The Business of Government Magazine - Fall/Winter 2011

11103 IBM BOG cov FALL 11 OUTSIDE; 5C: CMYK + PMS 201 with UV Coating

* Spine is 1/4”. Adjust width appropriately to page count.

The Business of G

overnment

About IBM Global Business ServicesWith consultants and professional staff in more than 160 countriesglobally, IBM Global Business Services is the world’s largest consulting services organization. IBM Global Business Services provides clients with business process and industry expertise, a deep understanding of technology solutions that address specific industry issues, and the ability to design, build, and run those solutions in a way that delivers bottom-line business value. For more information visit www.ibm.com.

For additional information, contact:Jonathan D. BreulExecutive DirectorIBM Center for The Business of Government600 14th Street, NW Second Floor Washington, DC 20005

(202) 551-9342e-mail: [email protected]: www.businessofgovernment.org

L I S T E N T O

THE BUSINESS OF GOVERNMENT HOURweekly conversations with government leaders

Saturdays at 9:00 am, Fridays at 2:00 pm on CBS Radio (1580 AM)*

Mondays at 11:00 am, Wednesdays at Noon, Thursdays at Noon on Federal News Radio, WFED (1500 AM)*

600 14th Street, NW Second FloorWashington, DC 20005

About the IBM Center for The Business of GovernmentThe IBM Center for The Business of Government connects public management research with practice. Since 1998, we have helped public sector executives improve the effectiveness of government with practical ideas and original thinking. We sponsor independent research by top minds in academe and the nonprofit sector, and we create opportunities for dialogue on a broad range of public management topics.

The Center is one of the ways that IBM seeks to advance knowledge on how to improve public sector effectiveness. The IBM Center focuses on the future of the operation and management of the public sector.

FA

LL

/WIN

TE

R 2

01

1

The Business of GovernmentBUSINESSOFGOVERNMENT.ORG FALL/WINTER 2011

Dr. Paul AnastasU.S. Environmental Protection Agency

Linda GibbsCity of New York

Robert HaleU.S. Department of Defense

Beth McGrathU.S. Department of Defense

David MatsudaU.S. Department of Transportation

David LebrykU.S. Department of the Treasury

Dr. Kathleen MerriganU.S. Department of Agriculture

Dr. Nick NayakU.S. Department of Homeland Security

Jonathan Woodson, M.D.U.S. Department of Defense

3 From the Executive Director

4 From the Managing Editor’s Desk

6 Conversations with LeadersA Conversation with Dr. Kathleen Merrigan

A Conversation with Jonathan Woodson, M.D.

A Conversation with Linda Gibbs

20 Profiles in LeadershipDr. Paul Anastas

David Lebryk

David Matsuda

Dr. Nick Nayak

32 InsightsShaping the Future of the National Guard

38 PerspectivesChanging the Way the U.S. Department of Defense Does Business

50 ForumLeading in an Era of Complex Challenges

66 ViewpointsManaging the Complicated vs. the Complex

The Rise and Fall of the Space Shuttle: Leadership Lessons

The Cyber Underground Economy: Unconventional Thinking for a Fundamentally Different Problem

84 ManagementA Guide to Data-Driven Performance Reviews

Virginia’s Implementation of the American Recovery and Reinvestment Act: Forging a New Intergovernmental Partnership

Use of Dashboards in Government

97 Research Abstracts

* Washington, D.C. area only

• Conversations with government executives

• Sharing management insights, advice, and best practices

• Changing the way government does business

INFORMATIVE

INSIGHTFUL

IN-DEPTH

THE BUSINESS OF GOVERNMENT HOUR

ON THE AIR Saturdays at 9:00 am, Fridays at 2:00 pm on CBS Radio (1580 AM)*


ON THE WEB Download current and archived shows: businessofgovernment.org

11103 IBM BOG cov FALL 11 INSIDE; 4/C: CMYK

Five Easy Ways to Connect

CONNECTING RESEARCH TO PRACTICE

businessofgovernment.org

Magazine Radio BlogReports


BlogRadio Books Magazine ReportsBlogRadio Books Magazine Reports

Books

BlogRadio Books Magazine ReportsBlogRadio Books Magazine Reports BlogRadio Books Magazine Reports

Fa l l / w i n t e r 2 0 1 1 iBM Center for the Business of Government 1

Table of Contents

From the Executive DirectorBy Jonathan D. Breul ................................................................................3

From the Managing Editor’s DeskBy Michael J. Keegan ................................................................................4

Conversations with Leadersa Conversation with Dr. Kathleen Merrigan Deputy Secretary, U.S. Department of agriculture ................................... 6

a Conversation with Jonathan woodson, M.D. assistant Secretary of Defense for Health affairs U.S. Department of Defense .................................................................. 10

a Conversation with linda Gibbs Deputy Mayor for Health and Human Services, City of new York .......... 15

Profiles in LeadershipBy Michael J. Keegan

Dr. Paul Anastasassistant administrator, Office of research and Development U.S. environmental Protection agency .................................................. 20

David LebrykCommissioner, Financial Management Service U.S. Department of the treasury ............................................................ 23

David Matsudaadministrator, Maritime administration U.S. Department of transportation ........................................................ 26

Dr. Nick NayakChief Procurement Officer, U.S. Department of Homeland Security ...... 29

InsightsShaping the Future of the national Guard: insights from Colonel Donald H. Dellinger, Deployment Director, national Guard Joint Continuous Process improvement initiative ................ 32

Perspectives: Changing the Way the U.S. Department of Defense Does Businessintroduction ........................................................................................... 38

robert Hale ........................................................................................... 40

Beth McGrath ........................................................................................ 45

Forum: Leading in an Era of Complex Challengesintroduction ........................................................................................... 50

Managing recovery: an insider’s View .................................................. 52

a leader’s Guide to transformation ....................................................... 59

«

«

The Business of Governmentwww.businessofgovernment.org2

ViewpointsManaging the Complicated vs. the ComplexBy John M. Kamensky .............................................................................66

the rise and Fall of the Space Shuttle: leadership lessonsBy W. Henry Lambright. .........................................................................71

the Cyber Underground economy: Unconventional thinking for a Fundamentally Different ProblemBy Gene Loughran and Frank Strickland .................................................78

Managementa Guide to Data-Driven Performance reviewsBy Harry Hatry and Elizabeth Davies .....................................................84

Virginia’s implementation of the american recovery and reinvestment act: Forging a new intergovernmental PartnershipBy Anne Khademian and Sang Choi .......................................................88

Use of Dashboards in GovernmentBy Sukumar Ganapati .............................................................................92

Research AbstractsManaging recovery: an insider’s View .................................................. 97

a leader’s Guide to transformation: Developing a Playbook for Successful Change initiatives ............................................................ 97

reverse auctioning: Saving Money and increasing transparency ........... 97

a Guide to Data-Driven Performance reviews ...................................... 98

Seven Management imperatives ............................................................ 98

Virginia’s implementation of the american recovery and reinvestment act: Forging a new intergovernmental Partnership .......... 98

assessing Public Participation in an Open Government era: a review of Federal agency Plans .......................................................... 99

implementing Sustainability in Federal agencies: an early assessment of President Obama’s executive Order 13514 ......... 99

Use of Dashboards in Government ......................................................... 99

How to Order Recent Publications ......................................................100

The Business of GovernmentA Publication of the IBM Center for The Business of Government

Jonathan D. Breul Executive Director

John M. Kamensky Senior Fellow

Daniel Chenok Senior Fellow

Frank Strickland, Jr. Senior Fellow

Michael J. Keegan Managing Editor

The Business of Government magazine and Host/Producer, The Business of Government Hour

Ruth Gordon Business and Web Manager

Gadi Ben-Yehuda Social Media Director

Shenna A. Humphrey Executive Assistant

IBM Center for The Business of Government 600 14th Street, NW, Second Floor

Washington, DC 20005

For subscription information, call (202) 551-9342. Web page: www.businessofgovernment.org. Copyright 2011 IBM Global Business Services. All rights reserved. No part of this publication may be reproduced in any form, by microfilm, xerography, or otherwise, without the written permission of the copyright owner. This publication is designed to provide accurate information about its subject matter, but is distributed with the understanding that the articles do not constitute legal, accounting, or other professional advice.

Table of Contents (continued)


From the Executive Director

Jonathan D. Breul is executive Director of the iBM Center for the Business of Government and a Partner, iBM Global Business Services. His e-mail: [email protected].

A Time for Transformational Change

the summer of 2011 was dominated by negotiations between Congress and the president concerning the federal deficit and the need to dramatically reduce spending in the decade ahead. there is little doubt that agencies across government will need to cut costs while maintaining, if not improving, the performance of their operations. the challenge thus facing government executives will be whether to use this unprecedented opportunity to transform their organizations while also making necessary spending reductions.

the impending fiscal storm will almost certainly separate those who have taken action to confront the difficult, and at times painful, realities of budgetary pressures from those who, either through denial or hubris, believe they are immune from its reach. as tough as it is to take action in advance of massive operational and personnel cost-cutting measures, few organizational realities compare with the sheer agony and consequence of an unprepared entity accepting the broadsword of efficiencies levied against it.

therefore, it is incumbent on agency leaders to not only move swiftly to identify and address any current deficiencies in the organization, but to implement the best possible proactive measures in anticipation of the unforeseen.

Developing a Playbook for Successful Changeto assist government leaders in better understanding the characteristics of successful transformations, the iBM Center recently asked Bob reisner, an expert in government transformation, to interview a select group of federal executives who have recently under-taken major transformation initiatives in their organizations. the results, featured in this issue of The Business of Government magazine, frame a series of interrelated steps which government executives should consider when they undertake any transformation initiative:

• Develop a compelling transformation game plan

• align the transformation game plan with your mission

• Center your game plan with a reliable innovation process

• transform strategically

• Design implementation to sustain transformation

transformational change is not the steady, incremental improvement most government officials have spearheaded in the past. Success in transformation depends on getting the right changes done right. a key lesson from leaders profiled here is that transforma-tion is indeed hard work, requiring intensive engagement with all stakeholders, including employees. transformation is clearly not for the faint-hearted, and in the modern networked age, it is likely to be far more consuming than any strategic challenge that has come before.

it is time for new ideas, re-thinking of old models, and the enthusiasm of new leadership to tackle old problems with fresh ideas and energy. ¥


By Michael J. Keegan

in this issue of The Business of Government magazine, we survey the intersection where leadership, complex challenges, and the need for transformation meet. whether it’s in the response to the global financial crisis, the national deficit, or the myriad of other pressing issues facing us, uncertainty seems boundless while constraints on resources are very real. it is within this context that we’ve assembled a varied group of government executives and thought leaders who are focusing on these problems and working to mitigate their effects. they offer their insights, lessons learned, and recommendations on these topics. it’s about connecting research to practice—crafting smart approaches that tame immediate demands without losing sight of the iterative nature of problem solving. this goes to the core of the Center’s mission: linking theory to practice as a way of shaping the business of government.

Forum on Leading in an Era of Complex ChallengesHistory is replete with evidence that complex or so-called wicked problems shun large, expan-sive solutions. By their very nature, these types of challenges are hard to define and have their genesis in innumerable causes whose boundaries are hard to delimit. what can be gleaned from it all is the need for smart approaches that take seriously the context of a problem and the realities of the day. Problems are rarely solved so much as they are alleviated, superseded, or transformed. as aaron wildavsky points out, “solved” is shorthand for an activity that aims at improvement. Our forum highlights two recent iBM Center reports that offer lessons on how to tackle complex challenges, as well as the role transformational leadership can play in seizing the opportunities these types of challenges present to today’s government leaders.

in the first contribution, ed DeSeve, who was a special advisor to President Obama over-seeing implementation of the american recovery and reinvestment act (arra), provides an insider’s view on managing the administration’s efforts. He identifies primary lessons learned from the implementation of arra. these lessons are creating, to quote Vice President Biden, “a new way of doing business.” the approach used to implement the recovery act—the use of managed networks—reflects some of the guiding principles for how to successfully meet future challenges when acting on big problems. DeSeve concludes his report with lessons for how public leaders can address major government-wide challenges. the second contribution to this forum focuses on transformational leadership—insights from a select group of federal executives who have recently undertaken major transformation initiatives. robert reisner, an expert in government transformation, has culled these insights in his recent iBM Center report, A Leader’s Guide to Transformation: Developing a Playbook for Successful Change Initiatives. Based on these interviews, reisner frames a series of interconnected and interac-tive steps that a government executive should consider when undertaking any transforma-tion initiative. whether it’s tackling complex public management challenges or seeking to use these challenges as an opportunity to change the way an agency operates, the five steps outlined by reisner may offer a foundation for building structures that anticipate the future and, in fact, help leaders shape it.

Perspectives on Changing the Way the U.S. Department of Defense Does Businessthe U.S. Department of Defense is one of the largest and most complex organizations in the world. to successfully achieve its mission in an era of fiscal constraint, the depart-ment has sought to reform many of its mission-support functions. this feature explores

From the Managing Editor’s Desk

Michael J. Keegan is Managing editor of The Business of Government magazine and Host/Producer of The Business of Government Hour. His e-mail: [email protected].


From the Managing Editor’s Keyboard

how DoD is changing the way it does business, from improving financial information to modernizing core business functions. we present the perspectives of two key DoD leaders directly involved in this enterprise reform: Bob Hale, under secretary and comptroller, and Beth McGrath, deputy chief management officer. Both bring an exacting combination of practical knowledge and understanding of the work to be done and the progress achieved to date. they have spearheaded a promising partnership between the CFO and DCMO communities within the department, and are collaborators as well as leaders in making the secretary’s vision a reality. in the end, it is clear that their collective focus is on enhancing the department by making it more efficient, accountable, and strategic in the use of resources, with the ultimate aim of providing the best possible support to the warfighters.

Conversations with Leaderswe feature conversations with dedicated public servant leaders, from a wide variety of disciplines, who share their extended reflections on the work they do and the efforts they lead. Dr. Kathleen Merrigan, USDa deputy secretary, discusses her department’s efforts to assist rural communities, promote the country’s agricultural production and exports, and ensure access to safe and nutritious foods. the medical mission of the U.S. Department of Defense is to enhance DoD’s and the country’s security by providing health support for a full range of military operations. Jonathan woodson, M.D., assistant secretary of Defense for Health affairs, joined me on The Business of Government Hour to discuss the Military Health System’s Quadruple aim, a healthy and fit force, and the future of military medi-cine. Over the last few years, we have focused on human service delivery. Our final conversation is with linda Gibbs, deputy mayor for health and human services for the City of new York, who outlines how the city is effectively delivering health and human services and the role technology plays in the city’s efforts.

Profiles in LeadershipOver the last six months, we’ve interviewed a variety of government executives who mani-fest the leadership and commitment needed to meet their varied missions. in this edition, we introduce you to four leaders who are changing the way government does business. Dr. Paul anastas discusses his path forward in integrating sustainability into ePa’s research and development efforts. David lebryk outlines the important and varied mission of the U.S. Department of the treasury’s Financial Management Service. David Matsuda promotes the vital role the U.S. Maritime transportation System plays in keeping our economy flowing. Dr. nick nayak offers insights into the U.S. Department of Homeland Security’s procure-ment and acquisition strategies.

ViewpointsJohn Kamensky discusses the different tools and strategies needed when managing compli-cated versus complex problems. Harry lambright outlines leadership lessons from the rise and fall of the U.S. space shuttle program. Gene loughran and Frank Strickland focus on thinking differently about cyber, and in particular, how best to respond to cyber crime and the underground economy that fuels it.

this edition closes by providing excerpts and overviews of our most recent Center reports. though all of our reports are freely available and searchable on our website, our management and abstracts features give you a preview of some of our most timely reports. if you have yet to read these reports, we encourage you to do so by going to businessofgovernment.org. we hope you enjoy what is offered in the Fall/winter 2011 issue of The Business of Government magazine. ¥


Conversations with Leaders

a Conversation with Dr. Kathleen Merrigan Deputy Secretary, U.S. Department of agriculture

First called the People’s Department by President Lincoln, the United States Department of Agriculture is a diverse and complex organization. From enhancing economic opportuni-ties for agricultural producers to protecting the nation’s food supply to improving nutrition and health, the USDA supports programs that touch the lives of most Americans every day. How does USDA assist rural communities? What does USDA do to promote the country’s agricultural production and exports? What is the Know Your Farmer, Know Your Food initiative, and how does it seek to promote access to safe and nutritious foods? Dr. Kathleen Merrigan, Deputy Secretary at the U.S. Department of Agriculture, joined me on the Business of Government Hour to explore these questions and so much more.—MJK

On Managing the USDA the USDa was created in 1862 by an act of Congress that was signed into law by abraham lincoln; it’s referred to as the “People’s Department.” it’s a wonderful place and a very large place. we have three big buildings in D.C. on the Mall, but we also have offices around the country and around the world. we manage a budget of about $145 billion. when most people think about USDa, they may think of farmers/ranchers [who are key USDa stakeholders]. Yet, what people may not realize is that nearly two-thirds of USDa’s budget is for nutrition assistance programs. we operate the nation’s food stamp program, known as the Supplemental nutrition assistance Program (SnaP). the department is also involved in the national school meals programs, so the bulk of the USDa budget goes to support of national nutrition assis-tance programs. interestingly, USDa is also the fifth-largest employer in the federal government.

Given my background and experience, i have a particular role in this administration leading efforts on building local and regional food systems. President Obama recognizes that we need to invest more in local/regional food systems. i’ve had great pleasure working on that and all the issues around childhood obesity and childhood hunger with the First lady. However, as a political appointee, i’m also very cognizant that the sands of time are running through the hourglass.

Given my previous experience as an agency administrator during the Clinton administration, i understand that you really have to set priorities. it’s quite challenging with all the things pressing upon us today. it’s important to have that laser focus and know how to manage your time to [concentrate on] your key strategic priorities.

On Working to Transform Rural America rural america has been in an economic freefall long before the rest of the national economy. USDa is the leading advocate for rural america. Secretary Vilsack, former two-term governor of iowa, was very cognizant of the problems in rural america—the infrastructure needs, the lower incomes, and [lack of] access to health care. we support rural communities and enhance quality of life for rural residents by improving their economic opportunities, community infrastructure, environ-mental health, and the sustainability of agricultural production.



For folks on the farms and the ranches, times have been tough. they work really hard, but for some time, we’ve seen a very serious migration from rural america. at this point, less than 16 percent of americans live in rural america. in fact, the average age of farmers in this country is 57. Yet, 30 percent of our farmers are age 65 and older. Farmers in their eighties are still farming because they’re not quite sure who to pass the farm on to. we’re really at a tipping point; in need of a major transition in our rural landscape if we are going to continue to feed ourselves.

we’ve identified specific strategies to make this happen. Strategy number one is to increase access to broadband in rural communities. On most farms there’s a spouse who’s working off the farm with this income being really impor-tant to keeping that enterprise going. increased broadband access in rural america would help with telemedicine, attract new business, increase local leadership development, and improve community services. we’ve really been focused on extending broadband using recovery act funding.

we’re also very focused on developing and supporting local and regional food systems as a way of creating job opportu-nities in rural america. increased economic activity in food-related sectors of the economy helps communities build and maintain prosperity. there is fervor in this country around local and regional foods–food trends that my friends in the retail food industry say they haven’t seen anything like it in their life-time. if we can help build, develop, and revitalize the critical infrastructure necessary for vibrant regional food systems, then the smaller-scale farmers could use it to deliver local foods.

there’s a lot of emphasis in this administration on green jobs and pursuing renewable energy specifically. USDa promotes rural america’s role in renewable energy produc-tion by providing leadership in the research, development, and sustainability of renewable energy and energy efficiency. we’re also very excited about recreation opportunities in our national forests and parklands. we think we can do better in terms of marshaling our natural resources to create better economic opportunities. the goal in this area is to conserve our natural resources, both public and private, while recon-necting americans to the outdoors.

Finally, we’re really focused on ecosystem markets. we need to come up with ecosystem markets where farmers and ranchers and others get a benefit from using their resources in a way that helps overall ecosystem development. we need to capitalize on opportunities to develop markets for ecosystem services that mitigate climate change. at the end of the day, it’s about fostering vitality in these rural communities.

On the Know Your Farmer, Know Your Food Initiativethe initiative is a hard thing for people to understand because it has no budget, it has no full-time staff. You can’t come to the USDa and visit the Know Your Farmer, Know Your Food office. in some ways this sort of shatters people’s typical concept of a program. i say no, it’s not a program. it’s a management initiative—a USDa-wide effort to carry out President Obama’s commitment to strengthening local and regional food systems.

i realized that rather than creating something new, what i really needed to do was look across all of USDa’s programs and appropriated accounts and ask the question: are we doing the best we can do within current mandates to facili-tate local and regional agriculture? the answer was clearly no, so the initiative is really about educating across the department and breaking down bureaucratic silos to develop common-sense solutions for communities and farmers. through this initiative, USDa integrates existing programs and policies, figuring out how to get these programs working in a more synergistic manner so to promote the critical connection between farmers and consumers.

i have a task force that meets every two weeks and part of it is educating one another about what we do. For example, we have a team subcommittee called local Meat. the committee reviews issues around slaughter capacity. a smaller farm may want to add livestock to their system, but may not have a place to bring the animals to slaughter because of capacity or distance. we’ve clarified some rules on investments and put some money on the table for mobile


slaughter units; trailers basically, that can come to your farm, are food-safety inspected, and so people can slaughter the animals in these units.

we also bring some outsiders in to talk about what’s going on in the countryside. it’s a way to cultivate healthy eating habits while educating, empowering consumers. in the end, we are seeking to demonstrate the connection between food, agriculture, community, and the environment. we have a share point on the computer where people share their expe-riences. it’s been really phenomenal and people have been very, very excited about it across the countryside.

On Strengthening the National Organic Program when i became deputy secretary, i said that it was going to be the era of enforcement in the national Organic Program. i helped write the law in 1990; it was part of the Farm Bill. it takes a while for people to understand rules, particu-larly complex rules such as those in the national Organic Program. You never want to catch people unaware, but the days of saying, “i just didn’t know,” are over. this program hasn’t gone after people in the way that i thought it should, so we really have put an emphasis on enforcement. we have actually had several legal cases in the course of this admin-istration. i think that there is a new faith in the national Organic Program.

this program’s budget is not quite $10 million, which is a small amount in the scheme of what USDa does. However, it represents a very significant increase over the years and

has made a difference. it has provided program staff more resources to enforce the rules. we also are interested in gaining equivalency with other locales. we signed our first equivalency agreement with the country of Canada. it means that our products can trade across that border without a problem because we’ve essentially recognized Canada’s standards and they recognize our standards as essentially equivalent. they may not be exactly the same, but they are sufficiently the same that we can let trade flow freely. we are working very hard to enact similar agreements with other parts of the world, particularly with the european Union.

On Increasing U.S. Agricultural Exports USDa is very involved in the national export initiative. we are looking for ways to open up markets. we’re very involved in conversations with countries over non-tariff trade barriers. we have tactics and strategies tailored towards certain countries. we do have target countries that we’re working to expand trade [with]. USDa has 98 USDa offices in 76 countries. their purpose: identify market opportunities for U.S. agriculture. we have trade missions bringing american companies to different countries to help them export their products. we look overseas to expand sales and boost incomes. exports also generate additional economic activity that ripples through the domestic economy. expanding existing market access and opening new markets under future trade agreements will significantly boost U.S. agricul-tural export sales. we’ve put ourselves on a pretty ambitious road. we’d like to get to a $150 billion export market next year in 2012.

“The People’s Department”

a new cell tower in Medicine Park, Oklahoma helps local communities in Comanche County connect to the internet.

Brian Broccoli and Colby Carrot encourage students, parents, and teachers during the launch of the Virginia no Kid Hungry campaign.

Farmers markets offer in-season, local produce to communities nationwide.

nicola Macpherson, agroforester, with her mushrooms and a lot more on her Missouri forestry farm.

amy Hicks’ organic farm participates in a local food cooperative offering a wide variety of food staples.

the average age of farmers in this country is 57. thirty percent of our farmers are age 65 and older.

USD

aU

SDa

USD

aU

SDa

USD

a


“ i realized that rather than creating something new, what i really needed to do

was look across all of USDa’s programs and appropriated accounts and ask

the question: are we doing the best we can do within current mandates to

facilitate local and regional agriculture?”

— Dr. Kathleen Merrigan

On Expanding the Use of Agroforestryagroforestry is my favorite topic. My perspective on agrofor-estry comes again from being at tufts [as a faculty member and director of the agriculture, Food and environment Program] and having students write papers on agriculture systems in other countries. what i got back was a lot of stuff about agroforestry and it was something, frankly, i was very unfamiliar with because it’s not very well practiced here in this country.

agroforestry is the intentional blending of agriculture and forestry to create integrated and sustainable land use systems which in turn can benefit landowners and communities. Basically, it’s another diversification technique a farmer can use on his operation to increase his bottom line. we do prac-tice agroforestry in this country, typically around riparian forest buffers, alley cropping, forest farming, and windbreaks.

Opportunities in things like forest farming and alley cropping have been underutilized. For example, forest farming is the cultivation of high-value specialty crops under the protec-tion of a forest canopy that provides the proper shade level. it includes crops like ginseng and shiitake mushrooms. in alley cropping, an agricultural crop is grown simultaneously with a long-term tree crop to provide annual income while the tree crop matures. Fine hardwoods, like walnut, oak, ash, and pecan, are favored species in alley cropping systems. we’re trying to promote the use of agroforestry by using the bully pulpit. i think it’s a great opportunity.

On Shaping the Future Secretary Vilsack has put two stakes in the ground. we need to have an expanded notion of this farm safety net. it’s not just about our disaster programs, our conservation programs, even our crop insurance programs, it’s about investing in rural america and making rural america a place where people want to raise families, where they want to farm, and where they want to be. this is the secretary’s vision. we’ll be talking about rural development when we get into that farm

bill debate. the second area the secretary’s talked about and i feel as strongly about is the need to increase the tools in our toolbox to bring in beginning farmers. we need to bring in a new crop of farmers and ranchers.

Yet, the capital cost is huge. Prime farmland in iowa is about $6,000 an acre. also, the average farmer requires nearly a million dollars in assets to farm. Given the increased interest in the local/regional food scene, young people seem inter-ested in reconnecting, getting their hands into the soil, and possibly pursuing a career in agriculture. to do this is incred-ibly capital-intensive. we don’t have enough tools in our toolkit to transfer land to the next generation in the way that we need [to].

we have another very interesting challenge. it’s a policy paradox, really. How do you have hunger in america—18 million children food-insecure at some point in the year—and obesity at skyrocketing rates? these phenomena stem from the same root cause: the lack of access to good, healthy food. we released the new food icon, MyPlate.gov. it replaces the food pyramid guide and is supposed to make you think about what you eat. if food trends don’t change, then one in three children born after the year 2000 are going to develop type 2 diabetes in their lifetime; we’ve got to do something. ¥

to hear The Business of Government Hour’s interview with Dr. Kathleen Merrigan, go to the Center’s website at www.businessofgovernment.org.

to download the show as a podcast on your computer or MP3 player, from the Center’s website at www.businessofgovernment.org, right click on an audio segment, select Save target as, and save the file.

to read the full transcript of The Business of Government Hour’s interview with Dr. Kathleen Merrigan, visit the Center’s website at www.businessofgovernment.org.

to learn more about the USDa, go to www.usda.gov.

The Business of Governmentwww.businessofgovernment.org1 0


The medical mission of the U.S. Department of Defense is to enhance DoD’s and the country’s security by providing health support for a full range of military operations, as well as sustaining the health of all service members and their families. DoD’s military health system works to ensure that the total military force is medically ready to deploy and that the medical force is ready to deliver health care anytime, anywhere. What is the Military Health System’s Quadruple Aim? How is DoD ensuring that it has a healthy and fit force? What does the future hold for the Military Health System? Jonathan Woodson, M.D., Assistant Secretary of Defense for Health Affairs, joined me on the Business of Government Hour to discuss these questions and so much more.—MJK

On the History of the Military Health System the Military Health System has a long and honored tradition. it really goes back to the days of the revolutionary war when provisions were made for the medical care of soldiers. it’s interesting; during the early part of the history of our country, the medical forces, if you will, were always retired at the end of the conflict, and no permanent provision was really made for a medical system until later in our history. Obviously, there was an expansion of the medical system to support the military operations. this was the first time that perhaps medical records and an evacuation system were used. there were even publications about the medical care that was delivered. we can’t really talk about a system of care until we get into world war i; then we saw an expansion of the medical system to support the large number of casualties. through world war ii, the system became refined—special-ties came about, the advancement of field labs and surgical units. with the advent of helicopter transport, we were clearing the battlefield much more efficiently; it allowed for the development of specific surgical techniques. My back-ground is as a vascular surgeon. it was during the Korean war [when] many of these techniques began. the casualties were coming from the battlefield much sooner, with cleaner wounds that were not infected, so you could do surgical repairs.

we fast-forward to today’s conflicts and 10 years of war. One of the signature advancements in the Military Health System has been the rapid evacuation of casualties within 24 to 48 hours, reuniting them with their families, getting them to definitive care centers in either Germany—landstuhl—or back here in the continental United States. we advanced not only the clearing of casualties in the battlefield, but the quality of the care given to them. Our survival rates are the highest in recorded history, the died-of-wounds rates the lowest in history. we try and bring every bit of technology and know-how to make sure that soldiers, sailors, airmen, and Marines survive when they go in harm’s way.

