Have you borrowed some lessons from other states? And more importantly, are you providing inspiration to others?

Governor Kaine: I've certainly borrowed -- yeah, you know, being in elected leadership is, you know, plagiarism is a virtue, not a vice. And we all -- governors -- I mean I go to National Governors Association meetings. We kick around ideas all the time. You know, some of the -- some states that have -- Oregon is a state that has done some long-term planning. Washington has done some long-term planning initiatives. Utah did some long-term planning initiatives--a little bit more around a particular topic, which is land use patterns and development. But there's some applicable lessons that you can generalize to state government performance.

And so certainly a learning what others have done, and I hope. You know, I hope others looking -- look at things that Virginia does and tries to learn from it. I know, again, at NGA meetings and other meetings of governors, you know, I'll often get asked, hey, can you give me a copy of that speech you just gave or I hear about this going on in Virginia. You've done some interesting things in the private financing of transportation infrastructure. We're interested in that. Can you share?

And so we try to share as much as we can, you know. Imitation is the sincerest form of flattery, so we don't mind being flattered. And if we can give people tools that they can use to serve their citizens, and they imitate Virginia a little bit, hey, that's great.

Mr. Morales: That's fantastic. And certainly there's 49 other benchmarks out there that the folks can learn from.

Governor Kaine: Right.

Mr. Morales: Now, Governor, you've had a very successful career in public service, first as an attorney, as mayor, Lieutenant Governor, and now as Governor of Virginia. I'm curious: what advice might you give a person who perhaps is out there considering a role in public service?

Governor Kaine: Well, first, do it. The -- I think in some ways the barriers to public service are getting higher -- financial sacrifice, you know, being in the press and the press can be a little bit merciless.

Hey, we're all going to make mistakes. If you make a mistake in your own personal circle, they will give you the benefit of the doubt. If you're in public life and make a mistake, people don't usually want to give you the benefit of the doubt.

So there are a lot of reasons why it can be hard to be in public service. But it is enormously satisfying.

You know, I don't have any illusions. People have short attention spans, so a few years after I'm governor, you know, most people will look at me and they won't know I was governor. They'll think I did the weather or something.

But I can drive by things in my community that wouldn't be there if it weren't for me. You know, as mayor, I got a bunch of schools built. As governor, I've now seen a college open in a hard-hit part of the state that didn't exist before I really started pushing the idea.

I can drive around my city and around my Commonwealth for the rest of my life and see things that have my thumb print on them. That is an enormously satisfying feeling.

And so for all the, you know, reasons that make it hard to get into public life, what I would say to anybody is that you can make a mark on your community in a way that will give you a feeling of satisfaction that is very, you know, that's just very powerful.

Mr. Morales: That is fantastic. So finally, for those who perhaps do not aspire to a career in government, but are interested in becoming more engaged with their government --

Governor Kaine: Mm hmm.

Mr. Morales: what advice would you have for this group?

Governor Kaine: There's a lot of opportunities, more than you might think. I mean, again, the Council on Virginia's Future that we've been talking about, a very key role. In fact, it really wouldn't be what it is without the private sector folks who are willing to engage to participate.

As Governor of Virginia, I've already done in 16 months probably 1,700 appointments of Virginia citizens to boards and commissions -- part-time, voluntary, on economic development, education, health care, agriculture policy. We get citizens engaged all the time.

At the local level, it's the same, whether it's a library board, a PTA, running for school board. There are so many opportunities, you know, for you to engage. I mean it really is a government by, of, and for the people. I mean, it is of the people. There are opportunities for you to get in and whether you want to spend, you know, an hour a week or full time helping your government be more responsive and do the things that you think ought to be done, there's a lot of opportunities for you.

And they are also very -- some very satisfying opportunities.

Mr. Morales: So there's something out there for everyone?

Governor Kaine: There definitely is. Whatever your interest, there's going to be some area where your talent is going to be put to use in service to your community.

Mr. Morales: That's great. Governor, unfortunately, we have reached the end of our hour together.

I want to thank you for fitting us into your busy schedule, but more importantly, on behalf of The IBM Center for The Business of Government, I would like to thank you for your dedicated service to Virginia as mayor, Lieutenant Governor, and now as the 70th Governor of Virginia.

Governor Kaine: Thanks, Albert, it was really good to visit with you today.

Mr. Morales: This has been The Business of Government Hour, featuring a conversation with Virginia Governor Tim Kaine.

As you enjoy the rest of your day, please take time to remember the men and women of our armed and civil services abroad, especially our fellow Virginians, who can't hear this morning's show on how we're improving their government, but who deserve our unconditional respect and support.

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

This has been The Business of Government Hour. Be sure to join us every Saturday at 9:00 a.m. and visit us on the web at There, you can learn more about our programs and get a transcript of today's conversation.

Until next week, it's

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