On the Mission of the Military Health System the Military Health System is a worldwide enterprise. we have about 140,000 folks who work within the MHS. we have a network of over 350,000 to 380,000 practitioners who provide care to our people through established integrated

a Conversation with Jonathan woodson, M.D. assistant Secretary of Defense for Health affairs U.S. Department of Defense

Fa l l / w i n t e r 2 0 1 1 iBM Center for the Business of Government 1 1


networks including hospitals, clinics, combat casualty care, research, and academics. it’s a full-service health enterprise. this year we’re looking at a budget of about $52.5 billion. we are also responsible for what we call garrison care. this is the routine care similar to that in the civilian sector. we also have the Uniformed Services University, which has a medical school, graduate nursing programs, graduate psychology programs, programs in public health, and, of course, a robust research effort. we also have a much larger medical research effort, the largest of which is the U.S. army Medical research and Material Command. we also have a series of labs around the world that do infectious disease surveillance.

as the assistant secretary of defense for health affairs, i am the principal advisor to the secretary of defense on all matters related to military health. i’m basically the chief executive officer of all of the things outlined above. i am responsible for not only setting policy, but also responsible for managing the Defense Health Program that totals $52.5 billion. we set the priorities of MHS in partnership with the uniformed military services. it’s a great partnership. the services train, man, and equip the force, and deliver the care within the direct system. we have triCare—the insurance program that provides an integrated set of networks with the civilian partners to deliver care to all of our retirees, benefi-ciaries, and members of the service.

My top challenge is to provide superior, high-quality, and safe care to wounded warriors that clearly aims to restore every service member to the highest functioning level after

injury or illness. there can be no higher mission. i see the MHS as a learning organization. as good as the statistics [are] about survival rates and died-of-wounds rates, we need to constantly improve. we always need to look at what we don’t do as well and improve. we have really got to push the envelope and establish the models for care. we have a responsibility for improving medical care. this is part of our long and honored history.

On Achieving the Quadruple Aimthe Quadruple aim refers to our strategic goals for improving the patient care experience, population health, and managing cost. all of this is wrapped around our core mission of readiness. we have to be prepared to deploy, engage, and support the troops in harm’s way in any part of the world at any time. Our job is to keep the force healthy and prepared. this comprehensive strategy assures that our system of care is aligned, balanced, and patient-centered. Clearly, the issue of readiness is very important. it’s all tied together, because if you don’t improve and maintain popula-tion health, you can’t have readiness.

On Treating Traumatic Brain Injury traumatic brain injury (tBi), the signature injury of the current wars, is a range of conditions that generally result from the ubiquitous ieD blast. it’s a range of conditions from very mild disordering of brain function that is temporary to more serious types of brain injury, such as might occur with a penetrating gunshot wound to the head. we have taken a structured approach to managing this problem from the time of the blast. we have a directive that spells out very clearly what is to happen with service members who have been

Readiness

Balance

Expe

rienc

e of C

are

Per Capita Cost

Population Health

Quadruple Aim

Get

ty im

ages



exposed to blasts. they are given an assessment almost on the spot if they’re within 50 meters of the blast. those that show signs of having a concussion go on to the next level of medical review. those who have evidence of significant concussion go to the in-theater restoration centers where they can rest and receive proper care.

Most of what we call mild tBi or MtBi will resolve on its own. a few will go on to have some chronic symptoms. we have a robust set of clinical and research programs to find out how best to manage chronic concussive syndromes. these therapeutic strategies include medicines as well as alternative therapy, acupuncture, and other types of thera-pies that have resulted in very, very good outcomes. Moving to the far end of traumatic brain injury, the severe trau-matic brain injury where there may be damage to the skull and brain from penetrating trauma, there has been remark-able improvement in both the neurosurgical approaches and the neuroscience understanding of traumatic brain injury. One such approach is inducing coma and removing the skull cap to allow the brain to swell. Using medications has produced an amazing improvement rate with serious head injury. another story that fits into that same context is Congresswoman Gifford’s story. She was actually cared for by former active duty surgeons who were battle-tested and learned these techniques. She went through some of those same procedures and, it appears, [has experienced] an amazing recovery.

with research, we are trying to identify biomarkers for trau-matic brain injury and then delivering programs that are looking at neuroprotective agents—medicines that will protect against further damage after a traumatic brain injury. i think greater society is going to benefit from what we learn.

we also have the Defense Center of excellence dedicated to the issue of advancing our knowledge and understanding of how to manage traumatic brain injury and psychological health disorders. they represent both intramural and, most importantly, extramural programs so that we can cull the best information that is around, transform it into usable knowl-edge, and then disseminate it into the field for rapid improve-ment in care. in collaboration with the U.S. Department of Veterans affairs, we really are extending this improved care [to] our veteran population as well.

On the Psychological Health of a Ready and Fit Forcethink about this. we draw into the military from the general population. Only about one in 10 individuals really are

suitable for military life, either because of their own personal preferences or prior legal issues, substance abuse issues, mental health issues, et cetera. we need to invest in strate-gies that allow more individuals to come on active duty if they so choose. what am i talking about? i’m talking about what we call building resilience in individuals. it’s the ability to give folks who may not have had proper nurturing the skills to cope with problems of life, to live through diffi-cult times. to make them understand the issue of how you nurture mind, body, and spirit relationships. Our job is not only just to take people as they are when they come in, but try and make them better. enhance them, enhance their innate coping abilities. this is part of building healthy popu-lations and it gets back to our strategic aim.

it’s about teaching coping skills. Most importantly, it’s about creating the culture and conditions where people can ask for help when they need it. we have launched the Real Warriors Campaign designed to combat the stigma associated with seeking psychological health care and to encourage service members, veterans, and their families to use the psycho-logical health resources available to them. through the campaign, we are seeking to promote resilience, recovery, and reintegration.

we’ve added 20,000 new mental health providers to our network. we have created staffing models within the Military Health System to ensure that we have adequate numbers of mental health providers. we’ve embedded mental health providers in units and deployed these providers on the battlefield to assess the condition and stresses on our force.

Soldier Mitchell raymond Comer sits quietly aboard a medical transport helicopter after his unit was hit by a makeshift bomb. any soldier who comes in contact with a blast is taken to the hospital for treatment.


“the Quadruple aim refers to our strategic goals for improving the patient

care experience, population health, and managing cost. all of this is wrapped

around our core mission of readiness.”

— Jonathan Woodson, M.D.

we’ve embedded mental health professionals in our patient centered medical homes. we have routine surveys and ques-tions we pose to service members to measure their level of stress and make sure they receive the care they need.

with the Department of Veterans affairs, we have established a robust telemental health program. Using the internet, indi-viduals can have a face-to-face counseling session. we’ve also established the TRICARE Assistance Program (triaP), a 24/7 web-based counseling program that uses audiovisual features to provide online access to behavioral health care counseling for short-term, non-medical issues. we’ve taken a broad strategy to supporting the mental health needs of the force.

On Advancing Medical Care and Research the issue is not only one of saving the servicemen and women on the battlefield, but the aim really is to ensure that we restore them to the highest functioning capability possible when injured. this means providing occupational therapy and counseling. it involves fitting certain wounded with advanced prosthetics. it means longitudinal care and researching new ways of regenerating human tissue. we’ve pursued projects exploring hand transplants, soft tissue regeneration, scar modification, new skin development, and burn therapies.

it’s about a commitment, a long-term commitment to improving the strategy for care and rehabilitation. we have counselors who prepare our wounded warriors for the next stage in their life if they choose to leave the service. Here’s an interesting statistic: one in five amputees stay on active duty. twenty-seven have returned to their combat zone. this is a testament to the medical care that is delivered, but it’s also a testament to the character of these young men and women who have signed up to serve this nation. they’re committed to building lives and continuing with their lives. they’re committed to serving.

On Managing Costs this is not a simple issue and it requires a menu of solu-tions. the factors that are increasing the costs of care in the private sector also affect us. Seventy percent of our retirees, for example, receive their care in the private sector. whatever is happening in the private sector is going to influ-ence our costs. the contributors to the increase in costs are the expanding use of technology, increased utilization of services, and increased pharmacy costs.

One way we are managing cost involves strategies that incentivize patients to move from retail pharmacy to mail-order pharmacy. this shift has many benefits. For instance, having a three-month supply of medicines delivered directly to patients via the mail reduces the potential of patients possibly missing a dosage. it also costs our beneficiaries less to get home delivery.

Medical staff listen as their commander asks for volunteers to extend their term of deployment at the hospital at Kandahar air Field in southern afghanistan.

was

hing

ton

Post

/Get

ty im

ages

Get

ty im

ages



we have to recognize that more care is not necessarily better care. we need to focus on the proper use of technology and avoid an overuse of technology. we are using clinical effec-tiveness research to drive our strategies for care, looking at best practices in clinical guidelines, looking at communi-cations strategies, so patients don’t fall through the cracks. Managing health care costs involves a complex set of issues that requires ongoing attention. it involves research and development of new strategies to reduce the cost, which includes connecting with the private sector.

we also need to have models of care that give patients access to quality health care as well as making them active participants in their own care. the patient centered medical home (PCMH) is that model. it is better for chronic disease management as it results in fewer hospitalizations for diseases [such] as diabetes and asthma, thus lowering costs. Our patients prefer it as well, with satisfaction levels higher than traditional models of delivery. we have over 65,000 individuals involved in patient centered medical homes.

On the Future Our aim is to build the best technical and professional work-force. we can produce surgeons who can cut and sew, but we want to build professionals that have the greater capacity to deliver care. i consider Uniformed Services University to

be an extremely important component of the Military Health System. it provides that academic focus that constantly reminds us to study and improve. it has contributed immensely to our improvement in care on the battlefield and in the strategies for medical developments in theaters of operation.

we always need to build toward the future. we have a robust set of scholarship programs to attract students. i’m proud to say i’m the father of a medical student who is a commissioned officer in the navy. She is looking forward to serving in the future as well. it’s those kinds of folks that we want to recruit. we also have loan repayment programs that will attract fully trained specialists into the ranks. this is a constant effort. we want to recruit the right mix of specialists, so that we’re ready to serve this nation anywhere at any time.

the fiscal environment we are in represents one of the major challenges facing us today. when resources are constrained, we have to look for ways to be very efficient and good stew-ards of public funds. we need to think seriously about how to transform ourselves into a more agile and responsive orga-nization. ten years of war have taught us, in fact, that we can operate with a relatively small medical footprint in these theaters of operation. we’ve developed strategies for clearing the battlefield very efficiently by having flying iCUs. we can leverage technology to do our jobs better. we need to transform into a medical force that is better positioned and stronger to meet whatever crises we may face in the future. it is critical that we do what we do better and constantly improve even in a fiscally constrained environment. ¥

to hear The Business of Government Hour’s interview with Jonathan woodson, M.D., go to the Center’s website at www.businessofgovern-ment.org.


to read the full transcript of The Business of Government Hour’s interview with Jonathan woodson, M.D., visit the Center’s website at www.businessofgovernment.org.

to learn more about the Military Health System, go to www.health.mil.

Get

ty im

ages



In an era of fiscal constraint marked by shrinking budgets and an increasing demand on services, government execu-tives are confronted with very difficult choices that go to the heart of effective leadership. This situation is ever more acute in the delivery of human services to those most in need. We continue to explore how local government executives are tackling these significant challenges, leveraging innovation, common sense, and technology to make a real difference. What is New York City doing to effectively deliver health and human services? How is the city using technology to be more efficient and effective in the delivery of these services? What common-sense approaches is the city pursuing to make a difference where it counts most? Linda Gibbs, Deputy Mayor for Health and Human Services for the City of New York, joined me on the Business of Government Hour to discuss these questions and so much more.—MJK

On New York City Health and Human Serviceswe provide a wide range of health and human services to a diverse and complex client population. we manage about $20 billion in services provided by nine different agencies that employ about 80,000 people: from public health that focuses on a whole range of quality of life issues to agencies like the Department of Probation that oversees individuals under court-ordered supervision. Broadly, i think agencies in the HHS portfolio provide “helping” services for the city residents. whether it’s a loss of a job or the onset of home-lessness, we have a set of safety-net services that can help people when a crisis arises.

there are the really large agencies, such as the Health and Hospitals Corporation (HHC); it’s the largest public hospital-owned organization possibly in the world, most certainly in the country. it is composed of 11 major hospitals throughout the five boroughs and dozens of community clinics. it has tens of thousands of employees and an annual budget of $7.5 billion. the vast majority of the people who receive services from our Health and Hospitals Corporation are individuals who are in public health insurance. we also serve everybody with a health need, so we’ll serve regardless of insurance

status. another example, there’s also the city’s Human resources administration—with a $6 billion budget and 20,000 employees—that manages the critical human services safety net, such as cash assistance and food stamps.

we also enroll folks in the Medicaid program while providing some really important crisis services ranging from support for victims of domestic violence and operating city shelters [to] providing adult protective services and elderly care.

On Managing New York City Health and Human Servicesinterestingly, new York City mayors have discretion on how to organize their administration. the city charter requires that a mayor have one deputy mayor, but beyond that it’s really at the mayor’s discretion. in the Bloomberg administration, there are about seven deputy mayors, with four having supervisory responsibility over city agencies.

a Conversation with linda Gibbs Deputy Mayor for Health and Human Services City of new York



i see my role as helping HHS agency commissioners to get their job done: to help them manage their organiza-tions, advance strategic decisions, pursue legislative action, assist with problem-solving, and then, of course, help bring agencies together in collaboration. this is the great aspect of having the city’s health and human services under one umbrella. we’re pulling together all of the agencies and pursuing a more holistic view. we are using resources in a collaborative way to do better problem-solving. instead of just managing a crisis, we try to tackle conditions that may have given rise to a specific crisis, so [as] to limit or break a cycle.

what a deputy mayor gets to do is to bring all interests throughout city government together, creating more holistic agendas while advancing solutions more aggressively. i think we have an obligation to anticipate problems before they happen, head them off at the pass, so that they don’t become a crisis. the worst is when you face a crisis that was avoidable.

On Community-Based Human Services Deliverythis is a theme that cuts across every human service disci-pline. Hundreds of millions of dollars [are] spent on home-less shelters, but not as much on community supports to prevent homelessness. Billions of dollars are spent in all kinds of adult nursing home care and living facilities, mental health facilities, and jails and prisons. any time an individ-ual’s needs are being addressed by removing them from the community and placing them into an institution it triples, possibly quadruples, the costs.

we spend so much money housing people in homeless shel-ters. You have to pay the rent for the facility. You have to pay the staff to supervise the facility and security to ensure safety at these shelters. it’s a costly endeavor. we know, particularly for single adults, that their homelessness has its roots in undi-agnosed, untreated substance abuse, and mental health issues.

we discovered the usefulness of supportive housing. Solving single adult homelessness is not just getting them an apart-ment. it is also about giving them support at the commu-nity level. if they have a crisis, then there’s somebody close to watch them and provide support. this is why keeping an eye on these folks before a crisis happens can get them back on the right path. it’s been wildly successful and is much cheaper. it’s what we want as people; nobody wants to live in an institution.

On the Use and Benefits of HHS Connect in the first term of the Bloomberg administration, i was the city’s commissioner of homeless services, and i had a colleague, who was then the commissioner of probation, whose office was in the same building as mine. we started working together. i was trying to reduce the number of people in shelters while he was trying to reduce the number of people in jails. we discovered that we were basically swapping populations. they would come out of jails and into shelters, out of shelters into jails. we really should combine forces and see if we could work together on reducing recidi-vism and devising housing stability strategies. it sort of grew out from there, and by the time you knew it we had 10 commissioners around the table talking about populations, individuals moving in and out of our various agencies and services. we decided to create a joint case management process. when an individual is served by more than one city agency at a time, our frontline workers will combine forces and work together to plan holistically around that client’s and/or household’s needs. we had some brilliant ideas, but initially we could not find a way in real time to let our front-line workers know about the existence of each other in a household’s life. at the time, city human services agencies had limited ability to share data due to siloed technology systems. Clients experience these silos in many ways: redun-dant forms, the required submission of duplicate paperwork, and having to stand in multiple lines in multiple offices.

we stepped back and focused on basically a technology solution. we had to find a way to get dozens of data systems to communicate. we had to both create that technology that would allow the information to be exchanged, but also build in the intelligence to recognize the common client—that the linda Gibbs in agency a is the same linda Gibbs in agency

Phoe

be Z

heng

/the

epo

ch t

imes


“ we provide a wide range of health and human services to a diverse and

complex client population. we manage about $20 billion in services provided

by nine different agencies. ”

— Linda Gibbs

B, etc. we called this project HHS Connect: it connects the data of all of our partner agencies and identifies shared clients, pulling up a full family profile of that individual. it uses innovative technologies to improve the city’s ability to serve its health and human services clients while providing better customer service and online access. it’s extraordinarily secure, sharing client information without compromising confidentiality.

individual agency workers now can enter the information about a household and see the entire city contact that that household has across agencies. they can draw on that information to facilitate applications or consideration for services for a client. Homeless services offers a great example of the benefit gained from this system. we’ve reduced the amount of time it takes to actually complete a homeless application from something like 22 hours—spread over three days in an office—down to six hours on average. it makes the client’s life so much easier. at the same time, it’s really

improving the efficiency of individual workers’ actions, and helping us to be more effective in dealing with prob-lems more quickly. we’re just on the cusp of rolling this out. the future is to now build in social networking capability, creating avenues for our frontline workers to work more collaboratively: also incorporating a joint scheduling that can help workers to be more sensitive to better managing their own and the clients’ time.

we’ll also be able to better understand good and bad client outcomes, analyzing the sequence of services and identi-fying patterns of services and behaviors that produce good outcomes.

On Strengthening New York City’s Nonprofit PartnersSocial services nonprofit organizations are very critical in delivering frontline services within new York City. [in FY 2009 new York City agencies providing social services relied on 1,300 service providers to deliver $4B of services through 3,700 contracts.] Helping these nonprofits manage through the recession has been one of the most challenging conversa-tions. we lost state and federal funding. the resulting budget cuts translated to reductions in frontline services provided by these nonprofits. at the same time, money these nonprofits depended on from charitable donations also took a hit. the nonprofits were really in distress at a time [when] we needed them to be strong. this crisis provided the impetus to focus on a practical plan to strengthen nonprofits working with the city.

we devised an exciting set of initiatives that we’ve been rolling out, focusing on improving nonprofit management. we’re really focusing on how to help nonprofits be stronger and more resilient during tough economic times. the city is a partner at the table, not simply as a funder, but as a party of interest in ensuring the strength of the nonprofit commu-nity. we created a program that partners nonprofits with busi-ness leaders in the city, who gave their private time to guide this initiative, bringing all kinds of private partners to the table. the focus of this initiative centered on strengthening

Deputy Mayor of Health and Human Services Linda Gibbs joined Mayor Michael Bloomberg at City Hall to discuss revisions to the juvenile justice system.



nonprofit leadership and management by providing tech-nical assistance and forging partnerships with successful businesses.

another critical part we didn’t have was access to information on which nonprofit was doing well and which was really in crisis. through the use of technology, we’ve developed a set of indicators for nonprofits focusing on their fiscal health, staffing, organization, and client service outcomes. Using these indicators, nonprofits can compare themselves to other nonprofits. we call this initiative the nYC Human Services Data Project (HSData). this project is also connected to an initiative we have that seeks to stream-line and reform procurement with the city.

Our third way of helping nonprofits involves streamlining the city’s procurement process to reduce burdens on these nonprofits. we needed to make it easier for them to work with the city and provide critical frontline services. we’re replacing our procurement system with a single master service agreement for every nonprofit. Our HHS accelerator is a major new initiative that will reengineer the relation-ship between us and community-based service providers by creating a centralized document management system, speeding selection, standardizing contracts, and regulating post-award actions. Basically, we’re standardizing contracting practices and reducing administrative requirements across the city’s agencies over four years. nonprofit organizations will be able to submit their qualifications in advance to register for procurement opportunities. it will reduce paper-work and time, and move to a truly electronic environment.

the great benefit of the mayor’s third term has been the time to actually do these things. i think by the time this adminis-tration is done we’re going to have a strong foundation built, which others can build upon.

On Redefining the Poverty Measure in New York City we had a very ambitious agenda to look at poverty in new ways within new York City. we have a significant social safety net, spending large sums of money helping people who are poor in order to deal with specific crises. the number of people in poverty seems just intractable. we’ve recognized that we had to shake things up. we’ve needed to think about and identify new approaches. we really needed to test our assumptions and develop a set of innovative new ideas to tackle poverty.

the current national poverty measure establishes the amount of money you need to live above the poverty line as the cost

of food times three. it was determined back in 1956 when this measure was established. Spin forward 55 years later and food is now about a seventh of what a household would need to spend in order to get by and be above that poverty line. we believe the world has just changed tremendously with two-earner households, transportation, and childcare. we established a new measure for gauging the city poverty levels, one that takes into account the cost of housing, child care and clothing, among other expenses not included in the formula used by the federal government. we thought we needed an accurate and honest measurement of poverty. we took a consensus approach developed two decades ago by the national academy of Sciences and we implemented it in new York City. the end result was rather than a poverty rate of about 19 percent we, in fact, have a poverty rate that is about 24 percent.

the federal poverty standard doesn’t accurately portray poverty within the city and that then fuels bad policy deci-sions. as a result, we don’t recognize where policy works and we’re not clear where we may need to target services. it has taught us more about the dynamics involved in under-standing poverty within the city.

On the Aging of New York City’s Population the city’s elderly population is growing. increasingly, there’s a greater share of the population 65 and older in new York City. i think in the next decade we’re going to have more new Yorkers who are older than 65 than younger than 18. this is a seismic shift in the demography of the city. we have

Jessica Frank lopez, Deputy Mayor linda Gibbs, tom nelson, edward ryan pose following the presentation of the first age Friendly City award.

Cri

stin

a V

inat

oriu



to think about the implications of such a shift. How is the aging of the city’s population going to change the expecta-tions that citizens have of their government? How is it going to change our civil society?

the Department for the aging has traditionally provided a pretty discrete set of services within the 300 senior centers that are across the city. Historically, these services centered largely on a food program—feeding the elderly. today, our senior centers are being used for much more—as centers for healthy living, social engagement, cultural engagement, and physical activity. How can we use our 300 senior centers as sort of a point of energy and activity to engage this ever-growing population?

we actually put out a call to all agencies asking them to imagine a role that their agency might take to help us plan for and anticipate this growing senior population. agencies came back with really interesting, creative ideas that i would

never have imagined. For example, for our elderly population social isolation is a huge issue. working in collaboration with the city’s Parks Department, we wanted to create opportuni-ties to draw individuals out of their apartments to safe places. through our Green Streets Program, we converted cement boulevards and little intersections into green spaces, planting trees, beautiful plants, and installing benches. it was a great opportunity to improve the visual quality of these communi-ties while also creating safe spaces for people to enjoy.

On the Future we really have to work on this integration issue among our agencies. How do we make sure that collaboration among agencies is hardwired? technology is one way, but to me it’s actually the ownership of shared initiatives. we’ve focused on a collaborative board type of leadership. we’re also starting to build shared services across our agencies, so that we have support units that do things that are not unique to a particular agency. we’re building more shared services across city agencies. we’re also investing in evaluation and knowledge-gathering, instilling in our agencies an obliga-tion to be self-reflective, curious, and innovative. it is really important to create a culture and give permission to take risks, constantly looking at the next frontier of improvement we need to work on. there is no resting on our laurels, but a constant push for improvement and building that into our organizations. ¥

to hear The Business of Government Hour’s interview with linda Gibbs, go to the Center’s website at www.businessofgovernment.org.


to read the full transcript of The Business of Government Hour’s interview with linda Gibbs, visit the Center’s website at www.businessofgovernment.org.

to learn more about the new York City government, go to www.nyc.gov.

launched in 1996, Greenstreets is a citywide program to convert paved, vacant traffic islands and medians into green spaces filled with shade trees, flowering trees, shrubs, and groundcover.


Profiles in Leadership

today’s environmental challenges appear more complex and ever more challenging. as science advances, the U.S. environmental Protection agency (ePa) continues to play an integral role in addressing these challenges. through its research and develop-ment efforts, ePa seeks to identify effective, efficient, and sustainable solutions that are science-based and designed to meet current needs while minimizing potential human health

and environmental risks. “there’s a 40-year history at ePa of deeply understanding the nature of the environmental prob-lems we face,” explains Dr. Paul anastas, assistant adminis-trator of ePa’s Office of research and Development (OrD) and ePa’s science advisor, “whether it is the contaminants in our water, the pollution in our air, or the toxicity of chemi-cals. we are the best in the world in understanding the nature of these problems.”

anastas leads the agency’s efforts in this area, overseeing a wide range of research programs from basic studies on the toxicity of chemicals to technology development for puri-fying water. OrD began with the inception of ePa, ensuring that science was at the table on every question and issue the agency addressed. “it was the recognition,” anastas admits, “that everything that we do needs to be science-based. we’re looking at how we get the right scientific foundation for all of the decisions we make and the actions we take.” He meets this critical agency mission with a budget of about $580 million and a staff of 2000.

Since taking the reins of OrD, Dr. anastas has set a path forward, providing the scientific and technological basis for

advancing ePa’s mission. “How do we use our deep knowl-edge and understanding,” posits anastas, “of the environ-mental problems we confront in order to inform and empower solutions? it is one thing to say X is bad or that we need to do things better by Y percent. it’s quite another to meet these challenges synergistically, so that we achieve environmental, economic, and societal benefits simultaneously.” Doing this also involves forging a new level of awareness. His perspective has its roots in albert einstein’s insight that “problems can’t be solved at the same level of awareness that created them.” it’s going beyond reductionist approaches that tend to define problems and solutions too narrowly. “Many times when we take a reductionist approach,” anastas says, “we wind up with unintended consequences. For example, we may find new ways to generate energy, but wind up causing various types of pollution as a result. what i’m saying is step back, look at the narrow focus we’re intending to accomplish, but also see how it interacts with the broader world—always asking: what are the consequences to human life and the environment?”

with such a perspective, anastas has sought to incorporate the goal of sustainability into his agency’s decision-making. For him this goal is OrD’s “true north.” He acknowledges that scientific and technological innovation are essential to the success of ePa’s mission, but it also needs to couple excel-lence in problem assessment with excellence in solving prob-lems. “Very seldom do the environmental challenges divide themselves neatly into an air project or a water project, so we asked ourselves: are we getting the synergisms we could be getting if we looked at things from a more systematic and systems approach? that’s really at the heart of sustainability. we reoriented and realigned the entirety of our research portfolio, defining problems in terms of sustainable systems,” explains anastas. this means that the work at ePa must not merely be to review, assess, and quantify problems; it must be to inform

Integrating Sustainability into Environmental Research and Development

Dr. Paul anastasassistant administrator, Office of research and Development

U.S. environmental Protection agency



“ Green chemistry is defined as the

design of chemical products and

processes that reduce or eliminate

the use and generation of hazardous

substances.”


the design of innovative new products, processes, and systems that incorporate sustainability as a design criterion.

For Dr. anastas, one way to do this is by pursuing research in green chemistry (also known as sustainable chemistry); a high-priority goal for his office. “Green chemistry,” says anastas, “is defined as the design of chemical products and processes that reduce or eliminate the use and generation of hazardous substances.” He has dedicated his entire profes-sional life to this scientific topic, and in fact gave it its name. “it’s a design protocol to ensure that we get all of the func-tion, performance, and capability from products without the unintended consequences of excessive waste, toxicity, and environmental risk.” Virtually every industry ranging from energy to transportation is pursuing it. Green chemistry in action has led to the development of safer solvents and substances, from paints to print toner. ePa promotes green chemistry and supports projects informing the design of chemicals throughout their life cycle.

in the meantime, tens of thousands of chemicals are currently in commerce now, with hundreds more introduced every year, but only a fraction of those chemicals have been assessed adequately for potential risk. “Computational toxi-cology,” says anastas, “is one of the many groundbreaking research efforts we are pursuing in this area.” technically, computational toxicology, or comptox, applies mathemat-ical and computer models to help assess chemical hazards and risks to human health and the environment. it is revo-lutionizing how chemicals are assessed for potential toxicity. according to Dr. anastas, it uses high throughput screening methods, meaning rapid testing of a wide range of bioassays in order to get information on thousands of chemicals much more quickly and cost-effectively. “we’re aggressively moving forward with this research. it can change the equation on how we understand the hazards certain chemicals may pose.” it is also a wonderful example of how information can be used to inform and empower the design of next-generation chemicals. “instead of just trying to assess how bad things are,” declares anastas, “we can [use this information and proactively] design them to be as [minimally] hazardous as possible.”

ePa also has the integrated risk information System (iriS), which provides information on potential human health risks from long-term exposure to over 540 chemicals present in

air, water, or on land. according to anastas, iriS assessments are critical to the agency’s programs and regulations, as they provide a scientific foundation for many of ePa’s deci-sions. “we use it to understand all the scientific information on various chemicals. it’s used in our regulatory programs, but it’s also tremendously informative to industry and the public.” Moreover, linking iriS to computational toxicology information can further advance the information available to health scientists and those who assess the risks substances may have on human health and the environment.

as ePa’s science advisor, anastas makes it a core impera-tive to promote a culture of scientific integrity within his office and throughout the agency. “we have a wonderful foundation and a long tradition of scientific integrity. First and foremost, scientific misconduct is never tolerated. But more importantly, we pursue the assurance that our science is of the highest quality and integrity.” ePa has internal and external systems in place to do exactly that. “Our Board of Scientific Counselors, Scientific advisory Board, and the extensive peer reviews we do ensure that our scientific endeavors are of the highest quality.” in the end, anastas recognizes that none of this happens without a fully engaged, qualified, and professional workforce. “the one unifying factor we all share is a passionate dedication to the agen-cy’s mission: to protect human health and the environment. the motivation stems from showing how the work we do relates directly to accomplishing that mission. the more that connection is crystalline, the better.” ¥

“Very seldom do the environmental challenges divide themselves neatly into

an air project or a water project, so we asked ourselves: are we getting the

synergisms we could be getting if we looked at things from a more systematic

and systems approach? that’s really at the heart of sustainability.”

to hear The Business of Government Hour’s interview with Dr. Paul anastas, go to the Center’s website at www.businessofgovernment.org.


to read the full transcript of The Business of Government Hour’s interview with Dr. Paul anastas, visit the Center’s website at www.businessofgovernment.org.

to learn more about ePa’s Office of research and Development, go to www.epa.gov/ord



David lebrykCommissioner, Financial Management Service

U.S. Department of the treasury


From collecting revenue to disbursing payments, the mission of the U.S. Department of the treasury’s Financial Management Service (FMS) is as varied as it is important. as the federal government’s financial manager, FMS touches millions of americans and virtually every federal agency every day. “we’re a little-known bureau of the Department of the treasury,” admits David lebryk, FMS commis-sioner, “with a huge mission and

a workforce that is dedicated to serving the public and providing critical government support and services.” in fact, three FMS programs—Payments, Collections, and Cash reporting—are part of the nation’s critical financial infra-structure and essential to government operations. the fourth responsibility for FMS is to manage the collection of delin-quent debt owed to federal and state governments. “we make payments for most of the federal agencies, totaling nearly $2.4 trillion to more than a hundred million people each year. we collect nearly $3.06 trillion each year in government revenues that fund the operations of government. we report on the financial activity of the government, managing a daily cash flow of $89 billion. Of the more than $6.17 billion we collect in delin quent debt owed to federal and state govern-ments, nearly half is for back child support to help meet the needs of america’s families and children,” explains lebryk. He executes these core functions with a budget of just over $200 million and a staff of about 1,700.

lebryk understands the gravity and importance of his organi-zation’s work. whether it’s getting a payment out on time to individuals facing natural disasters, or helping those whose payments were lost or stolen, “it may sound [like] standard

back-office activities, but when you look at our actual mission there’s significant purpose and meaning to what we do,” says lebryk. there are also serious challenges facing FMS. lebryk identifies three: budget, leading in time of change, and agency collaboration. “as [with] most everyone in government, right now the new budget environment is a serious challenge. we have already experienced annual reductions of over $25 million from our FY 2010 levels, with more reductions expected in the future,” explains lebryk.

Despite shrinking budgets, lebryk leads an FMS that continues to pursue a number of very timely strategic initia-tives, such as the all-electronic treasury, repurposing the austin Financial Center to a Debt Management Center, cutting it costs and increasing efficiencies, and migrating to shared services where possible. “there’s a significant amount of change ongoing within FMS,” lebryk acknowl-edges, “i think it’s much easier to work and manage in an environment of decreasing resources if you’re planning and forward-looking. we’ve really asked ourselves: How do we do a better job of doing what we do? this involves looking at all aspects of our business and figuring out how we become more efficient.”

lebryk recognizes that meeting these challenges head-on takes focus, discipline, and a clear strategic direction. He points out that it’s about creating and clarifying direc-tion while also aligning the organization and its resources accordingly. “we did a critical success factor exercise that convened FMS senior leaders and cross-cutting teams of people to identify those critical things that FMS needs to do well in order to be successful. we came up with five CSFs.” these critical success factors run the gamut: organizational commitment to operational excellence; effective and effi-cient use of technology; the right people with the right skills

Leading the Department of the Treasury’s Financial Management Service


“ we take stewardship at FMS and

our responsibilities to the taxpayer

very seriously, and that permeates

everything that we do.”


“ we continually look for ways to collect the nation’s revenues in the most effective

and efficient way, leveraging technologies to find creative solutions to provide

better service to agencies.”

in the right job, strong key collaborative relationships; and organizational commitment to security and protection of all FMS assets. “Once you identify them you really start to think through how we should align resources and efforts within the organization to be successful in these areas. we use them to set our strategic and tactical goals,” says lebryk.

a key strategic FMS goal is the “timely, accurate, and effi-cient disbursement of federal payments.” in terms of enhancing the security, effectiveness, and efficiency of payments, FMS pursued an “all-electronic treasury” policy converting from paper to electronic payments. “electronic Fund transfer (eFt) payments are much more cost-effec-tive,” explains lebryk. For each check that is converted to eFt, the potential per-unit cost savings to the federal govern-ment is 92 cents. along with the $120 million annual cost savings, other benefits include eliminating the risk of lost or stolen checks, the convenience of direct deposit or use of the Direct express Card, and positive environmental benefits from saving 12 million pounds of paper in the first five years alone. technology plays a critical role in this effort. FMS has sought to modernize its front and back-end it infrastruc-ture, replacing legacy applications with a single standardized application as part of its Payment application Modernization (PaM) initiative. FMS designed a centralized, web-based application service called internet Payment Platform (iPP), saving agencies substantially on vendor invoice processing costs. in fact, lebryk points out that an agency currently using iPP has reported 24–46% in cost savings.

along with payment and electronic invoicing, the paperless initiative also has implications for FMS’s collections activities. “we continually look for ways to collect the nation’s revenues in the most effective and efficient way, leveraging technologies to find creative solutions to provide better service to agencies,” says lebryk. in FY 2010, 85 percent of dollar collections were electronic. For example, beginning January 1, 2011, as part of the all electronic treasury initiative, businesses permitted to use paper Federal tax Deposit coupons were required to make those deposits electronically through treasury’s free electronic Federal tax Payment System (eFtPS), resulting in an increase in the rate of electronic collections to 96 percent and expected savings. this initiative is one of many examples, including Pay.gov, which allows individuals and businesses to make non-tax

payments to federal agencies on the internet. Pay.gov has been implemented with 160 federal agencies, collected $86.6 billion, and processed 76.4 million transactions in FY 2011.

FMS has also identified strategies to help increase the collec-tion of delinquent debt. these range from strengthening treasury’s debt collection authorities to increasing analytical capabilities. according to Commissioner lebryk, the legislative changes and initiatives outlined in the FY 2012 budget are esti-mated to increase collections by more than $5 billion annu-ally in 10 years, allowing 100% levy of payments to Medicare providers and federal contractors and permitting states to use the treasury Offset Program to collect delinquent state income tax debts from individuals who no longer reside in their state. FMS has also expanded its use of analytics to determine the return on investment (rOi) on pursuing certain debts over others, as well as in forecasting techniques to predict future call volume and delinquent debt levels. “we take stewardship and our responsibilities to the taxpayer very seriously, and that permeates everything that we do,” declares lebryk.

He understands that the success of the many FMS initia-tives rests on improving performance, implementing better processes, enhancing operations, and achieving outcomes. Doing this efficiently and effectively involves having the right people with the right skills in the right positions. “there are so many examples,” admits lebryk, “where the hard work of our people made all the difference … in my view, the dedi-cation, hard work, and professionalism of our people really [are the keys] to success.” ¥

to hear The Business of Government Hour’s interview with David lebryk, go to the Center’s website at www.businessofgovernment.org.


to read the full transcript of The Business of Government Hour’s interview with David lebryk, visit the Center’s website at www.businessofgovernment.org.

to learn more about the Financial Management Service, go to www.fms.treas.gov/index.html



David Matsudaadministrator, Maritime administration

U.S. Department of transportation


Promoting the U.S. Maritime Transportation System

the U.S. Maritime administration (MaraD) has a varied and vital mission—advancing the economic competitiveness of the United States while supporting a viable, safe, and secure U.S. merchant marine initiative for commerce, emergency response, and national security. “Unlike many of our Department of transportation agency partners, we don’t regulate. we’re a promotional agency, main-taining a strong advocacy role for

the maritime industry. we want to promote it. we want to promote jobs, U.S. businesses, and economic opportuni-ties for both workers and businesses in this key industry,” explains David Matsuda, MaraD administrator. it may be an industry that some either ignore or take for granted, but it is vital to the country’s economic and national security, contributing billion of dollars a year to the national economy while moving hundreds of billions in goods. it is also an industry that has evolved into a highly integrated transporta-tion network that leverages a vast system of U.S. waterways and ports consisting of more than 1,000 harbor chan-nels; over 20,000 miles of inland, inter-coastal, and coastal waterways; some 300 ports, and over 3000 terminals. “as a promotional agency one of our biggest challenges is getting people to understand how important maritime transportation is today. it literally keeps our country’s economy flowing,” says Matsuda. the agency he leads works closely with ship-ping, shipbuilding, port operations, vessel operations, and the various stakeholders that compose the maritime industry. He does this with an appropriated budget of $300 to $400 million and a staff of about 830. no small feat, given the crit-ical importance of this mode of transportation to the country.

Matsuda points out that waterborne transportation and the use of america’s waterways provide a cost-effective alter-native to other modes, alleviating congestion, reducing the cost of consumer goods, and most of all contributing to improving the quality of life. “the Obama administra-tion,” explains Matsuda, “is really looking at things from a twofold perspective: one is the livability of a community as supported by its transportation system, and the other focus is on how we make the entire system more sustainable.” the america’s Marine Highway program plays a significant role in making this vision a reality. in april 2011, MaraD released its report to Congress on america’s Marine Highway with transportation Secretary laHood acknowledging that it will serve as a roadmap to the future in creating and further strengthening the nation’s marine highways. as part of this effort, MaraD designated 18 Marine Highway Corridors that will support economic growth and create jobs in communi-ties across the country. it also awarded approximately $215.3 million from the transportation investment Generating economic recovery (tiGer) programs to expand marine highway projects along with other related initiatives.

MaraD also has a strong environmental stewardship focus, working with the maritime transportation industry to increase emphasis on sustainability and mitigate environmental issues. it has several programs in this area. One such is the ship disposal function of MaraD. Matsuda explains that his agency has the responsibility to dispose of ships that are no longer considered useful for defense or aid missions. “these ships can become more of a liability, environmental liability or otherwise. we are pursuing alternative disposal methods and looking for new, innovative ways to recycle them,” explains Matsuda. with the cost of scrap metal on the rise, many of these ships are being sold on the open market, and bring funds to the federal government. “the great part about


“ as a promotional agency, one

of our biggest challenges is

getting people to understand

how important maritime

transportation is today. it

literally keeps our country’s

economy flowing.”


that,” acknowledges Matsuda, “is we have authority to actu-ally use those funds. i’m sending some of that money to state maritime academies helping them offset the high fuel costs they have from operating their ships. we want to be able to help wherever we can.”

MaraD also has programs that work toward reducing port and vessel air pollution. Matsuda admits that the maritime industry needs to do some catch-up in this area. “the chal-lenge here is that when you buy a ship you’re buying an asset that’s going to last 20, 30 or more years. You can’t just keep upgrading it every few years, like a car or a truck. therefore, it is critical we have a solid standard in this area, so that companies can base their operations on it and plan for its future financing.” another significant environmental chal-lenge involves the treatment of ballast water and the problem of invasive aquatic species. when ships traveling through different aquatic ecosystems take on ballast water, they also take on many unwanted travelers: non-indigenous species. Matsuda describes the impact these species may wreak on an alien ecosystem when they are unleashed. One example of this is the zebra mussels takeover in the Great lakes. “there are new standards requiring better treatment of that ballast water to ensure no living organisms remain that could do damage.” along with stronger standards, MaraD performs testing that seeks to move treatment technologies from the laboratory to shipboard application as rapidly as possible. “we’re running three different laboratories, one on the east Coast, one on the west Coast, and one on the Great lakes, where we can test these technologies to see if they actually work. this testing can also help the regulators as they deter-mine the appropriate standard and understand what is techni-cally feasible right now.”

One of the most critical roles MaraD plays is in U.S. national security and emergency response preparedness. For defense and emergency response preparedness, MaraD maintains a commercially viable and militarily useful U.S. flagged commercial fleet. “the Maritime Security Program,” says Matsuda, “is one of the key ways in which we can ensure that sealift capability is there when the nation needs it. this program effectively accomplishes that, paying private operators a small retainer fee to ensure that they will operate under the U.S. flag when called upon. it’s much cheaper than growing the navy or even a government merchant service.

it’s one of the original public-private partnerships.” it’s such a valuable program that Matsuda is working with partners in industry, the military, and in Congress to identify the best way to extend the program for another decade or so. “it’s about making people aware of the value of the merchant mariners. For instance, on September 11, 2001, they helped evaluate a half million people in the largest sealift operation ever. they helped get people to safety as the world trade Centers were falling … our merchant mariners performed admirably on that day,” notes Matsuda.

the success of many of these initiatives involves cultivating the next generation of merchant mariners. Matsuda takes seri-ously his agency’s mandate in this area. He points out that his boss Secretary laHood has made it a department priority for the United States Merchant Marine academy (USMMa) in Kings Point, new York, to be a jewel among the federal service academies. “its key role and mission,” Matsuda explains, “is to graduate future maritime leaders. its focus is working to develop not just mariner skills, not just engi-neering skills, but also leadership skills.” as a result, MaraD is investing in the academy through capital improvements, it upgrades, academic program enhancements, and eliminating midshipman fees. “it really needs the kind of attention and support that our other national academies receive,” declares Matsuda. the future of this country’s maritime industry may depend on such a commitment. “i’ve found the people in the maritime industry are so mission-focused and dedicated that we don’t often have a problem finding good people. the challenge is keeping them and growing the next generation of merchant mariners,” admits Matsuda. ¥

“i’ve found the people in the maritime industry are so mission-focused and

dedicated that we don’t often have a problem finding good people. the challenge

is keeping them and growing the next generation of merchant mariners.”

to hear The Business of Government Hour’s interview with David Matsuda, go to the Center’s website at www.businessofgovernment.org.


to read the full transcript of The Business of Government Hour’s interview with David Matsuda, visit the Center’s website at www.businessofgovernment.org.

to learn more about U.S. Maritime administration, go to www.marad.dot.gov



Dr. nick nayakChief Procurement Officer

U.S. Department of Homeland Security


the U.S. Department of Homeland Security (DHS) has an expansive mission, and managing its resources efficiently and effectively as “One DHS” is key to successfully meeting that mission. “the DHS mission, as we all know,” notes Dr. nick nayak, DHS chief procurement officer, “is to ensure that the homeland is safe, secure, and resilient against terrorism and other potential threats and hazards.” this cannot happen without

acquiring critical and necessary services and supplies from outside the department. it also requires that the department pursue a focused acquisition and procurement strategy that aligns resources with DHS strategic objectives. the mission of Dr. nayak’s office, in conjunction with the department’s component contracting offices, is to procure those needed products and services, following sound business practices and a focused procurement strategy that ultimately gets the best deal for the department. this is no small charge, given the size and complexity of a department with a total budget of over $50 billion and 230,000 employees. “we spend nearly $20 billion a year—on the order of 46% of the DHS discretionary budget—to procure. we have roughly 18,000 long-term contracts and 98,000 contract actions that are performed by 1,400 contracting professionals within the department. My staff provides support to 500 programs that directly impact the DHS mission,” explains nayak.

Before the current period of fiscal contraction, DHS had increased its acquisition spend some 66% between 2004 and 2009, with the number of large complex acquisitions continuing to increase. it’s important to put this portfolio in proper context to understand the critical role Dr. nayak and

his office play in making the department successful. “DHS procures more services than supplies,” describes nayak. “Our top five services are guard services, research and develop-ment, it services, professional and engineering services. Our top five supplies are ships, boats, aircraft, it equipment and software, and security systems. the majority of our procure-ments are fixed-price. in fact, 64% of our contracts in FY11 (through august 2011) have been awarded as fixed-price contracts and over the last few years more than 80 percent of our procurements have been competitively awarded.”

with this understanding of the DHS portfolio, it’s also impor-tant to know the difference between acquisition and procure-ment within the department. “Very simply put,” says nayak, “procurement is a subset of acquisition. acquisition can be defined as having three parts—first is defining in require-ments what you want; the second phase involves going to industry for bids and that begins the procurement process; the last phase is once a contract is awarded—that begins the program management, contract management, and ultimately delivery of something of value.” nayak further illustrates the distinction between acquisition and procurement by explaining specific roles. the department’s chief acquisition officer, who is his immediate boss rafael Borras, DHS Under Secretary for Management, is responsible for every aspect of the acquisition life cycle that encompasses both procurement and program management. in fact, in January 2011, DHS further clarified roles by reorganizing the reporting structure of the procurement management and program management functions to provide a layered approach to acquisition over-sight. Dr. nayak leads the procurement management func-tions, while the newly established Program accountability and risk Management Office assumes the program manage-ment function. “where i oversee all contracts—the 18,000 contracts and 98,000 contract actions—this new office will

Leading DHS Procurement


“ You need to treat people, your

employees, extremely well, you need

to take care of your customers, and

ultimately you need to drive business

results. in my world that means being

able to demonstrate we’re getting a

good deal for the government.”


“if almost half of our discretionary budget is spent on contracting with industry

it’s essential that we have effective engagement.”

oversee all of the major programs, which DHS defines as those with $300 million-or-over life cycle cost,” notes nayak.

Such clarity has enabled nayak to focus on four core priori-ties: high-quality employees, contracting, program manage-ment, and industry engagement. “we need to have the right people with the right skills in place. it’s about getting and developing quality people, retaining them, keeping them excited.” to do this DHS pursues a rigorous professional career program that cross-trains interns through the acqui-sition life cycle. “we have a significant number of training courses and certifications. i think we’ll be in tremendous shape with the future acquisition workforce because of the caliber of people we are attracting,” asserts nayak. another of his core priorities involves making good business deals and effectively managing contracts. “i’ve got to find ways to enhance competition, reduce high-risk contracts, and basi-cally get a good deal for the government. Strategic sourcing is certainly a big piece of this effort.” Strategic sourcing involves understanding what the department needs across the entire enterprise and then identifying the best way to acquire that. “we have about 30 strategically sourced contracts, such as ammunition, it services, office supplies, it hardware, and administrative services,” nayak describes. “Since we began the program in 2005, we’ve saved about a billion dollars for the department. this year we plan on saving about $200 million. i think we can move that up to about $500 billion a year if we can come through with all of our strategic sourcing initiatives over the next several years.”

along with getting the best deal for the department, nayak focuses on making sure programs stay on target, deliver on time, and remain within budget. to do this he’s collaborating with DHS’s Program accountability and risk Management Office. “we’re all interested in finding a better way of managing our investments: how they come into play and are managed.” to that end, they’ve implemented an integrated investment life cycle model and a decision-support tool. the integrated investment life cycle enhances the ability of DHS leadership to better manage all facets of planning, procuring, and execution of its major programs. the decision support

tool seeks to strengthen accountability for program manage-ment as well as develop a discipline for all program invest-ments. “the goal here is to have all 500 of our programs in this decision-support tool, so that leadership can see the health of these programs in real time,” says nayak.

nayak recognizes the need to more effectively engage industry. “if almost half of our discretionary budget is spent on contracting with industry it’s essential that we have effec-tive engagement.” it’s connecting with industry, especially pre-solicitation, as a way to improve requirements. “i’m very much looking forward to going out and speaking to various industry forums so that i can get a sense of how we’re doing. it’s just constantly keeping an eye on the environment and adapting to the change,” declares nayak. Communicating with industry prior to and throughout the procurement process can enable the department to leverage existing technology, expertise, and experience to accomplish a shared goal.

“You have to pay attention to change and plan for it. it’s about focusing on employees, customers, and results. You need to treat people, your employees, extremely well, you need to take care of your customers, and ultimately you need to drive business results. in my world that means being able to demonstrate we’re getting a good deal for the govern-ment,” declares nayak. ¥

to hear The Business of Government Hour’s interview with Dr. nick nayak, go to the Center’s website at www.businessofgovernment.org.


to read the full transcript of The Business of Government Hour’s interview with Dr. nick nayak, visit the Center’s website at www.businessofgovernment.org.

to learn more about the U.S. Department of Homeland Security, go to www.dhs.gov


Insights

Shaping the Future of the national Guard: insights from Colonel Donald H. Dellinger Deployment Director, national Guard Joint Continuous Process improvement initiative

Whether the call is coming from a state governor or directly from the president of the United States, the National Guard must be always ready to respond and engage whether at home or abroad. Today, like most of the government, the Guard is hardly immune to this period of fiscal contraction and has sought to respond to the new fiscal realities by reducing waste, controlling costs and improving business processes. What is the mission of the National Guard Joint Continuous Process Improvement (CPI) initiative? How is the Guard improving its operations, becoming more efficient, and controlling cost? What is the Guard doing to promote management and orga-nizational excellence? Colonel Donald Dellinger, Deployment Director, National Guard Joint Continuous Process Improvement Initiative, shares his insights into these questions and how CPI is shaping the future of the National Guard.

Colonel, would you tell us more about the mission of the U.S. National Guard Bureau? How does your or-ganization support the overall mission of its dual state and federal force?

f__ Colonel Dellinger f__

the national Guard Bureau is responsible for the administra-tion of the national Guard of the United States, established by the U.S. Congress as a joint bureau of the Department of the army and the Department of the air Force. it holds a unique status as both a staff and operation agency. we work with the states and the adjutant generals within the states and terri-tories to assist in maintaining and developing the national Guard for the future missions and roles. today, tens of thou-sands of Guard members are serving in harm’s way in iraq and afghanistan, as the national Guard continues its historic dual mission, providing to the states units trained and equipped to protect life and property, while providing to the nation units trained, equipped, and ready to defend the U.S. interests.

Most people don’t realize the actual size of the national Guard. Currently, we are in 3,300 communities across the nation. On the army side, there are approximately 350,000 soldiers in the army national Guard, which is 32 percent of

the total army force and also 11 percent of the total army budget. On the air Force side, there are approximately 1,700 airmen in the air Guard, which is 21 percent of the total air Force personnel and six percent of the air Force budget.

Perhaps you could tell us about your role as a deploy-ment director of the National Guard Joint Continuous Process Improvement Initiative. What are your specific duties and what’s the mission of the CPI office within the Guard?


the Joint CPi office was established in 2009 by General Craig McKinley. the purpose was to assist in maintaining mission-ready forces by removing waste and non-value activ-ities. the mission of the national Guard Bureau Joint Process improvement Office is to create a culture of continuous improvement by deploying tools, training, and mentoring


Insights

to soldiers and airmen throughout the national Guard as a way to reduce waste, control costs, and improve business processes. My main duty is overseeing the entire program from cradle to grave.

Regarding your responsibilities and duties, what are some of your key challenges and what have you done to overcome them?


the top issue or challenge we’re facing right now is influ-encing top-level culture change. the young soldiers and airmen coming into the organization that are exposed to the methodology of lean Six Sigma or continuous process improvement really see the value of these tools. the real culture change involves senior leadership. they may be used to a specific way of doing business and don’t necessarily gravitate to new ways, especially when these new ways of doing things require an investment and there’s no way of really knowing how well it’s going to work. to address that, my main job is to engage these senior leaders and educate leadership on the importance of continuous process improve-ment. it is my main focus to show how lean Six Sigma can help senior leaders achieve their goals, objectives, [and] stra-tegic vision.

along with changing the culture, another major challenge is sustaining the effort. there are many complexities with how the national Guard operates. it’s a dual mission orga-nization—we have a federal and state mission. the national Guard Bureau does not have direct command and control over [state units] to direct them to implement continuous process improvement. we can only recommend CPi and provide resources for them to pursue it if they deem it

beneficial. Sustaining the CPi effort is very difficult given these operational realities along with frequent changes in leadership. it’s critical ensuring that you have a viable training pipeline of new leaders coming in, so that when the old leaders move out, new leaders move in continuing to use lean Six Sigma. we know best practices and the things that would help facilitate a successful continuous process improvement deployment, but we can only advise as we do not execute. trying to overcome obstacles involves exten-sive outreach, many personal meetings, and most of all, the building of relationships.

Colonel, it’s important to note that the term Lean Six Sigma is actually the combination of two management terms, one being Lean and the other being Six Sigma. Could you describe these different approaches? How do these two approaches complement each other and what drives the culture of continuous improvement?


People may not realize that lean Six Sigma, or more specifi-cally, continuous process improvement, has origins within the military, especially during world war ii. in the military, we don’t have a bottom line or customers as [do] private-sector companies with a focus on profit and expenses. we do have to accomplish our mission and sometimes being successful at that mission may not rest on realizing efficien-cies. with lean, these tools are used to eliminate waste in a process and by doing that you can see a huge improve-ment very quickly. i think the power of linking the two is being able to deliver what you’re supposed to be delivering all the time consistently. For the military i think that’s very important.

Continuous process improvement is an organizational frame-work, a way of thinking. People tend to focus too much on the tools while CPi is about defining and solving problems. the key here is not necessarily the tools, but making sure the tools—lean or Six Sigma, or both—are linked and informed

Definition of Lean Six Sigma

lean Six Sigma encompasses many common features of lean and Six Sigma, such as an emphasis on customer satisfaction, a culture of continuous improvement, the search for root causes, and comprehensive employee involvement. in each case, a high degree of training and education takes place, from upper management to the shop floor.


Insights

by your organizational strategy. if you take an organization, its strategy, goals, and objectives, then you assess them using metrics, you can better identify areas that need improvement. You can then bring in specific CPi tools to address these areas. i think one of the powers of lean Six Sigma and the DMaiC process is that it allows you to define the problem. Going through the llS measurement phase you collect data and information [that] enable you to confirm: 1) Did we define the problem correctly? 2) after defining the problem, is this something that we really want to invest in and tackle? is it a worthwhile endeavor? this gives leadership an oppor-tunity to make a decision without investing a lot of time.

all initiatives fail without leadership commitment. without that, you’re going to have an initiative that may start off strong but fades. the most effective way to achieve this sponsorship is to align your CPi effort to the strategic vision of the organization. leaders are going to focus on things that matter to them. when picking llS projects, make sure they have real value to the organization, so leaders don’t view CPi efforts as drains on resources. in the end, it’s more than simply improving processes; it’s about improving the organization.

What are some of the questions that one should be asked before engaging in a continuous process im-provement initiative?


are you willing to make the investment in time and commit-ment to actively sponsor and support a continuous process improvement initiative? Senior leadership is key to the

success of a process improvement initiative. Once senior leadership has chosen to implement change, lSS can provide the tools to make processes more efficient and effective. leadership needs to support the methodology and be willing to invest the time as this is not a quick fix. it’s not a silver bullet because what you’re trying to do is change culture. Changing a culture takes three to five years. when we discuss the mechanics of lean Six Sigma with leadership, it’s the change management part that’s the most difficult. if leadership isn’t bought in or there’s not a real commitment, we prefer that CPi not be implemented as the organization is not ready. it’s key that the methodology be embraced wholeheartedly. there has to be an “all in” mindset.

there are certain preconditions. we meet with senior leaders to understand their circumstances, priorities, and level of commitment. Based on our initial engagement, we then develop a plan of action. there’s nothing better than having a “proof of principle” to demonstrate what you’re trying to accomplishment. So, we highlight CPi successes and demon-strate various success stories throughout the national Guard.

Being directive in nature doesn’t necessarily always get you the results that you want. i think the path that we’re taking is the right path so that the results that we get and the activity that we get are real. what i mean by real is that people aren’t just trying to get a training target or a project target. they’re actually trying to find things that are nested within the strategy that are going to move the organization forward. i think that’s very important.

The Lean + Six Sigma Benefit = Improve Quality and Reduce Waste

together, lean and Six Sigma can be

used as complemen-tary approaches on any

process to eliminate waste and improve quality

through reduced variation in the product or service

being offered.

Six Sigma can help reduce variation, but

it alone cannot reduce waste or cycle times.

lean reduces waste, but it alone cannot reduce

variation. Variation is any systematic or random

deviation from an expected value of process performance or process

outcome.

+ =


Insights

Why did the National Guard Bureau select Lean Six Sigma as an integral part of its CPI toolkit?


when we first started down this road we had two separate programs. we had the air Force Smart Operations 21 (aFSO 21) that focused on lean while the army was doing lean Six Sigma. it became obvious that this wasn’t an efficient way of developing a continuous process improvement culture within the national Guard across our enterprise.

Under General McKinley’s leadership, we had to consolidate our efforts, establishing a joint program so we all are using the same methodology across this enterprise. the national Guard is very committed to being good stewards of the taxpayer’s dollars and to being the most efficient organization possible.

What are some of the steps that you’re taking to get the states involved in the initiative and to move towards this vision?


we had to have the buy-in at the most senior leadership level, so we developed a general officers steering committee made up of 10 adjutant generals to be an advisory board to General McKinley on the CPi initiative. General McKinley will have insight from the grassroots as well as the support of the adju-tant generals in moving forward with this methodology to make sure that the Guard is capable and ready. with declining resources and tightening budgets, it’s very important for an organization to be efficient and effective. we can’t afford not to be, especially the national Guard as we’re competing for resources with other DOD components. as efficient and effec-tive as we can be on limited resources makes us more valu-able to the country because we can provide capability at a lower cost compared to other organizations. i think that’s great value and that’s what we strive to do.

Would you outline the core values that are the founda-tion for your efforts within the National Guard Bureau and how do these values tie back to the overall mission of the Guard?


a core value in our program is a commitment to continuous improvement. in the military most people have that mindset anyway. it’s a natural tendency for leaders in the military to want to always improve and always do things to make an organization better. we’re working on short timelines. You’re

only in a job two or three years and you want to make the most of that time that you’re in the job to improve things. i think the CPi methodology enables us to get to root causes and find solutions that can keep the problem from reoccur-ring. i think that’s key. CPi also enables people to participate and problem-solve at the lowest level of the organization. You’re getting input and buy-in from the people that are actu-ally working the process. i think that is very powerful. when you have an organization where everybody feels empow-ered and has a say on how things are fixed, you get creative solutions and you get people always wanting to improve the organization. a prime example of that is we have a wing out in west Virginia that does the maintenance on C5 aircraft. it took them approximately 137 days to turn one aircraft around. now that time is down from 137 days to approxi-mately 30 days. today, the whole group meets every week from the commander down to the junior airmen to identify how to do it faster than 30 days. if you have a mindset as a leader or as a member of a team that you’re always striving to do the best, i think that leads to innovation; it leads to an organization that will continue to grow and learn.

i think the other core value is always keeping “the customer” in mind. who are you servicing? what are you trying to accomplish? For who and to what end? Keeping that focus keeps you on track and keeps you from unnecessarily wasting resources and time. Our biggest resource is time because we don’t have the same time as the active duty.

Air Force Gen. Craig McKinley, the chief of the National Guard Bureau, speaks at the 2011 National Guard Bureau Domestic Operations Workshop.

U.S

. air

For

ce p

hoto

by

tech

. Sgt

. Joh

n O

rrel

l


Insights

On Building a Successful CPI Initiative

Identify the Burning Platform

• Units must have a compelling reason for implementing process improvement.

• identifying the issue(s) causing the most “pain” for the state will provide the burning platform.

• Be able to articulate that burning platform and understand how lSS (lean Six Sigma) can address the problems.

Put Resources in Place

• Choose the right resources: employees, material, or technology, to ensure the initiative will succeed.

• ensure those resources are committed to implementing change management.

• the employees must be empowered to carry out initiatives.

Teach the MethodologyA Chinese proverb says, Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime. NGB-CPI provides the means for the states to “fish” by:

• Conducting Green Belt and Black Belt training classes throughout the fiscal year.

• assigning skilled Master Black Belts to mentor the Belts through the lifecycle of their project.

• Certifying knowledgeable, skilled Green and Black Belts to ensure the state will be able to support a self-sustaining initiative.

Prioritize Strategically Aligned Processes“The department must start setting priorities, making real trade-offs and separating appetites from real requirements,” former Secretary Gates said in reference to his announce-ment to find $100 billion in savings in the next five years.

• identify projects that are aligned to the state’s strategic plan.

• assess projects to ensure they meet the expectations of the organization’s goals.

• ensure projects will receive the focus and dedication to process improvement that they require.

Establish Ownership of the InitiativeIt must be clear who owns the initiative.

• each state, district, and territory will own its own CPi program.

• each unit, wing, section, and team will own its process improvement activities.

• with ownership comes empowerment and a sense of pride.

• empowered members are more committed, accountable, and engaged.

Take the Right MeasurementsWhat cannot be measured cannot be improved.

• Determine baseline performance criteria.

• Use the data in objective decision-making and analysis of variation and waste.

• Focus on the critical factors impacting a process.

• Scope a project narrowly enough to ensure completion; don’t boil the ocean.

Govern the Program

• Create a governance structure within the state to sustain momentum.

• Help to clear any hurdles that may slow a project, allowing the project to adhere to timelines.

• Hold regularly scheduled, productive meetings or review sessions to monitor project completion.

Recognize Contributions

• recognition of process improvement plays a valuable role in making sure team members remain satisfied in their roles.

• Builds enthusiasm for the program from a top-down and grassroots level.

• Helps drive innovation throughout the organization.

Source: CPi Shapes the Future of the national Guard by Donald H. Dellinger, National Guard Bureau: http://www.ng.mil/news/archives/2010/11/111010-CPI.aspx


Insights

we’re not on duty 365, but we still have the same mission so time is a huge resource and we can’t afford to waste it.

another core value is being receptive to new ideas. People look at lean Six Sigma and think that the methodology is very rigid and hinders creativity. i would argue just the oppo-site. the solutions represent the creativity. the methodology keeps you on track and ensures you’re solving the problem that you intended to solve and that you get the results that you intended.

i think another core value is making decisions based on data. Cultivating a culture that ensures decision-making is informed by data and not simply by experience.

Colonel, it strikes me that the successful deployment of the CPI Lean Six Sigma program is really not an end in itself. Rather, it’s an opportunity to start something new. How critical is it to manage change in order to make your efforts successful?


Change management is the real key to what we’re talking about here. the methodology is sound. it’s been proven both in industry and in the military. the real question is: how do you get leaders to buy into the methodology to be able to execute in the way it needs to be executed to receive those benefits? it’s a continuous dialogue that highlights your success stories and proof of principle. i think once you have that proof of principle, it’s hard to deny the results or the potential of what can be achieved.

the change management aspect is so important you can’t lose sight of it. there’s a tendency to focus on the training pipeline and the number of projects. in order to have a sustainable program, one that’s going to improve the organi-zation, you need to have that senior sponsorship and buy-in. the continuous beating of the drum of how important it is and how it’s going to help the organization, then communi-cating those successes, picking the right people, picking the right projects, so people see value is very important and is very critical not only to the sustainment, but is also the best advertisement for the program. i think adding value is the most important thing, and how quickly you do that. without change management, you have a problem-solving method-ology that may benefit a little bit of the organization, but it’s not going to have the power or really improve the organiza-tion to the extent to which it can.

Would you tell us about some of the current barriers you’re facing, and what are you doing to break down some of these barriers?


i think one of our biggest barriers is also one of our greatest strengths as the national Guard. it is how we’re organized and structured. the problem is that when you want to get things done in a large organization it takes a lot of relation-ship-building as we don’t have command and control with the state units. it just means you have to work a lot and build those relationships and trust. i think the other piece is getting buy-in, true buy-in. i think when you see that happen it’s amazing to see how much you can get done and how quickly you can get it done. i think organization and buy-in are really the key things that we have to work on within the national Guard. i’m happy to say that in the second year, we’ve trained over 384 practitioners. we have completed some 68 projects with about $32 million worth of benefit to the national Guard. we have another 236 active projects that are being worked on now. Some may say $32 million in a budget of billions isn’t that great. i think a program starting from nothing and realizing $32 million is a huge achieve-ment. right now, we have 35 states that are currently imple-menting continuous process improvement.

time and personnel are two of our greatest resources chal-lenges. any time that you’re able to give back time to the soldier or reallocating resources to a higher priority, i think this is very beneficial to any leader or organization. i think everybody in their lifetime wants to say when it’s all said and done that you’ve added value or you did something that you can be proud of. i think being a public servant is something that you can be very proud of at the end of the day. ¥

to hear The Business of Government Hour’s interview with Colonel Dellinger, go to the Center’s website at www.businessofgovernment.org.


to read the full transcript of The Business of Government Hour’s interview with Colonel Dellinger, visit the Center’s website at www.businessofgovernment.org.

to learn more about the national Guard Bureau, go to www.ng.mil/default.aspx


Perspectives: Changing the Way the U.S. Department of Defense Does Business

Introduction: Changing the Way the U.S. Department of Defense Does Businessthe U.S. Department of Defense is one of the largest and most complex organizations in the world, managing a budget more than twice that of the world’s largest corporation and overseeing millions of personnel operating worldwide. to manage this very large and complex organization, DoD has developed and maintained some 4,150 different busi-ness processes and systems. Given the size and complexity of the department’s finances

and operations along with the rapid pace of change, engagement in major mili-tary campaigns, and worldwide economic uncertainty, it is imperative that DoD create more agile, responsive, and efficient operations. to this end, DoD continues to pursue enterprise business transformation efforts. as Secretary Panetta1 noted in September 2011 Congressional testimony, the challenge of the defense budget relates to everything DoD does to fulfill its critically vital mission—protecting the U.S. and advancing U.S. national security interests.

to successfully achieve its mission in an era of fiscal constraint, the department has sought to reform many of its mission support functions, including core busi-ness processes and enterprise business systems, and to recast how it does busi-ness with the ultimate goal: to better support the urgent needs of the warfighter while ensuring taxpayer dollars are spent responsibly. Doing this will provide the best support and services for troops in the field and their families at home, and will enable the department to be a responsible steward of the nation’s resources.

Strengthening mission support perfor-mance through transforming business operations, while also ensuring account-ability across the enterprise, continues to frame much of the DoD’s efforts. DoD leadership needs access to timely, rele-vant, and reliable financial and cost information to make informed decisions and ensure that resources are properly aligned to mission. improving financial information for fact-based, actionable management decisions is a key strategic priority for the department, and rests on improving the operation and audit-ability of DoD financial activities. another closely related strategic priority involves the transformation of DoD’s business operations, forging an enterprise approach that realizes

1 Secretary of Defense Leon E. Panetta, Testimony before the Senate Armed Services Committee. September 22, 2011.

“ we must continue to

tackle wasteful and

duplicative spending

and overhead staffing.

we must be accountable

to the american people

for what we spend, where

we spend it, and with

what result.”

—leon Panetta Secretary of Defense

Get

ty im

ages

nor

th a

mer

ica


efficiencies, eliminates duplication, and provides business operations that are adaptable, responsive, and supportive of the department’s core mission. How is DoD improving its business operations and systems? what is DoD doing to modernize processes to become more efficient and control costs? How is DoD improving financial information and audit readiness?

tackling these enterprise challenges, such as improving financial information, modernizing business systems and operations, and achieving audit readiness, requires a focused approach and solid oversight. it also involves fostering a more integrated way of thinking about management within the department. to that end, DoD has put in place a solid governance structure led by the deputy secretary, who is responsible for department-wide business operations and management issues, but who, in many of these efforts, is also supported directly by the depart-ment’s comptroller and deputy chief management officer (DCMO), respectively.

in the following pieces, we explore many of these questions, offering critical insights into how DoD is changing the way it does busi-ness. to do this, we present the perspectives of two key DoD leaders directly involved in the enterprise reform: Bob Hale, Under Secretary of Defense and Comptroller, and Beth McGrath, Deputy Chief Management Officer. Both bring an exacting combination of practical knowledge and understanding of the work to be done and the progress achieved to date. they have spearheaded a promising partnership between the CFO and DCMO communities within the depart-ment and are collaborators as well as leaders in making the secretary’s vision a reality. in the end, it is clear that their collective focus is on enhancing the department by making it more efficient, accountable, and strategic in the use of mission support resources with the ultimate aim: providing the best possible support to the warfighters.

“ i’m determined to

make these decisions

strategically, looking

at the needs that our

Defense Department has

to face not just now, but

in the future, so that we

can maintain the most

dominant military in

the world, a force that

is agile, ready, capable,

and adaptable.”

—leon Panetta Secretary of Defense



Perspectives From robert Hale Under Secretary of Defense and Comptroller U.S. Department of Defense

At the time of his nomination by President Barack Obama in January 2009, Robert Hale was Executive Director of the American Society of Military Comptrollers (ASMC), the professional association of Defense financial managers. From 1994 to 2001, Mr. Hale served in the Pentagon as the Assistant Secretary of the Air Force (Financial Management and Comptroller), where he was responsible for annual budgets of more than $70 billion, efforts to streamline Air Force financial management, and compliance with the Chief Financial Officers Act. For the 12 years prior to his Air Force service, Mr. Hale headed the National Security Division at the Congressional Budget Office (CBO), devel-oping quantitative analyses of major defense budget issues and testifying frequently before Congressional committees. Mr. Hale graduated with honors from Stanford University with a BS in mathematics and statistics. He also holds a master’s degree in operations research from Stanford and an MBA from George Washington University. He is a Certified Defense Financial Manager (CDFM), a fellow of the National Academy of Public Administration, and a past member of the Defense Business Board.

We had an opportunity to gain Under Secretary Hale’s perspective when he joined me as a guest on the Business of Government Hour. The following is an excerpt of our conver-sation on a variety of topics related to how DoD is changing the way it does business.

Principal Financial Advisor to the Secretary of Defensei am the principal financial advisor to the Secretary of Defense leon Panetta on all budgetary and fiscal matters, including the development and execution of the Defense Department’s annual budget. i am also the DoD’s chief finan-cial officer, managing the department’s financial policy, financial management systems, and business modernization efforts. For us to be successful, defense financial managers must achieve three broad goals: acquire the resources neces-sary to meet national security objectives; ensure the legal,

effective, and efficient use of those resources; and maintain a capable financial management workforce.

this year, we will execute about $688 billion worth of budget authority to maintain our national security. we obli-gate $2 billion to $3 billion a day on average. it’s a very sizable amount. the Department of Defense is in many ways more like a country. Our budget is about equal to the gross domestic product of the netherlands. in terms of specific things that i do, i spend much of my time formu-lating budgets, as it is key to identifying and putting together our priorities. we also put them together in a way that convinces the Congress and the public that we both



need the resources and will spend them appropriately to maintain national security.

i also have a responsibility to make sure that we execute the budget in a manner that’s legal. there are 8,000 pages in the DoD financial management regulations. it’s effective—we meet the needs of our warfighters. and, finally, it’s efficient—for the sake of the taxpayers and … particularly in these days, efficiency is very much on our minds. all of those are part and parcel of my day-to-day responsibilities.

the great majority of financial managers in the Department of Defense work for our commanders and managers in the field. there are about 68,000 people in the defense finan-cial management community. roughly 58,000 of them are civilian employees. the other 10,000 are military. i’m going to guess 90 percent or more work for our commanders and managers. that’s how it should be. they are the people out there actually doing the day-to-day tasks. they’re the ones that need the advice and counsel to make sure that things are legal, effective, and efficient. a small percentage works in offices like mine that provide oversight. i think, basically, it’s structured properly.

Challenges Facing DoD’s Comptroller Certainly, a key challenge is to make sure that we acquire the resources needed to meet our national security objec-tives. this is extremely difficult when we are dealing with an economic crisis that has led to strong downward pressure on all federal spending, including defense spending, as a way to reduce the deficit. at the same time, it’s a dangerous world. we’re still in a shooting war in afghanistan. we are completing the military mission in iraq. we’ve been supporting a natO mission in libya. i think a key challenge is striking that right balance—getting the resources we need, but also understanding that we need to make every dollar count in order to hold down the deficit. Once we get the resources, we need to execute them in a manner that’s effec-tive. we do that pretty well.

a bigger challenge is how well we document the way we’ve spent the money and presenting that information to the public. in particular, we are one of the two federal agencies that have never had a clean audit opinion on its financial statements. we need to change it. we are working on that issue, but it is definitely a challenge. the last one i’ll mention is championing a strong financial management workforce. we need to have those 68,000 people well-trained. we need to provide a better framework for that training. i’m in the process of putting in place a course-based certification

program for defense financial managers. in summary, my three top challenges are managing the budget, pursuing financial auditability, and maintaining a strong workforce.

Financial Improvement and Audit Readiness Strategy the Department of Defense has reasonable controls over its budgets. there are some of our critics who assert the contrary. i think they’re wrong. as evidence of that, i’d quickly note that we have 3,000 auditors who are watching our programs and financials. we are compliant with key federal financial legislation. we do need to achieve auditable financial state-ments for a variety of reasons. it’ll help us clean up some imperfections in our business processes. Most importantly, having auditable financial statements will reassure the public that the department is a steward of the public trust.

i’ll tell you a quick story. it was early in my tenure as comp-troller of the U.S. air Force. i was trying to explain to my wife auditable financial statements. She’s not an accountant. i started talking and she stopped me and she said, “well, Bob, if you don’t have auditable financial statements, how do you know they’re not stealing from you?” i started to explain that audited financial statements aren’t designed to detect fraud, really. i just stopped and realized we’ll never convince the public we are good stewards of their funds without doing it. it’s that important.

when i came into this job, there had been progress made, no question. i quickly realized, though, the department wasn’t heading in a single direction. Services were doing different things. Some were doing more, some less. there



was little common purpose, so we formulated a focused approach. we identified the highest priorities for improving financial information and achieving audit readiness. these priorities specifically focused on the kinds of information we used most to manage. For us, that’s budgetary information because we manage the department based on budgets.

the second priority is mission-critical asset information, which is very important to warfighters. auditors call it exis-tence and completeness. we have focused our attention on trying to improve information for those categories and move toward audit readiness. at the same time, we also formu-lated a cost-effective approach for the rest of the audit. Our Fiar strategy organizes activities into five distinct “waves” representing significant levels of effort and accomplishments. wave 1, wave 2, and wave 3 are being worked concur-rently and are consistent with the initial Fiar priorities. wave 1 focuses on the processes and controls associated with the appropriation and distribution of funds from the Congress to the department. wave 2 includes several end-to-end processes that are separated into assessable units, each of which must be audit-ready before the Statement of Budgetary resources (SBr) can be audited. wave 3, as noted earlier, focuses primarily on the existence and completeness asser-tions, which moves the department closer to achieving its long-standing goal of total asset visibility.

there are other things we need to do to have full auditability, but the items noted above are absolutely critical. there are benefits to pursuing this focused approach. it holds down the cost, because you’re focusing your efforts and setting priori-ties. it has also brought the department together as every-body accepts we need budgetary information. there is more

support for this focused approach than there was for some of the others that we have pursued in the past. it is the right way to approach the problem. it’s not a panacea. there’s still a lot of hard work to go, but i think we have the right focus.

Challenges and Obstacles to Improving Financial Information and Audit Readinessthe size and the geographical dispersion of the DoD and its operations represent a major challenge to achieving full auditability. this brings me to two other major challenges or impediments we face. First, our financial systems are old. Some of them date back to the 70s and 80s. these legacy systems aren’t designed to do what auditors expect. they’re designed to track budgets. they are not designed to accom-modate audits. i’ll give you one fairly simple example. an auditor wants to see an invoice, a receiving report, or a contract that matches the invoice. we have that information, but it’s not automatically available. when an auditor pulls a sample of thousands of payments spread all around the world, we have to go chase down the paper. it’s a task that you can’t do quickly, and it’s very expensive. Our financial systems will automate all the necessary information.

Our business processes are variable across our command—sometimes from base to base. these processes may be effec-tive, but, in some cases, they are simply not something an auditor would accept. i’ll give you two examples. in one audit we discovered names weren’t being deleted from the access list in the financial systems. the auditors were rightly concerned, but it was easy to fix. in another instance, we do what’s called bulk obligations of military personnel dollars. we manage military personnel dollars centrally because we manage military personnel centrally. all we have are these bulk obligations. the auditors wanted to see more detail. this is a much harder fix, but we’re going to have to change this business practice in order to move toward auditability. there are some major challenges we’ve got to overcome, but we are on our way. it’s going to be a lengthy journey.

Modernizing Financial Systems—Enterprise Resource Planning Systemswe are installing enterprise resource planning systems (erPs) in three of four armed services. the Marine Corps isn’t pres-ently implementing such a system. we are also installing enterprise resource planning systems in most of the defense agencies. implementing a new it system is a challenge. there are the technical challenges, which tend to be rela-tively easier to overcome, especially after you’ve done it a few times. i think the hard task is always change manage-ment. You install a new erP in a commander base. You’re

FIAR

Plan

Enterprise

Transition Plan

Best Business Practices

Program Management

DoD’s FIAR Strategy



asking somebody who perhaps has spent 20 years doing financial management a certain way to do it in a different way. there is inevitably frustration experienced and retraining required.

i had a chance to visit some of the sites that are installing new erPs. You could see the frustration on faces and hear it in the voices of the people who are being asked to change. we’ve got to ask them to do it, but it’s not easy. it’s also not something that you do at one base and you’re finished and you can export it easily to the next base. Change manage-ment is a major challenge with these erPs, but we are making progress.

the navy is farthest ahead … about half of the navy is on their new navy erP unit. the army is moving out smartly and hopes within a couple of years to have their new system deployed throughout the army. the air Force is getting started at one major base and moving out from there picking up the pace. we have several agencies including one major defense agency on their new erP. it will be a number of additional years and some sizable additional expense before we finish this major modernization effort.

Cutting Costs and Realizing Savings we began then-Secretary Gates’ reform agenda with the FY2010 budget. Under the leadership of former Secretary Gates, we looked at systems that were either poorly performing or where, frankly, we had bought enough to meet our inventory needs. For example, we ended procurement of the F-22 aircraft and that of the C-17 transport aircraft. we terminated some poorly performing systems. we had the VH-71 presidential helicopter that was heading toward being a half a billion dollars per helicopter. we terminated that program. we terminated programs that were too narrowly

focused or beyond what we needed. there were some 20, mainly weapons, programs that were terminated or restruc-tured in fundamental ways in the FY10 and FY11 budgets.

with the FY12 budget we submitted last February, our focus was now on DoD business operations. we looked hard at whether we could just pursue better business practices. For example, we have literally thousands of data centers in the Department of Defense. we can achieve substantial effi-ciencies by consolidating data centers. this may also lead to potential, substantial savings. we need to restructure our organizations in ways that save money. the department dis established the joint forces command (JFCOM) that was set up about a decade ago. the rationale is that the joint forces could be sustained without a separate command devoted mostly to that task. it saved DoD about $400 million a year by closing JFCOM. there are a number of other reor-ganizations that are either underway or will get started. we did continue system terminations, for instance, the Marine Corps’ expeditionary fighting vehicle and the army’s SlaMraaM [Surface launched (Sl) and advanced Medium range air-to-air Missile (aMraaM)] ground-to-air missile. Finally, we did some streamlining. looking at lower priority tasks and acknowledging we’ll have to do with a little less. there were hundreds of examples, but i think those are illus-trative of the changes that we made to try to achieve some substantial savings.

Slowing the Cost of Medical Care Our goal is to continue high-quality care to our active duty personnel, their dependents, military retirees, and their survi-vors, but to do it while slowing the growth in costs. we will not reverse that growth, so our goal is to slow it. For the last several years, we have pursued a number of efficiency efforts in an effort to slow the growth in medical care costs. For

©iS

tock

phot

o.co

m/ J

ohnr

ob



example, we were able to achieve legislative authority to use the same drug pricing schedule used by the U.S. Department of Veterans affairs, which will save us nearly half a billion dollars a year. we are now using Medicare prospective payment rates for many of our outpatient activities, which also achieves substantial savings.

we need to make some changes in what we charge our beneficiaries for health care, particularly our retirees. i’ll pick just one example. there’s a system called triCare Prime. it’s a health maintenance organization that’s used by many working-age military retirees—working age being defined as under age 65. they pay, right now, $460 a year as an enrollment fee for this coverage. Just by way of compar-ison, i have a federal employees program that is generally similar to triCare Prime, and i think my fee is about $4000 a year. we’ve asked Congress to allow us to increase these fees modestly from $460 a year to $520 a year, and then, to index the fees to a medical care index so that they keep pace with growth in the cost in the private sector.

Congress seems to view the concept as generally favor-able, but it did limit some of the indexing to the cost-of-living allowance. we have a number of other programs. For example, we have made changes to the pharmacy co-pays design to incentivize the use of generic drugs as well as the mail-order pharmacy, where medically appropriate. Both actions will save us a fair amount of money. these are a few examples of the proposals we are pursuing that are working their way through the legislative process.

Building an Effective Financial Management WorkforceOne of my three main strategic goals is to champion an effec-tive financial management workforce. First, i think this work-force that’s out there now is generally well-trained. we have many courses. we did a small thing early in my tenure here. we created a searchable website that cataloged all the profes-sional development courses available to financial managers through the U.S. government. we are also embarking on the establishment of a course-based certification program

for Defense financial managers. i want to formalize more of our training. i also want to focus more training on strength-ening our analytic orientation. we are still pretty heavily oriented toward reporting. we need that, but we’ve installed new financial systems that make it easier to produce reports. there’ll be more time to focus on the analytic side of our business, so i’m hoping to use this course-based certification to move toward strengthening our analytic capabilities.

Our people are key and we’re trying to take some steps to provide meaningful improvements in these areas. i want to go back to fundamentals. i think the biggest thing will be to maintain, develop, and motivate a workforce that can get this job done. i think it’s probably the most important way in which we can accommodate the future.

i find the work we do very satisfying. it’s technically satis-fying, at least in the Department of Defense and finan-cial management. You are involved in financing one of the world’s largest and most complex organizations. i think the biggest reason is something i’ll call driving home satisfaction. it doesn’t happen every day, but there are times when i drive home from work thinking that i have done something that day to actually help the men and women who, as i speak, are putting their lives on the line to defend our freedom. this makes me feel good. i think you can find that kind of driving home satisfaction not just in the Department of Defense, but in many other public-sector jobs. it’s not for everyone, but it can be very rewarding. it’s an honor to serve, it really is. ¥

to hear The Business of Government Hour’s interview with robert Hale, go to the Center’s website at www.businessofgovernment.org.


to read the full transcript of The Business of Government Hour’s interview with robert Hale, visit the Center’s website at www.businessofgovernment.org.

to learn more about DoD financial management, go to http://comptroller.defense.gov/



On July 1, 2010, Beth McGrath was sworn in as the U.S. Department of Defense’s first Deputy Chief Management Officer, a Senate-confirmed and politically appointed posi-tion. In this role, Ms. McGrath leads the department’s effort to better synchronize, integrate, and coordinate DoD busi-ness operations. She serves as the Principal Staff Assistant (PSA) and advisor to the secretary and deputy secretary of defense for matters relating to management and the improve-ment of business operations. Ms. McGrath is focused on achieving increased efficiency, greater effectiveness, and improved performance in the department’s enterprise poli-cies, processes, and systems. She is also responsible for implementing DoD’s Continuous Process Improvement/Lean Six Sigma efforts, and was co-leading, with the director of national intelligence, an initiative to reform the government-wide security clearance process. Preceding her current posi-tion, Ms. McGrath served as the Assistant Deputy Chief Management Officer and the Principal Deputy Under Secretary of Defense for Business Transformation.

We had an opportunity to gain Beth McGrath’s perspec-tive when she joined me as a guest on the Business of Government Hour. The following is an excerpt of our conver-sation on a variety of topics related to how DoD is changing the way it does business.

Mission of DoD’s Deputy Chief Management Officer Our goal is to deliver a streamlined, 21st-century systems environment comprised of it capabilities that work seam-lessly together to support effective and efficient business processes and operations.

in 2001, there was significant focus on the financial audit within the department. as a result, we established the finan-cial management modernization program. Over time, it became clear that it would take more than just achieving audit readiness. we need to reform our overarching business operations. in 2005, DoD established the business manage-ment modernization program to look more holistically across

the business enterprise and go beyond focusing on the finan-cials. Congress also recognized that the department needed more tools in order to be successful. it was around that time that Congress required the department to develop and use a business enterprise architecture, an enterprise transition plan, as well as a more effective governance structure—tools that most corporations have as they manage their overall operation.

the national Defense authorization act established the deputy chief management officer position. it created both the posi-tion of the deputy chief management officer and codified the role of the deputy secretary of defense as the chief manage-ment officer or chief operating officer across the department.

Perspectives from Beth McGrath Deputy Chief Management Officer U.S. Department of Defense



Similarly, the act also identified the under secretaries of each military department as the chief management officers for their respective components. it put the structure across the depart-ment, across all of the business lines to effectively manage, oversee, and integrate the entire business space. these changes elevated the conversation across the entire enterprise.

the role of my office is to integrate; we’re integrating and aligning strategy, process, information technology, and performance across the DoD enterprise in each of our busi-ness lines. it’s really important to clearly communicate and articulate the mission, because at the end of the day we need to execute. we originally had a very small office, but it seems to grow daily. we started with about 12 people doing multiple jobs. Only recently, with the disestablishment of the business transformation agency, we’ve gone from about 12 to a little over 130 in the next year—percentage wise, it’s a significant growth.

Challenges Facing DoD’s Deputy Chief Management Officer the size of this department is a clear challenge. trying to implement initiatives across an enterprise as big as the 16th largest country in the world doesn’t happen overnight and is certainly not easy. Coming up with a framework that can be executed, replicated, and implemented across the defense enterprise is absolutely another major challenge we face. i would also add complexity of our mission and how we execute it. Many of our business operations are very non-standard, frankly by design. when you put size and complexity together, one may wonder why anyone would want such a job. i think it’s terribly exciting because it’s also an opportunity to really make significant change for an enter-prise of critical importance.

it is very important to build this coalition for change across the department, articulating the importance of our busi-ness support mission—how these functions really facilitate, empower, and enable our core national security mission. it is a tremendous opportunity, establishing the change agents across the entire department.

Strategy for Improving DoD’s Critical Business Operationsi love to talk about our business enterprise architecture (Bea), but that wasn’t the case a few years ago. when i talk about the holistic approach and the end-to-end process focus we have in the department, it is outlined in the Bea. it’s the blueprint that drives the path ahead from a business perspective. the Bea is critical to the DoD because it defines business transformation

priorities, business capabilities required to support those prior-ities, and systems and initiatives that enable these capabilities.

we need architects to build the Bea as they have the exper-tise to fit all the pieces together, but you really need busi-ness line owners to articulate how they want to execute their end-to-end process. in turn, the business owners provide that vision to the architects. the Bea needs to be executable and understandable. it also needs to align our strategy with a purposeful outcome, such as ensuring warfighters have the right capabilities, resources, and materials. the Bea also guides information technology (it) investment management to align with strategic business capabilities.

the Bea needs to align to a specific strategy for it to be purposeful and meaningful. Our annual Strategic Management Plan (SMP) provides that strategy. it is a key driver of Bea content. the SMP sets the strategic direction for the department’s business operations. we also align the SMP with the department’s overarching strategic goals outlined in the 2010 Quadrennial Defense review (QDr), which is updated every four years. every year we talk about what’s changed and how we need to adjust. we incorporate those changes in the SMP. in the 2011 SMP, we identified five over-arching goals. we anticipate updating it again, expanding the goals from five to seven. we’re putting additional focus on financial management auditability and our workforce. we are asking: do we have the right mix and number of civilian contractor and military personnel to do what we need to do?

Finally, we have our enterprise transition Plan (etP), which is the conceptual roadmap that implements the Bea. it defines

DoD’s Business Enterprise Architecture (BEA) website.



the path to a transformed DoD enterprise and identifies busi-ness investments that provide enterprise capabilities that support the warfighter and decision-makers. it says here’s where i am, here’s where we need to be, and then how we’re going to get there and by when.

together, these documents and their contents identify the department’s business mission area enterprise priorities (SMP), the target environment (Bea), the path to that target environment (etP), and the progress towards that target envi-ronment (Congressional report).

Focusing on Core Business Missions we identified core business missions: weapons systems life-cycle management, material supply and services, real prop-erty and infrastructure, financial management, and human resources. these areas are very much aligned to the way DoD is organized. we have found that in order to drive busi-ness improvements or business operations, we really need to cut across the various functional areas. we’re looking at end-to-end (e2e) processes. we identified 15 e2e processes to serve as the foundation for a shared understanding of the target architecture. we have chosen two areas—hire to retire and procure to pay—as our current main focus. it’s really taking a look at defining the high-level end of the process. what standards are needed? what changes are needed? what systems do you have that are currently executing the processes? You’d be amazed what you find when you start mapping systems to process. it’s also no secret that DoD has thousands of systems that are not interoperable.

if i’m trying to execute an end-to-end process, which is what we do every day, then our systems should be enablers in executing that process. though it may not be terribly exciting to map systems to processes, there is a real opportunity to make things better and more seamless. we are mapping, aligning, and documenting the various processes and stan-dards because those are the things that make things happen. we want these processes to be invisible to the operators in the field. at the end of the day, they just want their paycheck right and they want it fast. they want the information reli-able and accurate so they can make informed decisions and achieve business outcomes.

Improving Financial Information and Achieving Audit Readinessthis is a very important topic within the Pentagon and with our key stakeholders in Congress and the Office of Management and Budget (OMB). in august 2009, Under Secretary and DoD Comptroller Bob Hale really prioritized his focus on achieving financial auditability—focusing on the information that the department uses every day to manage, budgetary information, and something the accountants refer to as existence and completeness of assets. though i am not an accountant, i do co-chair with [Under] Secretary Hale the Financial improvement audit readiness (Fiar) Board that oversees all of our actions and activities associated with achieving auditability.

Secretary Gates made audit readiness a key priority. now, Secretary Panetta continues the pursuit and has, in fact, asked for us to accelerate our efforts. the current 2017 audit readiness goal is certainly a stretch goal. Under Secretary Hale and i have both testified and talked about our various audit strategies and our continued progress along the way. Frankly, in order to achieve auditability or any of our business outcomes, it takes the entire depart-ment. it requires putting the right structure in place, the right plans in place, having proactive oversight, and then frankly cascading the auditability outcome into the senior executive performance plans. Having such a structure keeps everyone’s eye on the ball.

we need to continue to look at how our business operates in order for us to achieve financial auditability. if we don’t have skin in the game across the department, then we’re not going to be successful. in order to pass an audit we need a busi-ness environment that records the financial results of busi-ness events in a consistent and reliable manner.

DoD’s Enterprise Training Plan (ETP) website.



Getting Off the GAO’s High-Risk List Government accountability Office (GaO) releases its bian-nual High-risk list, which highlights 30 areas that are most at risk of problems or failure. it has been said the DoD owns 15 of the 30 high-risk areas. actually, DoD owns eight of the 30 and then shares another seven—that’s how we get to owning half. we have spent a lot of time with our GaO partners to resolve some of the key high-risk issues we face. [in fact, GaO removed DoD’s handling of personnel security clearances from the list.] in the personnel secu-rity clearance area, we were very focused on backlog and transaction time. we partnered with the Office of Personnel Management (OPM), which is the main investigative service provider for the federal government, along with the Office of Management and Budget (OMB), and the Office of the Director for national intelligence (ODni). it took everyone working together on the policy process and enhancing the information technology system to enable us to get off the high-risk list.

we started by employing lean Six Sigma. we essentially locked everyone in a room and said we need to re-look at the process. are there processes we should change because it was established back in the J. edgar Hoover days and it may not be relevant to today? we discovered that there were changes that ought to be made in the federal investigative standards. OPM and ODni as the policy owners stepped up and made changes to those federal investigative stan-dards. we then looked at the actual backlog. we were able to take a 100,000 backlog for DoD down to zero, which is a significant improvement. in 2006, our average security clear-ance time was 165 days. today, it’s roughly about 47 days. we launched new tools to improve the speed and accuracy

of the security clearance process. [DoD unveiled the rapid assessment of incomplete Security evaluations (raiSe) tool, which tracks the quality of investigations conducted by OPM. OPM reports the results of raiSe to the Office of the Director of national intelligence, which, as the security executive agent of the Performance accountability Council, will arbitrate any potential disagreements between OPM and DoD and clarify policy questions. DoD also launched the review of adjudication Documentation accuracy and rationales (raDar) tool, which tracks the quality of clear-ance adjudications.]

along with our success improving personnel security clear-ance, we are also focusing on the high-risk issues associ-ated with infrastructure management. we have a very good handle on our buildings and infrastructure management. i predict that infrastructure management will be removed from the next GaO High-risk list. it’s not by accident. it’s because we have taken a very deliberate management approach. we sat down with GaO to find out what we needed to do. we have to understand our target and make the changes in our overarching business. it’s not just to get off the list, but it’s about making sustained improvement.

we’re also making great strides in managing the business transformation high-risk issues. Of course that’s my area and i pay a lot of attention to it. we are working very closely with GaO and it’s all about do you have the structure in place to proactively manage the business environment within your organization.

Cutting Costs and Realizing Savings last year, then-Secretary Gates announced various cost-cutting and reform initiatives across the department. it involved pursuing $100 million in overhead savings over the next five years—moving funds from what we refer to as tail to tooth. DoD sought to extract savings from mission support func-tions and reinvest it into DoD’s core national security mission. we have also sought ideas from various entities, such as the DoD workforce, the Defense Science Board, and the Defense Business Board. we are always looking for ideas and lessons learned, asking: are we organized in a way that optimizes the things we want to do or is there opportunity to make changes?

Characteristics of an Effective Leader Being decisive is a very important characteristic of an effective leader. it is also important to be orderly and purposeful about the direction you’re giving staff. You need to be confident but not overly so—confidence inspires confidence in others. a winning team is a winning team not by accident because



they believe in themselves and they believe in what they do. this confidence is also tied to being passionate. really good leaders are those who are very passionate about what they do.

an effective leader also has the analytical ability to take a big problem and a big enterprise like defense and then break it down into manageable chunks. the last two characteristics would be that a leader possesses a commitment to excel-lence not only in the mission or work part, but in the people part as well. it’s about maintaining high standards, raising the bar, and demanding excellence. [what] i do expect and strive for is to be the best you can and to give all that you have. Finally, people need to trust a leader. You need to have a strong sense of character. You really need to bring your a game always and have the trust in people to then drive a specific initiative, focus, or outcome.

Focusing on the Future we reach out to organizations within our department and also with industry. i meet very regularly with industry to find out the challenges they have and how they approach these problems, bringing back what i have learned to my effort in DoD.

it is not by accident that we’re taking this end-to-end cross-functional focus within the department. it’s been done by many others. You look for cost-cutting opportunities. we’re all about efficiencies right now. we don’t want to just cut

the budget. we really want to take unnecessary costs out of the operation. to do this correctly, we need to under-stand what we’re doing, how we’re doing it, and what we can do better.

we’re all experiencing the fiscal challenge right now. i think it’s frankly just starting. it’s very important to pursue addi-tional efficiencies across the department to take them in a very strategic and smart way. You want to be informed about the impact of reducing resources in a particular area. in order to do that effectively i think you need to under-stand how we do what we do, who does it, and with what resources. it is both a challenge and an opportunity to inform and really drive our message forward. ¥

to hear The Business of Government Hour’s interview with Beth McGrath, go to the Center’s website at www.businessofgovernment.org.


to read the full transcript of The Business of Government Hour’s interview with Beth McGrath, visit the Center’s website at www.businessofgovernment.org.

to learn more about the DoD’s Office of the Deputy Chief Management Officer, go to http://dcmo.defense.gov/


Forum: Leading in an Era of Complex Challenges


Introduction: Leading in an Era of Complex Challengestoday governments are facing very serious, seemingly intractable public management issues that go to the core of effective governance and leadership, testing the very form, structure, and capacity required to meet these problems head-on. these types of challenges run the gamut from the 2008 meltdown of the global financial system to the Y2K challenge, pandemics, and natural and man-made disasters. Many are more difficult to anticipate, get out in front of, and handle. in most manifestations, they don’t follow orderly and linear processes.

Complex challenges, or so-called “wicked” problems,1 tend to have innumerable causes and are hard to define, making their mitigation resistant to predetermined solutions or traditional problem-solving approaches. in certain instances, the scope, nature, and extent of these challenges eliminate the notion of quick fixes or one-size-fits-all solu-tions. the resources needed to properly address these wicked problems often transcend the capacity of any single agency. as a result, govern-ment leaders find it necessary to go beyond established parameters and institutional strictures, working across organizational boundaries in pursuit of multi-layered, networked approaches that are tailored to a specific challenge. as ed DeSeve underscores in his latest iBM Center report, Managing Recovery: An Insider’s View, “meeting complex, or wicked problems requires a new approach based on an integrated system of relationships that reach across both formal and informal orga-nizational boundaries.” this often demands that today’s government leaders be more innovative, collaborative, and flexible. it also may require government to supplement core skills with additional expertise that may be better suited to tackling complex, non-routine challenges. Unfortunately, there has been a tendency to solve, or at least, attempt to cope with many of these types of challenges by instituting equally complex structures and systems in response (i.e., establishing the U.S. Department of Homeland Security). as Professor Don Kettl points out, the current conduct of american government is a poor match for the problems it must solve. “if government is to serve the needs of its citizens in the 21st century, it must reconfigure itself—to shift the boundaries of who does what and, even more important, how its work gets done.” 2

Since complex challenges confront people with the unknown and unpredictable, they also demand a different style of leadership—one that shapes vision and fosters alignment and commitment through collaborative action. it is about pursuing ideas and engaging in activities that resonate with the situation, combining a particular context and the attributes needed to lead in that context. Depending on the challenge faced, government leaders

1 H. W. J. Rittel and M. M. Webber, “Dilemmas in a General Theory of Planning”, Policy Sciences, Vol. 4, No. 2, June 1973, pp. 155–69.

2 Kettl, Donald F. and Steven Kelman. Reflections on 21st Century Government Management. IBM Center for The Business of Government. 2007.



may need to fundamentally transform how their organizations operate to meet mission. For example, when facing the challenge of budget cuts and significant resource reallocation, transformational change that can deliver mission value more efficiently will be increasingly important.

Our forum highlights two recent iBM Center reports that offer lessons on how to tackle complex challenges, as well as the role transformational leadership can play in seizing the opportunities these types of challenges present to today’s government leaders. in the first contribution, ed DeSeve, who was a special advisor to President Obama, overseeing the american recovery and reinvestment act (arra) implementation, provides an insid-er’s view on managing the administration’s efforts. He describes a series of key decisions made by the administration at the outset in response to the worst economic crisis since the Great Depression. He identifies primary lessons learned from the implementation of the recovery act. these lessons are creating, to quote Vice President Biden, “a new way of doing busi-

ness.” the approach used to implement the recovery act—the use of managed networks—reflects some of the guiding principles for how to successfully meet future challenges when acting on big problems. DeSeve concludes his report with lessons for how public leaders can address major government-wide challenges in the future.

the second contribution to this forum focuses on transformational leadership—insights from a select group of federal executives who have recently undertaken major transforma-tion initiatives. robert reisner, an expert in government transformation, has culled these insights in his recent iBM Center report, A Leader’s Guide to Transformation: Developing a Playbook for Successful Change Initiatives. Based on these interviews, reisner frames a series of interrelated steps that a government executive should consider when undertaking any transformation initiative. whether it’s tackling complex public management challenges or seeking to use these challenges as an opportunity to change the way an agency oper-ates, these five steps may offer a foundation for building structures that anticipate the future and, in fact, help leaders shape it.

For a more in-depth exploration of each report highlighted in this forum, you may download or order a free copy of the full report at businessofgovernment.org. ¥

“ if government is to serve

the needs of its citizens

in the 21st century, it

must reconfigure itself—

to shift the boundaries of

who does what and, even

more important, how its

work gets done.”

—Don Kettl



Managing recovery: an insider’s Viewby G. Edward DeSeve

The first contribution is adapted from Managing recovery: an insider’s View, by Ed DeSeve. DeSeve oversaw the imple-mentation of the American Recovery and Reinvestment Act. He provides an insider’s view on managing the administra-tion’s efforts, describing a series of key decisions made by the administration in response to the worst economic crisis since the Great Depression. He identifies primary lessons learned from the implementation of the Recovery Act. The approach used to implement the Recovery Act—the use of managed networks—reflects some of the guiding principles for how to successfully meet future challenges when acting on big problems. DeSeve concludes his report with lessons for how public leaders can address major government-wide chal-lenges in the future.

in January of 2009, passage of the american recovery and reinvestment act (H.r. 1) was the most immediate legislative priority for the incoming Obama administration. the need for speed in enacting the bill was driven by the increasing severity of the economic crisis that came to be known as “the Great recession.” in fact, as additional data for the fourth quarter of 2008 and the first quarter of 2009 became available during early 2009, the sense of urgency increased. the recession was worse than the administration’s economic team had realized.

in an unusual show of speed, the act was passed by Congress on February 13 and signed by the president on February 17, 2009. the intensely partisan debate about the act only heightened the need to implement the sprawling $787-billion mandate well. Critics cited the potential for waste, fraud, and abuse and estimated numbers as high as five percent of the overall funding or almost $40 billion as the potential for mismanagement.

the president and the vice president acted swiftly after the bill was enacted and created a management structure that relied on innovative processes and technologies.

Purposes of the ActOne of the most beneficial aspects of the recovery act as it was passed was the clarity of its legislative purpose. the recovery act was designed by Congress and the Obama administration with five purposes in mind (arra, Section 3):

• to preserve and create jobs and promote economic recovery

• to assist those most impacted by the recession

• to provide investments needed to increase economic effi-ciency by spurring technological advances in science and health

• to invest in transportation, environmental protection, and other infrastructure that will provide long-term economic benefits

• to stabilize state and local government budgets, in order to minimize and avoid reductions in essential services and counterproductive state and local tax increases



to implement these purposes, the act contained three major funding categories: tax Benefits; Grants, loans, and Contracts; and entitlements. each of these can be easily correlated with one of the five purposes of the act. the three major funding categories were estimated by the Congressional Budget Office at the outset of the act as follows:

tax Benefits $288 Billion

Grants, loans, and Contracts $275 Billion

entitlements $224 Billion

Total $787 Billion

in an unprecedented move, the Office of Management and Budget, working with the treasury Department and the recovery Board, established a requirement and designed a system that allowed each agency to report on each taFS weekly. For every major agency, links to these reports are posted each week on the recovery accountability and transparency Board’s website—recovery.gov.

Organizing for RecoveryThe Biden Memo

with more than 250 newly created appropriation accounts across more than 25 federal agencies, it was clear at the outset that managing this effort was an extraordinary challenge. On February 20, 2009, Vice President Biden authored a memoran-dum to the president outlining a plan for overall management of the recovery program. this memorandum provided the blue-print for implementation. it contained recommendations on:

• implementation leadership

• the vice president’s role

• naming of a chair of the recovery accountability and transparency Board

• the need to speed the search for an implementation CeO

• the announcement of the implementation effort in a joint session of Congress

• immediate outreach to cabinet, governors, mayors, and Congress

• rapid announcements on funds release and projects starting

“Nobody Messes with Joe”

as a reward for Vice President Biden’s thoughtful blueprint, the president assigned the overall management responsi-bility for the program to Biden, explaining publicly in a joint session of Congress (as recommended in the Biden memo) that he did this “because nobody messes with Joe.” On numerous occasions, the vice president has joked about this being the last memorandum he will ever write the president.

the act gave a group of inspectors General responsibility for monitoring how the money was spent. it did not create a mechanism for coordinating the spending of the funds or for ensuring the achievement of results. Biden was looking for an implementation CeO who would crack the whip and get things done. ron Klain, the vice president’s chief of staff,

G. Edward DeSeve is the President of the Global Public Leadership Institute. As Special Advisor to President Barack Obama, Mr. DeSeve over-saw the successful implementation of the $787 billion American Recovery and Reinvestment Act.

ARRA Legislative Timeline

•introduced in the House as H.r. 1 on January 26, 2009

•Committee consideration by: appropriations and Budget

•Passed the House on January 28, 2009 •Passed the Senate on February 10, 2009•reported by the joint conference committee on

February 12, 2009; agreed to by the House on February 13, 2009 (246–183) and by the Senate on February 13, 2009 (60–38)

•Signed into law by President Barack Obama on February 17, 2009

Source: http://en.wikipedia.org/wiki/American_Recovery_and_Reinvestment_Act_of_2009



Don Gipps, director of presidential personnel, and rob nabors, deputy director of the Office of Management and Budget (OMB) initiated a search and ultimately had the vice president interview me.

Based on my prior experience as the deputy director for management at OMB, i suggested to the vice president that what was needed was an implementation coordinator, not a CeO. the cabinet contained plenty of CeOs as did state-houses across america. recovery act implementation called for building a coordinated network that would link all of the interested parties together to swiftly execute the purposes of the act.

the vice president agreed with this approach and suggested that i have three titles: Special advisor to the President for recovery implementation; assistant to the Vice President; and Senior advisor to the Director of OMB. these three titles ensured that i had the authority of the president behind me, that i reported directly to the vice president, and that i would be working closely with OMB during my tenure. this struc-ture proved prescient, as all three components were essential to success.

Major Actors the importance of managing implementation has been widely recognized. Key to this implementation was involving multiple major actors at the outset.

The President

in implementing the recovery act, the tone was set from the top. in his speeches, economic daily briefings, trips to recovery act sites, and daily meetings with key staff, the president made it clear that rapid implementation of the recovery act was among his highest priorities. He made sure that the recovery implementation coordinator was a key member of his senior staff and attended each morning’s staff meeting chaired by the chief of staff. He personally met periodically with his economic team, the vice president and the recovery implementation coordinator to get direct brief-ings on progress. He personally read and annotated memos and reports on recovery. at cabinet meetings, he stressed to each of the department secretaries the importance he placed on their achieving recovery goals quickly to aid the american people.

The Vice President

in the Biden memo, which was drafted by ron Klain, the vice president’s chief of staff, the crucial role of the vice pres-ident was articulated as follows:

• Designate the vice president to take the lead on imple-mentation. this was to be done by the president in a very public way and the Joint Session of Congress proved to be that venue.

• Have the vice president chair regular meetings with cabi-net secretaries or their designees where the agency had major implementation responsibilities

• appoint an implementation CeO who would report direct-ly to the vice president but also have reporting relation-ships to the president and the director of OMB

• Have regular public reports from the vice president and regular meetings by him with governors and mayors as well as Congressional leaders

all of these recommendations were accepted by the presi-dent and carried out by the vice president.

Recovery Implementation Office (RIO)

also in the February 20, 2009 memo was the recommenda-tion to create a modest office under the “implementation CeO” to oversee the “high level management dimensions” of the act. after a search seeking “experienced public admin-istrators, corporate executives and retired military leaders,” i was chosen. i followed the outlines of the memo but

Aboard Air Force One, a close-up of the president’s signature on the American Recovery and Reinvestment Act.

whi

te H

ouse



suggested that “coordinator of recovery implementation” was a more appropriate title than CeO. the “modest staff” of the recovery implementation office never exceeded eight full-time equivalents and the majority of these were temporarily assigned from other agencies.

Recovery Accountability and Transparency Board (RATB)

the recovery accountability and transparency Board was created by the american recovery and reinvestment act of 2009 with two goals:

• to provide transparency of recovery-related funds

• to prevent and detect fraud, waste, and mismanagement

earl e. Devaney was appointed by President Obama to serve as chairman of the recovery Board. the board and its chair have been instrumental in creating a reporting environment that emphasizes accountability, transparency, and speed. Quarterly reporting by recipients was instituted in accor-dance with the act and has been a highly successful mecha-nism for using transparency of data to minimize fraud.

the ratB was a tremendously effective partner to the recovery implementation Office (riO) and to OMB as we implemented the act.

Office of Management and Budget (OMB)

OMB was first out of the box on recovery implementation. OMB’s actions were led by Deputy Director rob nabors and acting Controller Danny werfel. nabors organized the daily calls with agencies while werfel worked to prepare internal and external guidance on implementing the act.1 On the budget side of OMB, the resource management offices worked to clear spending plans with extraordinary speed. they also resolved disputes among agencies such as resolving the application and implementation of Davis Bacon wage determinations.

the ability of OMB to work with bodies like the Federal acquisition regulatory Council, the Office of Personnel Management, the General Services administration, and others enabled the drafting of needed regulations and other actions by these agencies to be completed in record time.

riO and OMB worked closely in formal weekly meet-ings and daily informal meetings with the recovery accountability and transparency Board.

States

as of august 2011, states have been allocated $280 billion in funding. this meant that states were major players in directly receiving funds, and in some programs, had distri-bution and oversight of funds going to non-profits and local governments.

the national Governors association (nGa) took its responsi-bilities very seriously. when implementation problems devel-oped, nGa brought them forward and they were quickly dealt with.

Others With Statutory Responsibilities

• Council of Economic Advisors. as part of the unprecedented accountability and transpar-ency provisions included in arra, the Council of economic advisers (Cea) was charged with providing Congress quarterly reports on the effects of the recovery act on overall economic activity, and on employment in particular.

• Congressional Budget Office. CBO was required to make the initial estimates of the cost of the act and subsequently monitor progress in spending as part of its overall budgetary activity. in addition, it was required to provide quarterly reports on economic impact and jobs.

• Government Accountability Office. in addition to its general responsibilities providing “oversight, insight, and foresight” to all government programs, GaO was specifically tasked with oversight of implementation of arra programs in states and local areas and providing quarterly reports. it was also tasked with examining the number of jobs created as reported by recipients.

• Inspectors General. iGs were given funding under the act to exercise additional vigilance over the spending of recovery act funds. twelve of them were ultimately designated by the statute or by the president to serve as members of the recovery accountability and transparency Board.



Federal Agencies

early on, OMB instituted daily phone calls with senior responsible officials (SrOs) in all agencies involved in a major way with recovery. this amounted to more than 20 agencies which had more than 200 programs. they allowed each agency to describe implementation challenges and seek assistance solving them. they also gave riO and OMB the ability to send messages to the entire network of agen-cies all at once and get their feedback if any. this sense of urgency was reflected in making sure that every agency met or exceeded the goals or timelines in the act.

Organizing Implementation

“It Takes a Network …”

Given the complexity of the statute and the number of actors involved, traditional hierarchical principles were unlikely to produce results with sufficient speed to meet the urgency of the recovery act’s mission. without explicitly articulating network principles, the February 20th memo from the vice president to the president laid the foundation for invoking networks to manage recovery implementation.

addressing complex or “wicked” problems requires a new approach.2 in the Year 2000 Computer Crisis (Y2K), dealing with the Severe acute respiratory Syndrome (SarS) epidemic, responding to Hurricane Katrina, and launching the war against terrorism,3 a model of “managed networks” replaced the traditional hierarchical form of government organization. a “managed network” can be defined as: “an integrated system of relationships that is managed across formal and informal organizational boundaries with recog-nized principles and a clear definition of success.”4 this approach to governance is reflected in the guiding principles for managing the implementation of the recovery act.

the type of “managed network” that the recovery act repre-sented was a “community of shared mission.” the mission was clearly spelled out in the purposes of the act. everyone involved knew that job creation, assisting the needy, building and rebuilding infrastructure, stimulating investments in tech-nology, and assisting states and localities in meeting their obligations were the missions of the act.

translating a sense of mission into organization and ultimately into action requires the use of network management prin-ciples. in fact, each of the elements in Network Management Principles was consciously included in the design of the imple-mentation mechanism for the recovery act.

another example of using a formal network element was reli-ance on formal authority. this authority was derived from the president’s executive orders and memorandum as well as OMB’s guidance. Governance, leadership, distributed accountability, and information sharing were all built into the way the act was implemented and the way networks func-tion to accomplish the act’s purposes.

Key Implementation Decisions Made• Attention from the top was paramount. in a joint session

of Congress, the president announced that Vice President Biden would be in charge of implementation because, to quote the president, “nobody messes with Joe.” Biden would directly task the cabinet using a series of meet-ings, challenges, and deadlines. He would directly oversee the recovery implementation Office which was tasked with coordinating all aspects of implementation.

• Financial reporting would be done on a weekly basis. this unprecedented decision drove accountability and performance.

• Twelve Inspectors General would use new tools to fight fraud. empanelled under the statute as the recovery accountability and transparency Board (ratB), and with presidential authority, the Board would be given extraor-dinary ability to promote transparency, require account-ability from agencies and recipients, and use the latest technology to track reporting.

• Technology would be at the core of the network management approach used to coordinate the effort. Collaborative data tools, formal use of the internet for reporting, and high levels of interconnectivity would be used.

• Federalism could be made to work. there was an unprecedented relationship forged between the white House, agencies, the recovery accountability and transparency Board, and state and local governments. Using the tools described above and a series of well-crafted guidance documents plus the continual atten-tion of the vice president and his staff, state and local

Network Management Principles

•network Structure•Common Purpose•Governance•authority

•leadership•Distributed accountability•information Sharing•resources



governments were connected in a collaborative way to their counterparts in federal agencies, the white House, and overseers.

• The administration promised to use the ARRA experi-ence to institutionalize successful reforms. while all of the recovery implementation apparatus was intended to be temporary, the president and vice president wanted to be sure to capture what worked and make permanent successful processes and reforms developed in imple-menting recovery.

“A New Way of Doing Business”the lessons learned from the recovery act can encourage better performance of all federal government programs going forward. Some of these have been mentioned before and are summarized in this section.

the primary lessons learned from the implementation of the recovery act are:

• Attention from the top matters. there is no substi-tute for the president and the vice president being fully engaged.

• Transparency minimizes fraud. Having many sets of eyes and ears, including the public’s, committed to avoiding problems pays dividends if properly organized.

• Financial information can be transmitted in an almost-real-time environment. Having weekly financial data and quarterly recipient data made course corrections possible and constant reporting required both agencies and recipients to exercise greater care about the data.

• New technology enables direct reporting. the use of existing successful technology-based reporting models and the internet can make data transmission faster and more reliable, minimizing the need for intermediaries.

• Geospatial mapping makes data more understandable. the availability to the public of data that they could relate to their own neighborhoods was an extremely powerful tool in promoting program acceptance.

• Collaboration through networks was essential. Using clear principles, a series of networks was developed that aligned incentives and accountability in a way that promoted rapid and effective performance.

• The Recovery Act provides a template for agency plan-ning in the future. as the GPra Modernization act of 2010 is implemented, agencies are looking to the lessons of the recovery act for guidance.

Lessons for Acting on Future Big Challengeswhile we don’t know exactly what the future will bring, we do know that there will be huge challenges that only govern-ment can meet. Many of these challenges will be in the form of emergencies—technology, financial, health, disaster response, or others. we’ve seen them before: the 2008 melt-down of the financial system, the Y2K challenge, the SarS epidemic, and Hurricane Katrina. we will see them again.

Meeting complex, or “wicked,” problems requires a new approach based on an integrated system of relationships that reach across both formal and informal organizational boundaries. the approach used to implement the american recovery and reinvestment act—the use of managed networks—reflects some of the guiding principles for how to successfully meet future challenges when acting on big prob-lems. Some of the major lessons learned were:

Lesson One: Act quickly. the american recovery and reinvestment act was signed less than one month after President Obama took office. this was accomplished by close coordination with Congressional leadership and continued dialogue with key senators and representatives. there was a downside to fast action. Partisan opponents of the act felt disenfranchised and continued their criticism of the act throughout its implementation. the real ques-tion for history is whether the recovery act was effective in preventing an even more catastrophic economic downturn.

Lesson Two: The president and vice president must provide strong direction. in recovery act implementation, we all



learned the lesson that there is no substitute for presidential leadership. From his strong action even before taking office to his joint statement to Congress and on to his regular meet-ings with cabinet members and the recovery implementation Office team, President Obama demonstrated the kind of hands-on leadership that is required to meet big challenges. He delegated management of the challenges but he didn’t delegate very far. Having the vice president as the single “responsible individual” made all the difference.

Lesson Three: Collaboration maximizes speed of execution. Speed was of paramount importance in recovery imple-mentation. the sheer number of actors—more than 250,000 prime recipients alone—meant that collaboration had to replace command and control as the operative model. the mantra of “managed networks” was put in play at the very beginning of the act’s implementation and was the watchword throughout. leadership, clear guidance, resources, a compel-ling mission statement, information sharing, a networked structure, distributed accountability and the presence of stat-utory or regulatory authority that could quickly be deployed were essential elements.

Lesson Four: Federalism is a key form of collaboration. it was essential to eliminate the adversarial relationship that often exists in dealings between the federal government and states and localities. States were responsible for deliv-ering or overseeing more than one-third of recovery act funds. localities competed hard for their share of funding for programs. this competition sharpened the focus of these programs and helped speed delivery. Having state and local governments as full partners made the act’s implementation swifter and less prone to error.

Lesson Five: Information must be transparent, timely, and relevant. President Obama indicated early in his administra-tion that his long-held view that information was to be fully transparent was at the core of his approach to governing. this commitment translated itself into the operating prin-ciples of the act. even the name of the oversight agency, the recovery accountability and transparency Board, was a powerful symbol of what was expected. But the Board could not have been as effective as it was without the leadership of OMB in providing standards and guidance for data reporting. the unprecedented weekly reporting and posting of financial data for both obligations and outlays required by OMB set the tone for all data transmission under the act.

the rapid, open transmission of relevant information also served as a deterrent to fraud. Chairman Devaney often spoke of enlisting the “citizen inspectors general” and one

local recipient quipped, “no one would steal this money with everyone watching.” this phenomenon of citizen iGs and everyone watching was empowered by the collaboration of OMB and ratB with recipients and oversight agencies.

Lesson Six: It ain’t over till it’s over. as we view the imple-mentation of the act, it is clear that all of its original purposes were met. Jobs were created or saved; the needs of the most vulnerable were addressed; new and existing infrastructure was enhanced; and states and localities were saved from disastrous cuts or new taxes. there is a fear of a second reces-sion. the administration has been vigilant in guarding against this while at the same time seeking a path toward fiscal disci-pline. the lessons learned in implementing the recovery act will no doubt be helpful to them as they go forward. ¥

TO LEARN MORE

Managing Recovery: An Insider’s Viewby G. Edward DeSeve

The report can be obtained:• In.pdf(Acrobat)format

at the Center website, www.businessofgovern-ment.org

• Bye-mailingtheCenterat [email protected]

• BycallingtheCenterat(202)551-9342

1 For a list of all guidance documents from OMB see: www.whitehouse.gov/omb/recovery_default.

2 For a definition of “wicked problems” see C. west Churchman, Management Science, Vol. 14, no. 4, December 1967.

3 See “integration and innovation in the intelligence Community,” G. edward DeSeve in Unlocking the Power of Networks, Stephen Goldsmith and Donald F. Kettl. Brookings institution Press 2009.

4 Morse, Buss, and Kinghorn, Transforming Public Leadership for the 21st Century, p. 211.



a leader’s Guide to transformationby Robert A. F. Reisner

The second contribution to this forum focuses on transfor-mational leadership—insights from a select group of federal executives who have recently undertaken major transforma-tion initiatives. Robert Reisner, an expert in government trans-formation, has culled these insights in his recent IBM Center report, a leader’s Guide to transformation: Developing a Playbook for Successful Change initiatives. Based on these interviews, Reisner frames a series of interrelated steps that a government executive should consider when they undertake any transformation initiative. Whether it’s tackling complex public management challenges or seeking to use these chal-lenges as an opportunity to change the way an agency operates, the five steps outlined in this report may offer a foundation for building structures that anticipate the future and, in fact, help leaders shape it.

transformation continues to be seen by noted practitioners and 21st century federal leaders as a compelling description of the essential change that is needed throughout the federal govern-ment. in the future, transformation will be a joint-ownership enterprise that spans boundaries and involves constituencies in unprecedented ways. this emerging characteristic alone will require the successful leaders of future transformations to adopt a more democratic management style and build on the work of pioneers who have gone before.

Transformation’s Leadership Challengethroughout the federal government, there is a growing demand for effective leaders who can transform their agen-cies by implementing successful change initiatives that yield results. the pressure of budget reductions is redefining federal management practice. in agencies across the government, fewer resources are available. But there has been no corre-sponding decrease in the scope of the mission. this study describes new ways to create mission value in increasingly pressured times.

Some leaders have embraced the dilemmas caused by resource constraints as opportunities to introduce long-needed innovations and change the way that the business of

government is done. But even the best leaders quickly find that transformation is hard work involving many choices and unexpected consequences.

this addresses the challenge of transforming organizations. the guide is based on a series of interviews with experienced practitioners who described how they tackled the challenge of transformation in government organizations. their experi-ence may offer plays for you to include in your own transfor-mation playbook.

these insights were gathered in the first half of 2011 in a series of interviews with transformational leaders in agen-cies across the federal government. the insights from these leaders, whose missions range from finance and diplomacy to delivering postal services and veterans’ benefits, offer prac-tical advice on making choices that can make one transforma-tion initiative successful while others fall short. they describe concepts that will help future leaders to design their own transformation game plan and choose the right plays to call.



Robert A. F. Reisner is the President of Transformation Strategy Inc., a bou-tique strategy consulting firm that works with global firms and specialists in multiple disciplines to fashion creative solutions for clients in the public and private sectors. He is the author of “When a Turnaround Stalls” in the Harvard Business review (February 2002) and numerous technical papers on issues ranging from strategic planning to innovation to institutional transformation.

What is Transformation?What is meant by transformation? the question is not an insignificant one. For more than a decade, there has been a great deal of attention given to a variety of high-profile efforts, such as the Department of Defense (DOD) transfor-mation and the transformation of the United States Postal Service (USPS). while some will say that the DOD and USPS transformations did not live up to the “hype” which accom-panied their launch, they were important initial attempts at large-scale transformations. in interview after interview, today’s government leaders reaffirmed the value of transfor-mational change, of moving from one state to a fundamen-tally new one that builds upon the Dna of the traditional enterprise.

the guide has also been informed by successful examples of enterprise scale change (for example, the transformations of the Government accountability Office and the Veterans Health administration).

One goal of this guide is to give government managers the benefit of the experience and insights of government execu-tives with first-hand experience in leading transformation.

Who will be the transformational leaders of the future? Will they be appointed? Will they be the heads of agencies? Are they going to occupy new positions in their agencies? as the four questions imply, in a networked age, future leaders may come from almost any direction. there are examples of new, decentralized leadership styles emerging in organizations throughout the world today that depart from traditional top-down models. as some leading thinkers about management in the modern age have noted, the need for a hierarchical organization that makes the “trains run on time” is increas-ingly mismatched with the work of the modern, networked enterprise where operational effectiveness is expected and the new emphasis is on innovation. we should not expect that transformational leaders of the future would necessarily come from conventional succession plans alone.

Creating Mission Value if the lead might come from anywhere, what steps should be taken to ensure successful transformation initiatives?

to answer such a basic question, the transformation leaders we interviewed often began by focusing on creating mission value. Mission value is created by delivering better service at less cost. Strategies may include initiatives to increase quality or improve service or they may include efforts to cut costs and increase productivity. Unfortunately the potential conflict between more service and lower cost can sometimes set the transformation effort back. improving service and quality can be costly. Cutting costs and gaining efficiency alone can alienate customers and workers.

which strategy is the right one for your agency and when? One theme that came up consistently was the need for creative balance.

to create meaningful change and sustain it will require careful selection of initiatives to balance opportunity, support from constituencies, and capacity to manage change initia-tives. this search for the optimal balance was raised in multiple interviews. this seeks to serve as a practitioners’ highlight reel that illustrates how others found creative balance that worked for them.

Five Steps to Transformation: Leaders’ ViewsIntroduction: The Interactive Partsif you are already striving to lead transformational change, you know that many decisions will have to be made to improve service at lower cost. and you know that the right decision for your organization will depend on the strategic context. what are the changes reshaping your world and how quickly are they emerging? where are you on the curve of change? Has the idea behind the initiative just been formulated, or are you implementing strategies that have been carefully vetted with key constituencies? Often the answer to these questions involves making tough calls, and leaders will be significantly aided by a core structure that guides their actions.



Five major themes emerged as transformation leaders described the basic steps they took in launching and imple-menting major change initiatives:

• Develop a compelling transformation game plan• align the transformation game plan with your mission • Center your game plan with a reliable innovation process• transform strategically • Design implementation to sustain transformation

what’s important to see in overview is that these five steps interact with one another. the timing of your launch may determine how much innovation you can afford. aligning your initiatives with your mission will set priorities for your implementation strategy.

Develop a Compelling Transformation Game Plantransformation initiatives, by their nature, should possess a sense of urgency. Yet controlling timing can be an important element of transformation strategy and should be consid-ered carefully. Multiple leaders described their simultaneous recognition of the need for caution and appreciation for “burning platforms” that demand urgent change and help push it forward.

to manage timing, the transformation leader must create a compelling transformation game plan to guide the transfor-mation initiatives so that they will yield purposeful change. this may not seem surprising. But the need to develop a compelling game plan becomes especially important when the need for change is driven by the presence of a burning platform, an urgent call to action.

large-scale transformations have many moving parts. are your stakeholders supportive and willing participants? are you ready to undertake the transformation now or do you need to build organizational capacity? in what areas will

new skills and technologies be required to undertake the transformation initiative? leading successful change requires you to manage the timing with your game plan.

Seize Initiative to Lead Change

Do not lose sight of the imperative to lead the transformation. while balance may be essential to sustain transformational change, multiple leaders noted that waiting for stakeholder or Congressional guidance before undertaking change programs could cause transformation to founder. Seizing initiative will be essential to communicating the reasons for the change.

Choose When to Launch Deliberately

it is not only the case for change and the direction it takes that must be considered. the question of when to depart can be equally significant, and this question does not neces-sarily have an obvious answer. even when change surrounds you, the right time for your customers and your employees to undertake radical change initiatives may still have not come.

Use Burning Platforms Judiciously

Many of the transformation leaders interviewed discussed the role of timing in driving events. when they had a burning platform, or an urgent mission requiring immediate action to comply with statutory deadlines, for example, the ques-tion of when to start was made much easier. One trans-formation leader described his mission to implement an executive order that was among the highest Obama adminis-tration priorities and noted that this gave him advantages that enabled his organization to move widely accepted private-sector practices into the work of the agency.

Yet some of the transformation leaders who had relied on burning platforms to gain the momentum needed to act with care because this strategy is rife with unintended consequences.

Use the Power of a Mandate Carefully

Multiple leaders described white House meetings in which they were given urgent direction. Many of the transformation leaders interviewed for this guide are responsible for imple-menting new laws. Some of the new laws require funda-mental change in how they offer services to their constituents.

One experienced transformation leader commented, “with a new law to implement and impossible deadlines, the ques-tion of when to launch seems almost academic. all of the



Postmaster General Patrick R. Donahoe Sustaining Transformation through Financial Crisis and Reinvention

Patrick r. Donahoe was named the 73rd Postmaster General (PMG) of the United States on October 25, 2010. He came to the CeO’s job with more operating experience and practical accomplishment than any predecessor. But he faces a time of crisis. the Postal Service that he leads lost more than $5 billion last year and is projected to lose more than $8 billion this year.

Key transformational strategies implemented under Donahoe are:• reorganization of postal operations

• introduction of new methods of automation of flat letters and small parcels

• introduction of lean Six Sigma capabilities at the management level to facilitate continuous improvement of operational performance

His challenge today is to continue this process of right-siz-ing the capacity of the Postal Service while negotiating to sustain it in the short term through another round of postal reform. the outcome is not a given. the sources that gen-erate costs in operations and facilities and those that limit the capacity of the service to raise prices are strong and their influence is deep.

the task of the leader of the Postal Service will be not only to craft a vision of transformation and an ongoing transformation plan, but also to sustain it through ongoing challenging times.

Richard Spires Using Private Sector Best Practices

to Define the Path to Changerichard Spires, the Chief information Officer of the Department of Homeland Security, has deep experience in both the public and private sectors. in DHS, the CiO leads a highly dispersed enterprise with more than a dozen agen-cies that were put together in 2003, and are still seeking to achieve departmental alignment. a key point of emphasis for CiO Spires has been to bring best-practice models from the private sector to his role at DHS, which includes closing data centers, moving to cloud computing, improving pro-gram governance, and strengthening program management.

there are 43 legacy data centers that are being consolidat-ed into two principal facilities. Since the beginning of the

Federal Data Center Consolidation initiative (FDCCi), DHS has closed one data center, with an additional four planned for closure by the end of 2011. DHS’s goal is to close more than 40 existing data centers by the end of FY 2014.

DHS it management has transformed and improved its current it Program reviews by adopting the techStat pro-cess and criteria, which enables deep-dive analysis into select it programs. as a result of techStat, the department reformed its acquisition strategy to support modular devel-opment, engaged agency leadership, assigned dedicated resources throughout the program’s lifecycle, and enforced direct line of accountability to the OCiO.

Dan Tangherlini Focusing Review with Mission Definition

Daniel M. tangherlini is assistant Secretary of the treasury for Management, Chief Financial Officer, and Chief Performance Officer. His time at the Department of the treasury coincides with a transformational period when the department has had to evaluate and assess its actions during the financial crisis of 2008–09, to lead economic policy-making during the recovery, and to make necessary adjustments to new laws and responsibilities.

His diverse and practical experience may have been critical in addressing one of treasury’s highest priorities in recent years: the need to better understand the finan-cial crisis that has framed treasury’s work since 2008. evaluation of the treasury’s performance and role during the time of the troubled asset relief Program (2008–09) has been ever-present.

a second fundamental change came when treasury was given vastly expanded responsibilities under the american recovery and reinvestment act of 2009.

Most recently, treasury established the new Consumer Financial Protection Bureau and has received new over-sight responsibilities under the Dodd-Frank wall Street reform and Consumer Protection act.

the actions taken in guiding these activities also come at a time when the GPra Modernization act of 2010 has given agencies throughout the government responsibility for rethinking the missions of their various components.

Dan tangherlini is in a position where the global and the operational must meet in providing resources, maintain-ing records, and managing the operations of a core federal agency in the midst of change.



critical considerations involve how to launch effectively, not whether to do it.”

another transformation leader commented, “it can be a dangerous move to rely too heavily on external forces,” because when you do, you lose the ability to time your launch to ensure optimal effectiveness. the leaders inter-viewed here had a nuanced appreciation for the difference between “urgency” and “crisis.”

Clear the Space for Objective Analysis

One problem with relying on exigent circumstances is that it makes analysis of trends more difficult. Urgent situations make it harder to pick your moment. when dynamics make a moment special and urgent and are given added signifi-cance as the justification for timing of a launch, it may be more difficult to see the multiple forces that contribute to shaping crisis events. there are times, even in a crisis, when the best move may be no move at all. even the smartest initiatives can be set back when the information is wrong or the capacity to deliver is shaky. Setbacks can last a decade.

One leader reflected, “if your thinking is focused entirely by the effects of crises, you have lost control from the first. Such moments of crisis make it difficult to mobilize large collabor-ative groups because reason, orderly process, and legitimate problems are swept away.”

in the end, the diversity of experiences across the government is so wide that leaders will have to consider the implications of their individual context to time their launch carefully.

Align the Transformation Game Plan with Your Missionto succeed, you will need to understand that transformation depends on your agency making the connection between the traditional enterprise and a future vision that will be viable in the emerging marketplace. to be effective as a leader of change and to ensure the integrity of your message, you will have to make sure that the change is consistent with the law, practice, and with oversight. aligning change initiatives with a rigorous definition of mission gives you a tool for priori-tizing change that matters.

Begin with Mission Alignment

One transformation leader explained, “aligning your initia-tive with the mission of the agency is always the key step. establishing a measure with which you can define value should come from that process.” Undertaking the stages of

planning, implementation, and review of a transformation initiative begins with mission alignment.

Balance Cost Reduction with Service Improvement

the phrase “You can’t cost cut your way to success” is repeated often by transformational leaders. But it’s not always clear exactly what this phrase means. there have been many instances in the past decade when technology change has permitted dramatic cost reductions and process changes. this in turn has allowed the leaders of public institutions to achieve significant efficiency improvements. Clearly cost-reduction initiatives can be critical, especially as budgets are cut.

in the view of several transformational leaders, creating align-ment with mission, examining alternative service delivery methods, and responding to constituent and Congressional expectations will be necessary transformational skills in the future. Future transformation leaders will also face the twin challenges of narrowing agency mission to accommodate a new budget, while enhancing service delivery.

Engage Stakeholders at Every Step

aligning change initiatives with mission will help throughout the process of winning support for defining the optimal for-mula for creating mission value. in the networked age of social media, stakeholder engagement has become an ever-more encompassing task that was brought up by virtually every leader we interviewed. as a result, there is value in considering how best to engage stakeholders in every step of the transformation.

• Define mission collaboratively with your employees. • Use mission definition to build shared vision.• Seek top-level clarity about mission.• Make mission personal to every manager.

Personally Lead a Transformation Dialogue

Many of these initial insights involve change that is personal and individual. not surprisingly, change that cuts this deep will evoke a reaction from powerful core constituen-cies. Many see this as an opportunity to create a dialogue about the future. Ultimately this conversation will involve Congressional oversight committees.

a broad conversation about transformational strategies enables a more meaningful dialogue to shape the details of achieving mission definition with fewer resources.



instead of focusing only on cutting costs and therefore creating future dilemmas about mission and service, the transformational dialogue offers an opportunity to talk about creating mission value and finding the optimal balance.

Center Your Game Plan with a Reliable Innovation Processtransforming a complex federal agency must rely on an inno-vation process that can generate imaginative and reliable change initiatives. this is the core engine of transformation and your innovation process must have the capacity to formulate a new vision for change initiatives that can create the depend-able building blocks of an organization that will thrive in the emerging marketplace. Having a reliable innovation process will allow you to center your transformation initiatives in a way that connects traditional mission with the future.

the concept of innovation is at the heart of transformation. By definition, transformation requires fundamental changes and a vision of an alternative future, the work of innovation. One of the leaders who experienced the many barriers to implementing major change initiatives saw his central task to be introducing new applications and facilitating the use of new technologies to create an innovation environment.

“we can make things happen in 15 minutes and we can handle the clearance process for federal managers; what happens from there is up to them,” said one promoter of innovation.

Be Realistic About the Speed of Transformation Initiatives

Several of the transformation leaders interviewed faced dilemmas over the speed with which they should implement new initiatives. even when innovations promise better service or new cost reductions, there is still a need to line up support. Few transformations take place in a vacuum. Few leaders, if any, work in settings where there are no interested parties.

Democratize Data to Add Leverage

One source of innovation that a number of transformational leaders draw on is the movement to make data public, high-lighted during the recovery act initiative of the Obama administration.

Judiciously Select the Moments When Radical Change is Required

Creating the process for innovation will make it clearer and easier to make decisions about alternative courses of action.

Learn from the New Open Collaboration Models

One of the leaders responsible for implementing a contro-versial new law described the process of bringing trans-parent government tools to bear in formulating regulations and brokering disputes among previously unreachable inter-ested parties. He believes that transparent enterprise and open government policies can play a critical role in imple-menting a new reform law that follows years of conflict. Opening government and encouraging stakeholder participa-tion in implementing the new law enable collaboration and compromise on a broader scale.

in the modern technology environment, there are many new opportunities for creating collaboration and sharing services. Budget necessities may ease resistance and make it easier for some in siloed areas to readjust their thinking.

Transform Strategicallytransformation initiatives can be challenging to lead and require subtlety to manage efficiently. an illustration of this is the potential tension between supporting initiatives that require only incremental change and sustaining technology and those that embrace disruptive change. effective leader-ship of change initiatives requires that both traditional line managers and the leaders of innovation be participants in the transformation program.

Use Best Practices to Drive Transformation

One of the transformation leaders interviewed described a situation in which a best practice had been used to highlight the differences between the desired state and the status quo. Using this best practice standard, his department showed the clear value of adopting management practices that are now common in the private sector.

Assemble Joint Teams of Young Turks and Line Managers

a key consideration in formulating a transformation strategy is the need to balance the interests of line managers and their processes with an investment in innovation. transformational managers seldom get to work with a greenfield situation. More typically, there are interests, constituencies, and even competitive service delivery alternatives. when this is the case, there is a need to select the most valuable places to invest scarce resources to effect change.

Build Joint Ownership through Review

Strategic investment in new service development can be connected in integral ways with the implementation and



management process by creating joint ownership of the investment.

Find the Path to Maximize Consensus

One transformation leader noted that project analysis, espe-cially in an environment of shrinking budgets, requires that strategic planners consider the way that line managers will view investment alternatives.

Design Implementation to Sustain TransformationMany of the transformation leaders interviewed had insights into the process of sustaining the changes that they had intro-duced. they suggest a variety of tactics that can help make the implementation process successful. all the transforma-tion leaders interviewed viewed collaboration as an essential element of modern organization and crucial to the imple-mentation challenges to transformation initiatives.

Explicitly Recognize the Inevitable Barriers

One transformational leader described being called to an urgent meeting at the white House with a high-priority request to create something that could not normally be achieved in a short time frame. But instead of listing barriers, he brought a list of actions necessary to override the normal obstacles.

Design Sustainable Change Initiatives from the Start

the interviews with transformation leaders offered the fol-lowing suggestions as ways to build an implementation plan that would nurture sustainable initiatives:

• recognize the cross-boundary challenges.• Make the performance review work for you.• Sustain change with review anchored by mission.• Build ties to the change.• Build a constituency for innovation.• Gain permission to innovate.

The Arc of ChangeMany of the insights that transformational leaders have offered here are presented as individual plays in a practi-tioner’s playbook. these are ideas that others have tried in seeking to achieve transformational change in their agen-cies. Seen as a group, the concepts have an interconnec-tion and offer a future direction. they build upon a concrete need to anchor change in the mission of the agency. they encourage innovation, but not without the collaboration of line managers who have been there before and have seen both change that worked and change that evaporated quickly after the energy of the launch was expended.

in a time of budget cuts and significant resource reallocation, transformational change that can deliver mission value more efficiently will be increasingly important.

to sustain transformation that is described here leaders are calling plays and creating individual game plans that must anticipate an arc of change. the five steps outlined here offer a foundation for building structures to anticipate the future and to help shape it. ¥

TO LEARN MORE

A Leader’s Guide to Transformation: Developing a Playbook for Successful Change Initiativesby Robert A. F. Reisner


at the Center website, www.businessofgovernment.org




Viewpoints

Managing the Complicated vs. the Complex By John M. Kamensky

Understanding the difference between a complicated problem and a complex one is important for today’s leaders. they require different strategies and tools that are largely not interchangeable. Sometimes a problem will morph from one state to the other—either from complicated to complex, or vice versa—so you’ll need to be ready to adapt your strate-gies and tools accordingly.

So what are the differences? a recent Harvard Business Review article by Gokce Sargut and rita Gunther McGrath offers these distinctions:

“ … the main difference between complicated and complex systems is that with the former, one can usually predict outcomes by knowing the starting conditions. in a complex system, the same starting conditions can produce different outcomes, depending on interactions of the elements in the system.”

For example, building a highway is complicated, but managing urban traffic congestion is complex. likewise, building a state-of-the-art air traffic control center is a complicated challenge in executing a project, while directing air traffic is complex, involving in-the-moment problem-solving.

The ComplicatedBasically, a complicated problem is predictable and linear in nature. there is a clear beginning, middle, and end, with both variation and repetitiveness involved. with compli-cated problems, it is possible to identify and model the relationship between the parts, for example by using logic models. Furthermore, the relationships among the parts can be reduced to clear, predictable interactions. For example, building an aircraft engine is complicated, but if done right, the inputs and results are highly predictable and repeatable.

those organizations, programs, and projects that tend to be complicated in nature typically rely on organization charts and chains of command, and the leaders hold formal

positions of authority. the kinds of management tools typi-cally used for complicated organizations and projects include project management software, Pert flow charts, lean Six Sigma, activity-Based Costing, and logic models. Project management relies on documentation and specifica-tion. Success mainly depends on the execution of a plan or process.

The Complex in contrast, a complex problem possesses sufficient intricacy that behavior cannot be predicted via linear relationships; such problems are also marked by a high degree of self-orga-nizing behavior. this occurs in areas as diverse as recovery from Hurricane Katrina and the implementation of health care reform legislation.

author Jeffrey O’Brien says: “‘Complex’ is a synonym for ‘unpredictable’—or at least not easily predictable.” in complex systems, he notes, “interactions are not linear, but emergent.” He goes on to observe: “we can’t untangle complex systems in our minds, and we can’t intuit our way

Viewpoints

John M. Kamensky is a senior fellow with the IBM Center for The Business of Government. He is also an associate partner with IBM Global Business Services and a fellow of the National Academy of Public Administration.

to a better-working world.” He says that computers can help, but “they must be augmented with perception, reasoning, cognition, and intuition.”

Sargut and McGrath say that there are three properties that determine the complexity of an environment: the number of potentially interacting elements, the interdependent connec-tions among those elements, and the degree of diversity among those elements. Other academics, such as Dr. Goktug Morcol of Pennsylvania State University, say that complex issues cannot be reduced to merely “rules and tools.” He says they need to be seen as a set of activities and relation-ships that constitute a social system that reciprocates, adapts, and reproduces over time. the key is to understand how the players are integrated. like O’Brien, Morcol says this is the phenomenon called “emergence.”

emergence, Morcol says, is “a system that emerges from the relationships of policy actors” and that “the properties of the emergent system are more than a simple sum of the effects of their behaviors.” His analogy, using biology, is that life is an emergent phenomenon—it arises from the properties of indi-vidual molecules—but life is not able to be reduced to the individual molecules, it only exists when they are combined.

Morcol says that a set of analytics tools has evolved to measure and explain emergence in public administration systems. these include social network analyses, agent-based simulations, and qualitative case studies. Other strate-gies and tools for understanding or managing complex issues include risk management tools, market-based incen-tives, frontline empowerment, a focus on capabilities-based budgeting and planning (instead of the traditional

Selected IBM Center Reports Describing Tools Used to Manage in a COMPLICATED

Environment

Using the Balanced Scorecard by nicholas J. Mathys and Kenneth thompson

Improving Service Delivery in Government with Lean Six Sigma by John Maleyeff

Using Activity-Based Costing to Manage More Effectively by Michael Granoff, David Platt, and igor Vaysman

Project Management in Government: An Introduction to Earned Value Management by Young Hoon Kwak and Frank anbari

Selected IBM Center Reports Describing Tools Used to Manage in a COMPLEx Environment

Designing and Managing Cross-Sector Collaboration: A Case Study in Traffic Congestion by Melissa Stone, emily Saunoi-Sandgren, John Bryson, and Barbara Crosby

Food Safety: Emerging Public-Private Approaches by noel Greis and Monica nogueira

Collaboration and Performance Management in Network Settings: Lessons from Three Watershed Governance Efforts by Mark imperial

Integrating Service Delivery Across Levels of Government by Jeffrey roy and John langford

Managing Recovery: An Insider’s View by edward DeSeve



Viewpoints

“requirements-based” approach), using a balanced scorecard, an emphasis on transparency, real-time performance data; and PerformanceStat review meetings.

Dr. louise Comfort of the University of Pittsburgh says that the key to fostering successful emergence and complex behaviors is to increase transparency—the ability of partici-pants to share relevant information. notably, this may be one of the supporting rationales for the Obama administration’s Open Government initiative.

Coping with Complexityworking in a complex environment that focuses on solving big challenges—such as traffic congestion or food safety—often means learning to live with a high degree of ambiguity and uncertainty. Sargut and McGrath have also identi-fied three coping mechanisms that can provide leaders and managers with some sense of control amidst what they might consider chaos. these include improved forecasting methods, better risk mitigation strategies, and an increased ability to make tradeoffs with less-than-perfect information.

Improved forecasting methods. according to Sargut and McGrath, leaders and managers can take several steps to increase their predictive abilities in a complex environment:

• First, stop using forecasting tools that assume phenomena are truly independent or that averages or medians can be extrapolated to entire populations.

• Second, start using modeling tools that simulate the behavior of a system.

• third, use three types of predictive information. Divide the data you use among three buckets: lagging data, current data, and leading data. too much from any one bucket may create unwanted bias.

Better risk mitigation strategies. Managers need to undertake better risk management when facing a complex environment:

• Start by limiting or even eliminating the expectation of accurate predictions.

• Decouple parts of a larger system so they are not so inter-dependent and build in redundancy to reduce the chance of large-scale failures.

• Get comfortable with using storytelling and counterfactu-als. Stories can give great insight because the storyteller’s reflections are not limited by available data.

• look at the same data through different professional ana-lytic lenses (e.g., the view of an economist vs. a finance analyst vs. a lawyer). triangulation compensates for the limits of any single approach.

in sum, Sargut and McGrath believe that leaders who combine soft forms of analyses, such as storytelling, with hard quantitative analyses will find their combination to be an extremely powerful way of making sense of complex systems.

Making smarter trade-off decisions. Making trade-offs in complex systems is more problematic, but two strategies can help. First, ensure your management team provides diversity of thought. this may make it more difficult to reach deci-sions quickly, but it generally improves the quality of longer-term decisions. Second, be willing to invest in incremental, small investments in new projects or approaches. Sargut and McGrath say that this means: “you manage failure by containing costs, not by eliminating risks.”

Leading in the Midst of ComplexityOnce you’ve figured out that your problem or issue is complex, the next challenge involves understanding how to lead in such an environment. author Jeffrey O’Brien says: “Making the world work better is about untangling and managing complexity,” adding: “Change is easy. it happens by itself ... Progress, on the other hand … is deliberate and difficult. But it’s not random.”

O’Brien offers a five-part approach for untangling a complex situation so leaders can begin addressing it: seeing, mapping, understanding, believing, and acting. He says we can master complex systems by following a discernible path:

Acquire the tools to see the bigger picture. every phenom-enon is a set of data points ready to be captured, says O’Brien. Developing the tools to collect the data, such as building a telescope to see the universe, is the first step.


Viewpoints

Use visual maps. Having data doesn’t create meaning in and of itself, especially if it is a large amount of data. You need to organize data to create meaning, such as with a map of the solar system. O’Brien notes: “However, to be useful, any map must present data selectively … the power to map is the power to define … [w]ithout context, data is just noise. to be useful, it must be organized. that’s precisely what maps do. Maps tell us where we are.” Good visualization tools allow you to step back when looking at complex problems, and they give you a chance to create clarity.

Create a model that provides understanding. a map may tell you where you are, but it doesn’t tell you where you need to be going. to anticipate the future, you need to create a model or conceptual framework that can describe and antici-pate complex behaviors, such as the laws governing astro-physics and rocket propulsion. the goal in private industry, for example, is to model customer behavior well enough to make predictions in real time and anticipate future behaviors.

Believe that the model will work. Having an optimistic belief—or creating a common vision—is about inspiring the confidence among stakeholders that progress is possible, as when the United States sent three astronauts to the moon and back. this often requires a bold leader willing to take risks.

Take decisive action. a leader needs to enable his or her organization’s forward thinkers to design, build, adapt, opti-mize, and automate whatever complex system is being addressed. an example of this is the assembling of the apollo 11 team of scientists and engineers. the key, notes O’Brien, is that “Complex systems aren’t static. they react to our interventions.”

Managing in a Complex EnvironmentManaging in a complex environment, according to Yves Morieux in another recent Harvard Business Review article, is more successful if the manager applies six rules that Morieux developed when studying successful corporations operating in a complex environment. these rules likely apply in the public sector as well.

what do successful organizations do? Morieux says that they adhere to the following six rules. notably, these rules closely parallel some of the principles applied by the Clinton-Gore national Partnership for reinventing Government in the 1990s through its reinvention labs.

1. Improve understanding of what coworkers do. People have to really understand each other’s work and they can learn it only by observing and interacting. “the man-

ager’s job is to make sure that such learning takes place. without this shared understanding, people will blame problems on other people’s lack of intelligence or skills, not on the sources and constraints of the organization.”

2. Reinforce the people who are the integrators. “Conflicts between front and back offices are often inherent. Back offices typically need to standardize processes and work, and front offices have to accommodate the needs of indi-vidual customers.” the response should be to empower line individuals or groups to play that integrative role instead of creating coordination processes and layers. this is one way of differentiating the complicated part of a program from the complex.

3. Expand the amount of power available. People with the least power tend to shoulder the burden of cooperation and get the least credit, so organizations should “ … cre-ate new power bases, by giving individuals new respon-sibilities for issues that matter to others and to the firm’s performance.” at the federal level, Vice President Gore encouraged executives to give employees “permission slips” to act on their own. this is one approach to create a “flexible” organization.


Viewpoints

4. Increase the need for reciprocity. “a good way to spur productive cooperation is to expand the responsibilities of integrators beyond activities over which they have direct control … removing resources is a good way to make people more dependent on, and more cooperative with, one another, because without such buffers, their actions have a greater impact on one another’s effective-ness. eliminating internal monopolies … increases the possibility for reciprocal action and impels cooperation …” after all, “ … the multiplication of corporate require-ments … is arguably a transfer up the hierarchy of certain goals and accountabilities that should remain nearer the bottom of the organization.”

5. Make employees feel “the shadow of the future.” “People are more likely to feel the shadow of the future if you bring the future closer.” For example, reduce the lead times on projects or assign managers to “down-stream” work (e.g., put product design engineers in charge of after-sales service of new products and make them responsible for the warranty budget).

6. Hold accountable the uncooperative. a company modi-fied its reward system by deciding that once a unit told other units it had a problem, the units that failed to cooperate in solving the problem would be held respon-sible for the delay. in the federal government, President Clinton shifted the burden of proof for waivers from internally imposed administrative rules from the request-or to the granter of waivers.

Morieux concludes, noting: “Smart rules allow companies to manage complexity not by prescribing specific behaviors but by creating a context within which optimal behaviors occur

… companies following smart rules are highly efficient in terms of the resources they use, because problems are solved entirely by leveraging, through cooperation, the skills and ingenuity of employees.”

But smart rules are not enough. leaders in today’s world first need to be able to discern whether the challenges they face involve complicated programs or initiatives, or whether they are more closely involved with a complex challenge. Because these two sets of challenges require different strat-egies and tools—and because they involve different gover-nance and accountability approaches—it becomes vitally important for leaders to be reflective about the context of the challenges they face so they can choose wisely. ¥


Viewpoints

the rise and Fall of the Space Shuttle: leadership lessons

By W. Henry Lambright

the space shuttle was a remarkable technological creation—perhaps the most complex machine ever built. it was also an extraordinary government program. it began officially in 1972, when President richard nixon authorized its start. it ended in July 2011 when the last shuttle landed safely. the lifetime cost of the program was $209 billion.

was the shuttle worth the investment? there is disagreement. in my view, it was—but there are downsides to the program. there are positive and negative lessons to be drawn from the shuttle experience. the aim of this essay is to suggest lessons for leadership of large-scale, long-term technological programs that have national significance.

in an earlier article, i wrote of lessons from apollo.1 But apollo was unique—a best-case example of agency and national leadership. it showed technological management at its optimum. the space shuttle presents other lessons, the kinds that come from “normal programs.” in such programs, not only are lessons mixed, but they sometimes are conflicted.

leadership of government programs always involves politics and management. administrative leaders work at the boundary between an organization with a task to perform and a polit-ical environment of president, Congress, rival agencies, interest groups, and other forces. as with the space shuttle, certain programs encompass politics, administration, and technology. Politics and administration shape technology, but technology also shapes politics and administration, since it provides both new options and problems. the space shuttle experience illuminates how naSa leaders have sought to manage a large-scale, long-term technological program in a political environment. their decisions have led to the shuttle’s successes, as well as flaws in running the program.2

Birth:1969–1972the basic responsibility of any agency leader with a tech-nological mission is to make sure his or her agency survives in a vigorous and productive manner. to do that, he or she

must promote (i.e., “sell”) the next big mission to political authorities. Otherwise, the agency loses vitality and fails to adapt to changing times. in promoting a new program, the agency leader must build support inside and outside the agency while overcoming opposition. thus, in the wake of america’s successful moon landing, naSa administrator tom Paine sought to sell a post-apollo program to President richard nixon.

Paine proposed a range of possible activities, such as a Mars mission, a moon-base, a space station, and a shuttle to go to and from the space station. nixon was not interested in so huge an effort. times had changed from 1961 when Kennedy initiated apollo, in part because of apollo’s success. Paine failed in his post-apollo effort and resigned. James Fletcher came on with naSa’s budget in free fall.

Fletcher succeeded by crafting a program that nixon and others, especially OMB, were willing to accept. this was the minimal human spaceflight program on Paine’s menu, the shuttle. it was priced at $5.5 billion for development. Congress went along. in hindsight, Fletcher offered too much

na

Sa/B

ill in

galls


Viewpoints

W. Henry Lambright is Professor of Public Administration and Political Science and Director of the Science and Technology Policy Program at the Maxwell School of Citizenship and Public Affairs at Syracuse University. He teaches courses at the Maxwell School on technology and politics; energy, environment, and resources policy; and bureaucracy and politics.

for too little money. the shuttle was oversold and under-financed. Fletcher may not have had much choice, since he had to satisfy not only nixon, who was interested in an impressive program for electoral and prestige purposes, but OMB, which demanded a “cost-effective” program.

as Michael Griffin, naSa administrator from 2005–2009, observed: “the shuttle was intended to be a robust, reliable vehicle, ready to fly dozens of times per year at a lower cost and a higher level of dependability than any expendable vehicle could ever hope to achieve. it simply didn’t happen. what the shuttle does is stunning, but it is stunningly less than what was intended.”3

Fletcher got a decision from the president to develop the space shuttle, but had to promise more than naSa could deliver in technological advancement and cost savings. But had he not achieved a go-ahead on the shuttle, the human spaceflight mission might have died, and perhaps naSa itself would have been dismantled. with anti-Vietnam war protests

and domestic unrest, the atmosphere of the 1969–1972 period was toxic. the problem for naSa was that the shuttle had no real destination without a space station. instead, its role had to be rationalized as an all-purpose launching system for satellites and planetary spacecraft. Fletcher pack-aged the shuttle as “the” national launching system, enlisting Department of Defense and intelligence agencies as allies in launching classified missions in addition to civilian spacecraft.

Development:1972–1983the development of the shuttle program followed in the 1970s. naSa was ambitious. it had promised a technological leap, a spaceplane that would launch like a rocket and land like an airplane. Griffin has argued that naSa should have developed the shuttle using a more evolutionary approach.

“what if we had not tried for such an enormous techno-logical leap all in one step? what if the goal had been to build an experimental prototype or two, fly them and learn what would work and what was not likely to? then, with that knowledge in hand, we could have proceeded to design and build a more operationally satisfactory system.”4 But that approach, emphasizing gradual learning, was not used. Development was pushed hard.

One result of the approach used was that by the late 1970s, overruns and delays were visible. President Jimmy Carter considered cancellation. But Fletcher had created a strong political constituency for the shuttle in DOD and the intel-ligence community. the naSa administrator robert Frosch found that the shuttle’s connection with the spy satellites Carter wanted for policing nuclear non-proliferation trea-ties was a strong argument for sustaining the program. Carter thus decided to maintain the program and give it the funds it needed to overcome some of its emerging technical problems.

ronald reagan succeeded Carter and he appointed James Beggs naSa administrator. Beggs managed the shuttle through a flight testing stage and a few years beyond. in

President Richard M. Nixon and Dr. James C. Fletcher, NASA administrator, discussed the proposed space shuttle vehicle in San Clemente, California, on January 5, 1972. The President announced that day that the United States should proceed at once with the development of an entirely new type of space transportation system designed to help transform the space frontier into famil-iar territory.

na

Sa


Viewpoints

1983, Beggs persuaded reagan that tests were proving that the shuttle was “operational.” this term connoted a machine that was reliable and capable of routine flights. now that the shuttle worked, argued Beggs, it was time to take “the next logical step” in space policy.

Operations:1983–1993in 1984 reagan decided to take the step Beggs advocated. He called for building a space station. it might not have been possible to launch a large new development program if the shuttle had not been seen as ready to go to the next techno-logical stage, that of operations. For the ensuing few years, it looked like the shuttle was indeed highly capable. it took not only astronauts but civilians into space. these included poli-ticians and eventually, in 1986, a teacher.

then came the explosion of the shuttle Challenger in 1986. this accident took the lives of seven people, the teacher included, and occurred on television, before an audience of millions. this event made clear that the shuttle was not all it was supposed to be, something that was already obvious to many naSa engineers. it was not possible for the shuttle to fly frequently; it took an army of technicians to service the shuttle between well-spaced flights. Certain safety procedures were stretched or ignored.

after the Challenger disaster, an investigation showed that the shuttle was not operational in the reliable, routine sense, and that naSa had made high-risk decisions. Beggs was not administrator at the time of the disaster: he was fighting a criminal charge later proved false. the acting administrator, william Graham, was overwhelmed. reagan brought Fletcher

back to the helm to chart naSa’s recovery as an agency and return the shuttle to flight.

Reorientation:1993–2003national policy decisions were made after Challenger to reduce the stress on the shuttle manifest. naSa would not launch commercial or national security satellites. this meant fewer flights. the main task of the shuttle would be to launch certain scientific spacecraft requiring a shuttle and, particu-larly, to build the space station. it took 32 months for the shuttle to return to flight. when it did so, it launched the Hubble Space telescope. there was also a program begun to develop a possible shuttle successor, which was called the national aerospace Plane. this latter program survived only a few years.

the Space Station had its own problems and delays. it was not until 1993, when Bill Clinton was president and Dan Goldin was naSa administrator, that the Space Station’s design was finalized. Following Goldin’s advocacy, the presi-dent and Congress agreed that the Space Station would be an international Space Station (iSS), in which the former adver-sary, russia, would join europe, Japan, and Canada in part-nership with the United States. naSa was managing partner of this vast enterprise. with iSS finally secure, given its top priority as a post-Cold war symbol of international coopera-tion, the shuttle’s role as its builder was now equally stabi-lized. also, following the astronaut repair of the Hubble telescope in 1993–1994, the shuttle won praise for enabling great scientific discovery.

Unfortunately for naSa, Clinton constrained the overall agency budget. Goldin wanted to give more emphasis to space science. Priorities at naSa now favored the Space Station and science. the shuttle was squeezed. Goldin and the administration also launched a shuttle successor program, called the X-33. it became difficult to acquire money to upgrade the shuttle if it were destined to be soon replaced. Finally, the notion of the shuttle as operational in the routine sense crept back into the collective consciousness of naSa and its political overseers. a good deal of shuttle servicing was privatized, as naSa focused more on iSS and research and development in space science.

near the end of the decade, the X-33 was cancelled. Goldin called for a major shuttle upgrading effort, as well as a Space launch initiative to research technologies that could eventu-ally replace the shuttle. in late 2001, Sean O’Keefe succeeded Dan Goldin as naSa administrator. O’Keefe inherited a huge overrun on iSS, and gave his attention to mitigating this problem. He also called for building a complement to the

NASA model of space shuttle being prepared for testing in Langley’s 16-foot Transonic Tunnel, May 3, 1978.

na

Sa l

angl

ey r

esea

rch

Cen

ter


Viewpoints

shuttle called the Orbital Space Plane. this would take some of the strain off the aging shuttle by launching crew but not cargo to the international Space Station, and help extend the life of the shuttle, perhaps to 2020.

Retirement:2003–2011the shuttle Columbia accident of 2003, which occurred as the shuttle entered the earth’s atmosphere, killed seven astronauts and spread debris over a number of states. the investigation that followed made it clear that the shuttle was still being asked to do too much given its vulnerabili-ties. Moreover, as with Challenger, the accident was shown by investigators to be due not just to technology, but also to management weaknesses. O’Keefe himself came under criti-cism for adding to schedule pressure in his attempts to get the much-delayed Space Station on track via shuttle flights.

O’Keefe guided the shuttle recovery process, making a host of technical and managerial improvements. He even sought to change the traditional naSa culture from one of “prove to me it is unsafe to launch” to “prove to me it is safe.” He also took advantage of the mood of his political masters and the public that lives should not be risked simply to go continu-ally around in earth’s orbit. Beyond the international Space Station, there was a new mission that could be sold.

thus, in 2004, Bush proclaimed that naSa would go back to the moon by 2020, and subsequently to Mars and beyond. naSa would end the shuttle in 2010, the point when the

iSS was expected to be fully assembled. the shuttle would be succeeded by a new rocket-spacecraft system called Constellation that would reach the international Space Station and also go to the moon and deep space. with the shuttle ending, so also ended the nascent Orbital Space Plane.

in 2005, Michael Griffin became naSa administrator. Griffin returned the shuttle, grounded two and a half years, to flight and to resumed building of the iSS. Griffin set as his prime task the implementation of Constellation. He wanted to adopt the kind of rational, evolutionary approach he had not seen used in the case of the shuttle. thus, Constellation would require a space capsule carrying astronauts (Orion), a rocket to do what the shuttle had done in servicing iSS (ares 1), a heavy-lift, deep-space exploration rocket (ares 5), and a device that could land on the moon (altair). in addition, he launched a new program to enlist commercial firms to help launch cargo to the iSS. He began Constellation development with Orion/ares 1.

Unfortunately, Griffin could not persuade Bush and Congress to fund Constellation adequately. when the Obama adminis-tration came to power in 2009, it found Constellation under-funded by at least $3 billion, years behind schedule, and inflicting damage on the budget of naSa’s Space Science Program. in February 2010, Obama summarily killed Constellation, and called for an expanded commercial sector role—i.e., to replace the shuttle in taking astronauts along with cargo to iSS. He also proposed enhanced technology development.

naSa administrator Charles Bolden had little role in the president’s Constellation decision, but he did play the lead-ership role in bringing the shuttle to its conclusion in 2011, one year later than originally scheduled, and selecting the museums to which the remaining spacecraft of the shuttle fleet would be sent. it also became his role to help chart naSa’s future in the post-shuttle era.

ThePost-ShuttleFuture:2011–?Congress—both parties—soundly pushed back at Obama’s cancellation of Constellation. Obama had gone too far for lawmakers in a way that was ineffectively communicated. By mid-april 2010, the President backtracked and later that year the white House and Congress struck a compromise policy. Under the compromise, set in an authorization bill signed by Obama, ares 1 was killed. a version of Orion would be built called the Multi-Purpose Crew Vehicle (MPCV). the development of a heavy-lift, deep-space rocket akin to ares 5 would be accelerated and named the Space launch System (SlS). with ares 1 gone, the role of the shuttle would be

President Ronald Reagan speaks to a crowd of more than 45,000 people at NASA’s Dryden Flight Research Center following the landing of STS-4. To the right of the President are Mrs. Reagan and NASA Administrator James M. Beggs. To the left are STS-4 Columbia astronauts Thomas K. Mattingly and Henry W. Hartsfield, Jr. Prototype Space Shuttle Enterprise is in the background.

na

Sa


Viewpoints

performed by commercial firms, and new technology would be developed.

the prime interim deep-space goal, which Obama announced in april 2010, was not the moon but an asteroid, to be reached by 2025. Mars, perhaps a decade later, was the ultimate destination. the post-shuttle future is uncertain, especially because the shuttle’s demise has placed the U.S. and other spacefaring nations in a dependency relation to russia in launching astronauts to iSS. russia’s recent failure of an unmanned cargo-supply rocket has caused worry about this dependency. also, the commercial firms have yet to prove themselves in providing shuttle-like services.

the point of relying on commercial firms and russia to get to iSS, under Obama policy, was to free up naSa to return to deep-space exploration. On September 14, naSa announced its new deep-space rocket design. it resembled plans for the aborted Constellation heavy-lift rocket and was in part “shuttle-derived.” naSa said it would devote $3 billion a year to building the new deep-space transportation system. with money going to SlS rocket development, the MPCV, and associated costs, naSa would spend $18 billion for the system over the ensuing six years. its aim would be to launch the first unmanned vehicle in 2017.

naSa planned the rocket to be “evolvable.” it could be made more powerful over time. the initial version would potentially have more lift-potential than the shuttle or even the Saturn 5 moon rocket. what was being proposed was an ambitious space system for exploration.5

the $18 billion cost figure was just the beginning. the policy question is whether in these hard times anything as big as this can make it through the political system and be sustained. For that to happen, there are critical implications for leadership, many of which are also “shuttle-derived.”

Conclusions and Lessons Learnedthe space shuttle was a magnificent flying machine. as its design intended, it launched like a rocket and landed like an airplane. it resembled a spaceplane that visionaries after apollo imagined, but with such severe limits in capability that the resemblance was superficial. in spite of those limits, it performed remarkably well over three decades, with 133 successful flights.

For years, the space shuttle was the nation’s prime launch vehicle for satellites, planetary spacecraft, and human beings. it enabled the awe-inspiring Hubble Space telescope to attain orbit and then be serviced several times. it made it

possible to build the international Space Station. it pioneered U.S.-led international connections upon which the iSS has expanded. it was a symbol of U.S. leadership in the world. it inspired young people who saw heroic astronauts living and working in space.

Of the 135 flights, two failed—Challenger and Columbia. Because the shuttle was a national icon, those failures were especially devastating to naSa and america. they graphi-cally revealed technical weaknesses and managerial failures.

there are many leadership lessons, both positive and nega-tive, to be learned from the shuttle experience. the emphasis here is on naSa leadership, but such leadership cannot be separated from national leadership. the shuttle was not only a naSa technology; it was a national technology. as leaders, naSa administrators stand uncomfortably between the managerial tasks of a complex organization and the often capricious political requirements of washington, D.C. these lessons are about launching programs, developing them, sustaining them, coping with crises along the way, transitioning to next-generation technology, and integrating components of the leadership role.

1. Launching. leaders of science and technology agencies like naSa have to be entrepreneurial, taking advan-tage of technical windows of opportunity—and politi-cal necessity—to advocate new missions to keep their agency viable for the next decade and more. Unless

Anchored on the end of orbiter Endeavour’s remote manipulator system arm, astronaut Jeffrey Hoffman (foreground) prepares to install the new wide field planetary camera into the empty cavity of the Hubble Space Telescope (HST). Astronaut Story Musgrave works with a portable foot restraint.

na

Sa


Viewpoints

they extend the technical frontier, their agency can lose its edge and fail to adapt to changing times. naSa is an organization geared to engineering development, not routine operations. while pursuing the next technical generation, leaders must protect ongoing missions. what is perceived as routine may yet be experimental. also, in pursuing the new, the leader should be optimistic but realistic. Overselling can lead to credibility issues and disappointment later. the leader should fight hard for resources for new and existing missions, and if resources are not available, bring ambition in line with what is technically and fiscally possible.

2. Developing. leadership in developmental projects entails balancing pace, cost, and risk. it is best to manage a new technology, especially a large-scale new technology, in an aggressive but evolutionary manner. there is learn-ing and confidence-building along the way to increased complexity. Great leaps forward work best if money is ample. But with great leaps come increased techni-cal and managerial risk. even in a great leap forward or crash project like apollo, there can be a sequence: Mercury, Gemini, and finally apollo itself. the point is to look and learn before leaping.

3. Sustaining. the leader can’t just sell a new program once. He or she must engage in continual advocacy, especially early in the development process. Programs begin under one president and Congress and have to be readopted under succeeding political masters. Funds come in yearly appropriations. leaders must make alliances with politi-cians, other relevant agencies, and international allies. the DOD/intelligence agency partnership naSa had with the shuttle paid off when Carter was president in maintaining the program. Once a program has influential constituents and significant sunk costs, it is likely to sur-vive. However, survival cannot be assumed. For long-term programs, rationales have to adapt.

4. Crisis Decision-Making. the best way to cope with a crisis is not to have it. the two shuttle accidents were as much about management errors as technology. it is clear, in hindsight, that there were warning signals and nega-tive trends. naSa deviated from its own best practices. Once a crisis occurs, the leader has to deal with techni-cal and managerial recovery—finding what went wrong and who was to blame, and fixing the technical and organizational malfunctions. there are also huge public relations and Congressional issues to deal with in win-ning back credibility. the two crises affecting the shuttle point up that agencies (and political authorities) can be in denial. the leader typically is focused on the external pressures facing the agency. He or she can’t forget to

look “down and in” as well as “up and out.” Disasters with the shuttle shut down the program for years. leaders have to be vigilant as technology managers.

5. Transitioning. it was clear at least since the Challenger disaster that the shuttle had serious technical issues and that it would need to be replaced as it aged. Various false starts were made to launch and develop shuttle successor programs. Billions were spent and all efforts died pre-maturely, yet the prospect of a successor helped justify not investing in service upgrades in the shuttle. Shuttle-successor decision-making thus reveals how not to transi-tion technology. this is not only a case of naSa failure. it is also an instance of failure by national policymakers to anticipate and plan for inevitable change.6

6. Integrating components of leadership. a leader has to deal with politics, management, and technological choices simultaneously when a program like the space shuttle is at issue. leadership entails having capable associates to help in decision-making. this is especially true if the leader is not technically trained. However, the shuttle history shows that leaders with technical backgrounds may not necessarily be adept in build-ing alliances and acquiring needed resources from the president and Congress. leaders need teams at the top that embrace relevant political, managerial, and techni-cal skills. Further, the long life of the shuttle shows that leadership takes a relay form. a sequence of leaders have to carry the baton in a marathon. Some may be abler

Against a black night sky, the Space Shuttle Discovery and its seven-member crew head toward Earth-orbit and a scheduled linkup with the International Space Station (ISS). The P5 installation was conducted during the first of three space walks, and involved use of both the shuttle and station’s robotic arms.


Viewpoints

na

Sa

than others in one respect or another, but all have to do their part in keeping the program going. they also have to pave the way for the eventual ending of the program to be as smooth as possible, so as to minimize disruption for the organization, its employees, contractors, and oth-ers that have depended on it. Knowing when and how to terminate a program can be as important as when and how to get it underway.

in conclusion, the rise and fall of the space shuttle provides important lessons that are positive and negative. the shuttle did not achieve its early goals, but still was an amazing machine. it was the key to human spaceflight for three decades. what comes after the shuttle is the leadership chal-lenge ahead.

the proposed naSa space transportation system that has been announced differs from the shuttle. it is an explora-tion system—bolder and more ambitious than the low-earth orbit shuttle. But so was Constellation, and it failed to survive a change in presidents. the only way the present plan can be sustained over the long haul is for the political constitu-ency to match the scale of the technology. Big technologies require large-scale political coalitions. the proposed explo-ration system is very large-scale. Hence, naSa leaders and their allies have to base the new system on rationales that go well beyond jobs in a few “space states.” One of the champions of this new technological system is Senator Kay Bailey Hutchison (r–tX). She is assuredly conscious of jobs. However, she also has said that even conservative budget-cutters will support the new space mission “because they see that as part of the american spirit and most certainly part of the american economy and america’s national security where we cannot afford to be in second place.”7 Creating a constituency that sees space in those terms is the key to sustaining a program that aspires to the stars. ¥

Artist concept of SLS launching.

na

Sa

1 w. Henry lambright, “an apollo Project for Climate Change/energy? History lessons for Future Success,” The Business of Government, Fall/winter 2008, 66–69.

2 For the history of the Space Shuttle, a useful source on which the author relied is Columbia Accident Investigation Board (CAIB) Report, Vol.1 (washington, D.C.: naSa and Government Printing Office, 2003).

3 Michael Griffin, “Operationally Fragile: Space Shuttle was Oversold at the Beginning,” Aviation Week and Space Technology, July 18/25, 2011, 72–73.

4 ibid.

5 Kenneth Chang, “naSa Unveils Giant rocket that Might Someday Go to asteroids and Mars. ” New York Times, September 15, 2011, a23.

6 this point is made clear in the CaiB report, p.211.

7 Quoted in Chang.


Viewpoints

the Cyber Underground economy: Unconventional thinking for a Fundamentally Different Problem

By Gene Loughran and Frank Strickland

Thinking Differently about Cyber Government officials have warned of the potential for a cyber Pearl Harbor that paralyzes one or more critical components of the country’s public and private infrastructures. in april 2011, a cyber attack crashed 30 servers at a South Korean bank, destroying data and eliminating financial services for several days. if north Korea was responsible for the attack, as South Korean officials have asserted, it demonstrates how one of the world’s most impoverished nation-states can use cyber to successfully attack one of the world’s most pros-perous. this would seem to increase the possibility of a digital Pearl Harbor as both rational and rogue state actors acquire cyber warfare capabilities. this conventional thinking could, however, obscure a much greater danger in the near term, one that threatens our economic recovery while feeding on an underground economy.

noah Shachtman, contributing editor at Wired magazine and non-resident fellow at the Brookings institution, argues in a recently published study that the cyber danger better resem-bles neighborhoods controlled by criminal elements, making it difficult for honest people to live and work there. Cyber crime is fueled in no small part by an underground economy wherein criminals buy and sell the information, tools, and techniques used in cyber crimes1.

Government leaders should consider whether the top cyber threat is a digital Pearl Harbor—whatever that means in prac-tical terms—or the high-tech underworld, especially at a time when the american and global economies can ill afford substantial drain from illegal activities. while the respon-sibilities for dealing with crime and underground econo-mies have traditionally fallen to law enforcement officials, a wider range of government leaders should understand the underground cyber economy. the weapons and tactics created there could be used by amateurs and sophisticated actors to attack public information, services, and infrastruc-ture. Moreover, while law enforcement takes the lead in confronting the underground cyber economy, solutions will likely involve a wider range of public and private-sector

groups working together in structures and modalities, most of which do not exist today.

The Nature of the Cyber Underground Economythe cyber underground economy—a collection of virtual marketplaces where cyber criminals buy, sell, and trade goods and services—continues to thrive even in the chal-lenging global economic climate. at the heart of the cyber underground economy are computer hackers. Groups of young computer enthusiasts—motivated by the challenge of accessing restricted networks—formed the earliest cyber criminal gangs in the 1980s.2

almost two decades later, technology and network speeds have advanced substantially, enabling an explosive growth in electronic commerce or e-commerce—with billions of dollars traversing the world wide web (www) each day. Cyber crime, too, has matured —increasing in expertise, sophistication, and organization. no longer a teenage hacker trying to get free phone calls, the modern day cyber criminal is organized and calculating.

Goods sold on the cyber underground primarily consist of payment card information (PCi) such as credit card numbers, Pins, and bank account credentials, personally identifiable information (Pii) such as e-mail accounts, addresses, and social security numbers, and enabling items such as crime-ware. However, the criminal is interested in any information that can be exploited for profit.3 Services include providing mules that can turn stolen accounts into currency, phishing campaign management, web hosting, development services, and botnet leasing.4

the cost of goods and services in the underground economy ranges from two U.S. dollars for a U.S. credit card (CC) dump with card verification value to several hundred U.S. dollars per month for botnet rentals to $3,000 for crime-ware like the Zeus Sploit-Pack, a popular botnet exploitation package.5 with these tools and services, anyone from another


Viewpoints

cybercrime syndicate or gang, a terrorist group, or a nation-state can conduct criminal activities such as fraud, laun-dering money, or stealing identities and secrets.

Cyber crime takes many forms, and most, but not all, have some interaction with the cyber underground economy. this article focuses on major cyber crime issues that directly affect the global economy and include computer intrusions; fraud as it relates to financial services; theft of identities, credit cards, credentials, or trade secrets; and operation of the economy in which these goods and services are bought and sold.

the actual size of the cyber underground is difficult to esti-mate. One approach is to look at costs associated with reported losses as a baseline measure. Over the last 10 years, complaints reported to the internet Crime Complaint Center (iC3) increased nearly twentyfold, with damages estimated at around $559.7 million.6 However, according to a presenta-tion given by Peter Guerra at the 2009 BlackHat Conference in las Vegas, nevada, estimated losses due to cyber crime range widely and may be much higher.

what is clear is that the growth of cyber crime over the last decade, in terms of dollars lost, has been enormous. Considering the vast numbers of compromised accounts potentially available for sale in the underground economy (over 130 million credit card, debit card, and bank account credentials stolen or lost in 2009 in the U.S. and Canada), current estimates placing the global cyber underground economy in the tens of billions of U.S. dollars are entirely plausible.7

Participants in the Cyber Underground EconomyOver the course of 30 years, cyber crime has evolved from teenage pranks to a well-oiled, organized criminal economy. Organized crime, as used here, means cyber crime groups with some sort of organizational structure and does not

imply that traditional organized crime groups are involved in a meaningful way in the cyber underground economy. in fact, there is only scant evidence of this type of involvement.8 ShadowCrew and DarkMarket were two major carding forums that illustrate organized cyber crime.

ShadowCrew, whose organization was modeled on the italian Mafia, boasted more than 4,000 registered members; DarkMarket had more than 2,000. the U.S. government estimated that ShadowCrew was responsible for an esti-mated $4 million in losses9 due to its criminal activities. Both ShadowCrew and DarkMarket harbored an economy of underground cyber criminals who bought, sold, and traded goods and services used in identity theft, spam, fraud, and other illicit activity.

albert Gonzalez, a rising star in the organized crime gang known as ShadowCrew, came onto the scene in 2003 when he was caught using blank debit cards with stolen card numbers (presumably from the ShadowCrew carder forum) to withdraw hundreds of dollars in cash. after a stint as a U.S. Secret Service informant, Gonzalez returned to a life of crime, enlisting the expertise of programmers and crimi-nals he knew to build a small group that would ultimately

Gene Loughran, Senior Managing Consultant, leads advanced mission analytics work for cyber and several other national security missions. Gene has led several breakthroughs in assessing the value of information and IT, most recently for the U.S. Central Command’s communications architecture in the war zones. Gene is a Certified Information Systems Security Professional (CISSP) and holds the CIO University’s certification in federal executive information competencies.

Leaders

Technical Elite Facilitators Operators

Drop

Victims

Leaders pay elites andfacilitators for services

Operators monetize this datathrough stolen identities,fraudulent transactions, cardinformation

Facilitatorsmaintain/rent botnetsand purchase exploitsto execute attacks.

Elites discover exploitsand write malicious code

Victims execute malwareand lose PII/PCI

Malware

Cash & Orders

Orders

Profits

Cash-commission

PII/P

CI

Spam

Note that this is only a model. Roles, communications methods, and payment nodes can vary greatly.

For example, the RBS scam involved only a few leaders, one technical elite (also a leader), and a handfulof facilitators that fed operators in over 200 cities worldwide.

Figure 1. Cyber Underground Economy, Roles and Relationship Model (IBM)


Viewpoints

engineer one of the largest breaches in history—the tJX heist. tJX was the largest theft of credit card data in U.S. history, totaling close to one and a half years’ worth of t.J. Maxx credit card transactions, or about 94 million records in the U.S., Puerto rico, and Canada.10

as cyber crime has evolved and forums for trading illicit goods and services have matured, the economy has diver-sified. this diversification has created demand for special-ized services; seldom will only one individual create, fund, spread, and cash in on a criminal operation without such assistance. it has also created a taxonomy of recurring roles played by individuals in underground endeavors. these roles can be generalized into the following categories: leaders, technical elites, facilitators, and operators.

the albert Gonzalez group had significant technical and facilitative connections with eastern europe, while the rBS worldPay heist was perpetrated primarily by Moldovans, estonians, and russians. in fact, many of the large “carder” forums use (or used) russian as the primary language, as indicated in Figure 2.11

However, as Figure 2 also shows, english is commonly found on these sites as well, and the role of the U.S. as host

to infrastructure, operators, and targets in the cyber under-ground economy cannot be denied. information from rSa’s anti-Fraud Command Center shows that the U.S. is the “top [phishing attack] hosting country—hosting 57 percent of attacks” and is also the top targeted country, with 37% of attack volume.12

Given the global nature of the internet, this should not be surprising. Cyber crime is almost inherently a global phenomenon; just as traffic occurs on the world wide web, the cyber underground economy is worldwide as well. Global cyber criminals use the unique features of the internet to increase their available targets, obscure their identity, and hamper police efforts.

Figure 3 shows the global extent of Zeus botnet command & control (C&C) servers (note that this likely represents more than one Zeus botnet and botnet operator).

How Does the Cyber Underground Economy Function?Cyber crime in the traditional sense encompasses crimi-nals motivated by greed and money. the lowest hanging fruit for cyber criminals is unknowing, uninformed users or

Frank B. Strickland is a Senior Fellow with the IBM Center for The Business of Government and a Partner with IBM’s Global Business Services. Frank is a career intelligence officer with 24 years experience in CIA’s Senior Intelligence Service and the U.S. Marine Corps. During this time, Frank led a number of programs focused on developing innovative solutions and methodologies to measure and analyze mission performance. Frank co-founded Edge Consulting, a boutique consulting firm that achieved national recognition for pioneering work in the application of operations research methods and IT to quantify the value of intelligence.

Figure 2. CarderPlanet.Com Website Front Page-partial (F-Secure) Figure 3. Global Zeus C&C Servers, Nov 2010 (Abuse.ch)


Viewpoints

consumers who fall victim to social engineering tricks, online fraud, or malicious e-mails. For a criminal, normal consumers offer little risk for decent gains. For example, spammers can potentially make up to US$8,000 per week, while botnet operators can make up to US$620,000 annually.13

Most of the cyber underground economy revolves around the theft, resale, and monetization of stolen information. there are many ways cyber criminals do this, but typically, a “dealer” will organize a campaign to illicitly obtain data of value, such as identity information, bank accounts, and debit or credit card information. the dealer enlists at least two other players in the underground economy. 14 the first is a technically sophisticated “researcher,” someone who discovers security vulnerabilities or writes exploits the dealer can use to steal data. 15 Second, most operations require the services of a botnet farmer to send spam, host websites used in phishing attacks, host websites used in drive-by down-loads, or provide any number of other services the dealer might use as an attack vector to obtain the desired data. 16 the dealer may employ other facilitators—for example, they may hire a spammer rather than conduct this part of the operation themselves.

From there, the dealer mounts the attack and collects data. the dealer then typically sells the data in bulk to operators or “consumers” who specialize in monetization through a variety of means: stealing money through atMs with compro-mised debit cards, using stolen credit cards for fraudu-lent purchases, creating stolen identities, or performing any number of other forms of wire fraud. the whole process is depicted in Figure 4.

More specifically, carding networks refers to the individual and group associations that form to: 1) acquire 2) process 3) monetize and 4) distribute the proceeds from stolen

payment card information. Carding networks are endemic of information theft and resale activities in the underground economy. Many internet forums specialize in this particular activity, including a number of well-known examples, such as ShadowCrew and CarderPlanet. Figure 5 depicts the func-tions of a typical carding network.

Carding networks employ a variety of means to obtain com-promised information. Some of the most popular include:

Phishing. in these operations, a spammer will send out e-mails that appear to come from a bank, a tax collec-tion agency, or any other organization to which people will readily divulge financial information. these e-mails contain a link to a website that again appears official, but only serves as a front to collect the required data—in this case, name, debit card number, and Pin.

Network intrusion. a person with a wireless-enabled laptop breaks into a corporate network and downloads customer data, complete with card information. in the tJX case, albert Gonzalez masterminded the compromise of over 45 million cards with this technique. 19

ATM skimming. Vendors build specialized hardware that attaches directly to atMs and gas pumps to capture the magnetic stripe and Pin from debit cards.

Malware. Vulnerability researchers identify exploits or write trojans to capture the desired data. these tools use keystroke logging, form capture, screen capture—any technique the researcher can imagine to capture the data from the victim’s computer or in transit. Computers become infected through drive-by downloads on websites, files contained in spam, or software vulnerabilities. 20

Researcher

Farmer

Dealer Consumer

Researchers discoverexploits and / or writemalicious code

Farmers maintain botnetsand their associatedcommand and controlsystems

Dealers purchase exploits fromresearchers and rent botnets fromfarmers and use them to executeattacks. The goals include, but arenot limited to spam distribution,brute force password attacks, DDOS attacks, and other dataextraction techniques

Most dealer activities, with the exception of DDOS, involvegathering data. Consumersmonetize this data through stolenidentities, fraudulent transactions,stolen credit card information, anda variety of other means

Capability

Money

Data

Money

Blank/CardMaker

Skimmer

HardwareVendor

Carder

Specialized hardwareto capture ATM carddata and PIN

Mules

SafeAcct

Fencer /Facilitator Drop

Acct

ATM

Hacker

ExploitResearcher

Specialized software tobreak into accountdatabases

Phisher

BotnetFarmer

Specialized network ofcomputers used to trickaccount holders into revealingcard, account data, and PCIs

Stolen Credit Card, Debit Card, Bank Account, and Personal Identification Information

Blanks orembossedcards

Useable cards Duplicate cards used in ATMs to cash outcards and depositmoney into dropaccounts

Facilitator sets upsafe accounts and arranges transfer

Cyber Underground Economy

Figure 5. Example Carding Network (IBM)Figure 4. Information Theft and Resale Model (IBM)


Viewpoints

the groups that capture the data will often sell it to another outfit that specializes in monetizing that data. Buyers and sellers come together on carding forums, where the data are often sold in bulk, with prices dependent on factors like the origin and verified value of the card. 21

Most “cash out” operations utilize one or both of the follow-ing techniques:

Money mules. these individuals use duplicate atM cards to take money directly from financial institutions. the mule takes a cut and places the rest in an account. From there, the money eventually reaches the data provider, often through a series of mules to disguise the transaction.

Reshippers. reshippers use stolen account credentials from the data provider to purchase goods online, which are then shipped to a drop site. the reshipper picks up goods from the drop and ships them to the data provider in exchange for some percentage of the value of the item. these operations may employ a series of reshippers, again to obfuscate the transactions. 22

an example of a typical carding forum is shown in Figure 6. this webpage is from “theGrifters.net” carding forum, which was active from 2005-2006 after the ShadowCrew site was taken down by the U.S. Secret Service in Operation Firewall with the assistance of the young albert Gonzalez.

Future Trends in the Cyber Underground Economyit’s clear that, without radical changes in the nature of the internet, international cyber crime laws and enforcement, or security countermeasures, the cyber underground economy will continue to function and indeed may thrive. Prices of

traditional goods and services seem to have steadily fallen since the early days of the economy and many now appear as commodities.

although not authoritative, this information corroborates expert opinions that prices for payment card and person-ally identifiable information have fallen significantly.23 this may be an indicator that the cyber underground economy is simply obeying laws of supply and demand, since, as seen in Figure 7, the availability (supply) of this information to crimi-nals, by all accounts, has significantly increased over time.

the dropoff in compromised records in 2010 may be a result of the police takedown of albert Gonzalez and his affiliates. if this is indeed the case, then there is hope that police action and cooperation can significantly impact the cyber underground economy. So far, however, there are no indications that the dropoff in records compromised in 2010 has resulted in increased prices on the cyber under-ground economy.

Unfortunately, the cyber underground has always recon-stituted itself, even after very successful police operations. there are always those who evade the law and reconnect, in different forums or in private, with their partners in crime to attempt further scams. the vast and varied opportunities for the technologically savvy and morally bankrupt make this very likely to happen again in the future.

technological advancements and changes in social behav-iors as a result of technological innovation will continue to shape and drive criminal behavior. advances in computing power, storage, and bandwidth serve as the foundation for an interconnected world of devices, networks, and social needs, making a ubiquitous computing environment a reality.

Figure 6. ‘TheGrifters.Net’ Carding Forum Webpage (Archive.org)

Figure 7. PCI/PII records compromised by theft or loss (2002-2010) (IBM/DataLossDB.org)

Theft / Loss of PCI and PII Records

0

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

2002 2003 2004 2005 2006 2007 2008 2009 2010


Viewpoints

trends in cloud computing, virtualization, expanded storage, and mobile computing continue to advance society’s need for convenience, connectivity, and speed. at the distant end of the moral spectrum, these same trends enable criminal and corpo-rate enterprises, and provide nation-states expanded access to lucrative information and a broader target set, whether for financial gain or economic, military, or political advantage.

New Thinking—New Solutionsin a recent aspen institute panel on cybersecurity, three cyber experts, including former nSa and Cia Director, General Michael V. Hayden, USaF (ret.), emphasized that the cyber threat represents a fundamentally different security problem for which new thinking and solutions are required. Digital networks, which are becoming the central nervous systems for commercial, governmental, and societal enter-prises worldwide, are attracting criminals ranging from cyber vandals to sophisticated organizations that specialize in cyber

crime. the same technologies that increase the benefits of cyberspace, such as mobile devices and cloud computing, also present new vulnerabilities to criminal attacks.

these cyber criminals are fed by an underground economy. Perhaps government leaders’ thinking should be unconven-tional in that, at least in the near term, as much or more emphasis is placed on the underground cyber economy and cyber crime as is placed on nation-states’ capabilities and a potential cyber Pearl Harbor. Such thinking may lead to strategic benefits for our economy, and also government’s ability to deter other problems in cyberspace, such as cyber attacks by nation-state sponsored groups. we hope that this information on the cyber underground economy will help public and private-sector leaders challenge their thinking about cyber priorities, and consider fundamentally new modalities for combating cyber crime and, specifically, the underground economy. ¥

1 independent of Shachtman’s work, Gene loughran led a team in 2010 that assessed implications of cyber underground economy to a national security mission.

2 http://en.wikipedia.org/wiki/the_414s

3 Fossl, Marc, et al. Symantec Report on the Underground Economy from July 2007 to June 2008. Symantec. 2008. PDF; http://csrc.nist.gov/pub-lications/nistpubs/800-122/sp800-122.pdf; http://www.gfi.com/security/pcifaqs.htm.

4 Fossl, Marc, et al. Symantec Report on the Underground Economy from July 2007 to June 2008. Symantec. 2008. PDF.

5 Paget, Francois. Cybercrime and Hacktivism. Mcafee labs. 2010. PDF.

6 2009 Internet Crime Report. internet Crime Complain Center. 2009. 4. PDF.

7 DatalossDB.org. Account Record Loss/Theft. iBM analysis. 2010.

8 http://mobile.eweek.com/c/a/Security/web-Security-report-Outlines-Structure-of-Cybercrime-Gangs/;http://mobile.eweek.com/c/a/Security/inside-the-russian-CyberUnderground-517933/

9 http://en.wikipedia.org/wiki/ShadowCrew

10 http://datalossdb.org/incidents/548-hack-exposes-94-million-credit-card-numbers-and-transaction-details

11 http://www.f-secure.com/weblog/archives/carderplanet_cc.htm

12 http://www.rsa.com/solutions/consumer_authentication/intelreport/ 11188_Online_Fraud_report_1110.pdf

13 Guerra, Peter. How Economics and Information Security Affects Cyber Crime and What This Means in the Context of a Global Recession. 2009 BlackHat Conference. 2009. 3. PDF.

14 http://www.securityweek.com/structure-crybercrime-organization- hackers-have-supply-chains-too

15 http://www.fastcompany.com/magazine/127/nexttech-fear-of-a-black-hat.html

16 rajab,M.,Zarfoss,J.,“A multifaceted approach to understanding the botnet phenomenon,” pp.41–52. 6th aCMSiGCOMM conference on internet Measurement, SeSSiOn: Security and Privacy, 2006.

17 Graham et al. Cyber Fraud ttPs, p. 22. 2009.

18 http://www.computerworld.com/s/article/97017/Secret_Service_busts_online_organized_crime_ring

19 Verizon Data Breach investigations report, p. 63. 2010.

20 Burgess, Christopher and richard Power. Secrets Stolen, Fortunes Lost: Preventing Intellectual Property Theft and Economic Espionage in the 21st Century, page 13. 2008.

21 Symantec internet Security threat report, p.8. 2009

22 Graham et al. Cyber Fraud ttPs, p. 22. 2009.

23 http://mobile.eweek.com/c/a/Security/web-Security-report-Outlines-Structure-of-Cybercrime-Gangs/


Forum: Leading in an Era of Complex ChallengesManagement

the GPra Modernization act of 2010 requires each federal agency to identify a set of priority goals, designate someone to be the goal leader for each goal, review progress toward these goals, and publicly report at least quarterly on that progress. Such a process represents a more focused review (concentrating on the priority goals) than the broader perfor-mance reviews described here.

Several federal agencies have responded to the need for data-driven performance reviews by developing an approach that consists of regularly held, structured, data-driven perfor-mance review meetings. this is simple in concept. Some elements, such as periodic program review meetings, are common throughout government. the data-driven perfor-mance reviews presented in this report reflect such features but add other elements.

What are Data-Driven Performance Reviews?the overall process discussed here refers to a leadership strategy that federal executives can use to monitor and improve the efficiency and effectiveness of their department, program, or group of programs. this goal is pursued through the use of regularly scheduled, structured, data-driven meet-ings to review performance indicators with department or program personnel. Data are normally the centerpiece of the meeting discussion, although non-quantitative information naturally plays a major role as well.

these meetings bear a close resemblance to other types of program reviews that federal officials traditionally hold with members of their staff to identify emerging trends and discuss key program issues and problems. However, the process described here is distinguished by the frequency and regu-larity of its meetings, the focus on the latest performance indi-cators, and the somewhat structured format.

“regular” means that meetings with reporting units are held at least twice a year and on a regularly scheduled basis.

a Guide to Data-Driven Performance reviewsBy Harry Hatry and Elizabeth Davies

Excerpt from the GPRA ModernizationActof2010

aGenCY USe OF PerFOrManCe inFOrMatiOn tO aCHieVe aGenCY PriOritY GOalS.

not less than quarterly, at each agency required to develop agency priority goals… the head of the agency and Chief Operating Officer, with the support of the agency Performance improvement Officer, shall—

(1) for each agency priority goal, review with the appropriate goal leader the progress achieved dur-ing the most recent quarter, overall trend data, and the likelihood of meeting the planned level of perfor-mance;

(2) coordinate with relevant personnel within and out-side the agency who contribute to the accomplishment of each agency priority goal;

(3) assess whether relevant organizations, program activities, regulations, policies, and other activities are contributing as planned to the agency priority goals;

(4) categorize agency priority goals by risk of not achieving the planned level of performance; and

(5) for agency priority goals at greatest risk of not meet-ing the planned level of performance, identify prospects and strategies for performance improvement, including any needed changes to agency program activities, regu-lations, policies, or other activities.

Source: Title 31 U.S. Code, Section 1121 (b)


Management

Harry P. Hatry is a Distinguished Fellow and Director of the Public Management Program for the Urban Institute. He has worked on public sector issues in performance measurement, performance management, and employee/contractor motivation and incentives for many years. He is a fel-low of the National Academy of Public Administration.

“Structured” means that the meetings focus on the latest available performance information and have a reasonably common format.

this approach to conducting performance reviews can be used to:

• encourage attention to the need for continuous improvement

• Help identify policies and practices that are working well and ones in need of improvement

• improve the organization’s effectiveness and efficiency

• Provide a more convincing case to OMB and Congress that the organization is using its funds wisely and that its budget requests are justified

• increase accountability of programs under review at meetings

this guide presents the core components of using regular, data-driven performance reviews as a strategic leadership approach that can be employed by managers and executives at multiple levels of the federal government. it addresses the series of questions listed in the accompanying sidebar.

the questions may be applied at any level within a depart-ment or agency, such as by the headquarters level of a federal department (e.g., the Department of Housing and Urban Development (HUD)), an independent agency (e.g., environmental Protection agency (ePa)), an agency within a department (e.g., the Food and Drug administration (FDa)), or by divisions or programs at lower levels. the guide focuses on suggestions for officials at the highest levels of the federal government. However, it also provides suggestions for how lower-level officials in an organization can implement this process.

Following is an excerpt from the full report describing how one agency, HUD, has developed its performance reviews, which they call HUDStat.

Questions to Address When Implementing Data-Driven Performance Reviews

The Core Team 1. what type of leadership is needed?2. who should be included in start-up activities?3. what staffing is needed?

The Meeting Structure4. Should meetings focus on reporting units or on specific

themes? 5. How frequently should the meetings be held?6. How long should meetings last?

The Performance Indicators7. which performance indicators should be reviewed?8. Does existing technology support regular reporting of

performance indicators?

Meeting Preparation9. what pre-meeting preparation is needed?10. Should the leader notify units of major issues and

questions in advance?

Running the Meeting11. which individuals inside the organization should attend

the meetings?12. Should meetings be open to individuals outside the

organization? 13. what is the content and typical agenda of these meetings?14. what should be the tone of the performance review

meeting?15. what should be the physical set-up of the meetings?

Following Up after the Meeting16. what follow-up should be undertaken?

Sustaining the Process17. who needs to support this process?18. what did managers recommend to sustain this process?19. Does the use of data-driven performance reviews deliver

improved services and cost savings?


Management

Elizabeth Davies is a Research Associate at the Urban Institute’s Metropolitan Housing & Communities Policy Center and Justice Policy Center. Her research has focused on issues surrounding prisoner reentry, public housing, and intergovernmental partnerships.

Department of Housing and Urban Development’s HUDStatthe Department of Housing and Urban Development (HUD) conducts quarterly performance meetings focused on each of its four OMB high priority performance goals. HUDStat staff members (in the Office of Strategic Planning and Management) go through an extensive preparation process before each meeting.

History

2009(June): Priority goal-setting exercise begins

2010(October): First meeting of HUDStat

Logistics

• Structure: Meetings are theme-based, currently on the subjects of rental housing, fore closures, veterans’ home-lessness, and energy efficiency—HUD’s four OMB high priority performance goals.

• Location: Meetings are held in a department conference room with some visual and audio equipment added. Given the size of the room and the presence of some people on a teleconference, each person “at the table” has a microphone. Six flatscreen monitors in the center of the room display the data slides. Seating is assigned but this practice is being reconsidered.

• Staffing: the process is staffed by seven Fte in the Office of Strategic Planning and Management (out of a total of 26 Fte in OSPM). analysts are assigned to each theme and are responsible for working with programs to get data and monitoring action items.

• Timing: Meetings are for two hours. reporting units for each of the four themes meet every four months; some reporting units contribute to multiple themes. thus, HUD spaces its meetings so that there is one PerformanceStat meeting each month.

• Attendance: By invitation only. thirty participants at the table, including the secretary, regional directors (10), deputy secretary, senior advisors, assistant secretaries, general counsel, and the heads of other support offices, such as the CFO, CiO, and CHCO. all regional directors participate in the meetings. Career program managers and staff from headquarters and the field attend and actively participate. Videoconferencing has been used but is still considered to be problematic. HUD is

What HUDStat Is and Is Not

IS …• review of progress toward goals, understanding

where problems exist, and using collective knowledge to address these issues early

• Sharing local successes and best practices in order to replicate what works

• Opportunity to collaborate in order to achieve goals

• Focus on “places” as much as “programs”

• relentless focus on improving data quality and problem-solving

IS NOT …• a “show-and-tell” to the HUD Secretary that avoids

the issues

• Focus only on what is not on track or not working

• Programmatic focused discussion on how each program is doing individually, without looking at how programs interact locally

• a process that is finished after an individual HUDStat session

Source: www.performance.gov


Management

considering recording meetings, opening up the meetings to the department, and posting session information on the intranet.

• Data: HUD’s strategic plan identified more than 20 measures associated with high-priority performance goals. Data are available drilled down to the city and county level.

Meeting Preparation

Six weeks before the meeting, OSPM analysts begin working with program and field staff to review data and trends. they pay close attention to performance variation across the country and identify areas with exceptional or troubling performance. Once these areas have been identified, OSPM and program staff often conduct a site visit to meet with field staff and discuss the findings, as well as identify barriers to performance and possible solutions for discussion during the HUDStat meeting. regional administrators participate in the preparation process. OSPM staff work with reporting unit staff to prepare data tables, charts, and other visuals and share them with the reporting unit leadership before the meeting. Some regions hold pre-meeting preparation sessions. OSPM writes a brief memo to the secretary explaining the find-ings and preparing the secretary for the meeting. OSPM staff routinely meet with reporting units and programs to make sure that the data are being presented accurately and to ensure that there are no surprises when it comes time to meet.

Meeting Content

1. agenda2. introduction3. review of previous meeting’s follow-up items4. Discuss overall findings5. Discuss specific regions or areas6. Brainstorm next steps

Meeting Follow-Up

1. Smaller groups may be convened to discuss and priori-tize list of next steps developed at the meeting.

2. OSPM summarizes meeting and prepares a list of action items, including who is responsible for the action and the target completion date.

3. a smaller group, consisting of about 15 high-ranking offi-cials (including the secretary and regional administrators) prioritizes those actions. it was formed because the larger group struggled with finding time to prioritize next steps in the actual HUDStat meeting. Prioritization helps deter-mines how much time office staff will spend monitoring progress.

4. OSPM staff monitor progress on action items.

Next Steps

HUD is developing a HUDStat business intelligence system, designed as a tool for managers and staff at headquarters and in the field to track progress on key performance goals. there are currently no interfaces with other systems; data are manu-ally extracted from the program system by program staff and e-mailed to database administrators for loading into HUDStat. One of the goals of this initiative is to transform the way HUD uses data. From a management perspective, HUD must be highly focused on the day-to-day performance of its grantees and staff. regular reporting on the key program inputs, activi-ties, outputs, and outcomes for all offices and at all organi-zational levels of the department are intended to become the norm if HUD is to achieve its goal of becoming a data-driven agency. the department hopes that the new business intel-ligence system will give program and field leadership the ability to calculate and monitor their own statistics. ¥

TO LEARN MORE

A Guide to Data-Driven Performance Reviewsby Harry Hatry and Elizabeth Davies







in 2009, the american recovery and reinvestment act (arra) provided a one-time boost in spending to state and local governments of more than $275 billion which was distributed via 65 different federal programs (both new programs and some already in existence). the funds were intended to help bridge the immediate fiscal problems created by the Great recession. arra funds were accompa-nied by a new, centralized system of strict financial account-ability and performance reporting, with frequent reporting requirements. these new requirements, as well as the rapid implementation timeframe required by arra, created an enormous implementation challenge for all the participants in our federal-state-local-nonprofit intergovernmental system.

this report focuses on arra’s implementation in three Virginia municipalities and examines how arra’s legisla-tive requirements are fostering a new intergovernmental part-nership. these three cities are alexandria, a historic town located in the national capital region; richmond, the capital city of the Commonwealth of Virginia; and Blacksburg, a dynamic small town in southern Virginia and home to Virginia tech.

Virginia and ARRAimplementation of arra presented a number of challenges for Virginia. Meeting federal expectations for speed of imple-mentation, increased information to enhance transparency and accountability, risk management, and collaboration were central to the planning and efforts to implement the act. transparency of reporting to enhance accountability was particularly important for a Democratic governor facing a republican-controlled state house of delegates concerned that arra money could be used to curry political favor across the state.

while individual Virginia state agencies varied in their preparedness for reporting under arra, the structure of grants at the federal level varied as well. the state central accounting system provided overall continuity. the comptrol-ler’s office was continuously engaged with the agencies as they developed their reporting processes, but the reporting responsibility rested directly with the agencies themselves. these responsibilities were often not new, as state agencies had responsibilities for coordinating with federal agencies, communicating issues related to the management process,

Virginia’s implementation of the american recovery and reinvestment act: Forging a new intergovernmental Partnership

By Anne Khademian and Sang Choi

Implementation Strategies Design of the Grants Management Process

CommunicationPractices

Coordination with Local Partners

Outside Government

Alexandria: incident Command System Strategy

Centralized, Separate Political: advanced technical: agency-Based

Centralized Committee Process

Richmond: it-Driven Strategy Decentralized, Separate Political: Medium

technical: agency-Based

Minimal Coordination, Contract-Based with nonprofits

Blacksburg: Partnership-leveraged Strategy

Decentralized, integratedPolitical: Medium technical: Central to agency-Based

Partnered initiatives

Implementation Strategies for Alexandria, Richmond, and Blacksburg—Three Strategic Dimensions


Management

Anne M. Khademian is a professor of public administration and policy with Virginia Tech, and was recently named the Director for the School of Public and International Affairs in the College of Architecture and Urban Studies.

Her research interests focus on leadership and organizational culture, inclusive management, policy networks, and the work of organizations involved in homeland security and financial regulation.

and clarifying issues before passage of the arra. what has changed, according to participants in the process, is the rigor of the reporting process and improvements in transparency, particularly at the sub-recipient reporting level.

Management of the arra implementation in alexandria, Blacksburg, and richmond has resulted in three distinct strat-egies which are classified as:

• incident Command System• information technology (it) Driven• Partnership leveraged

three features differentiate these three strategies. they are the design of the overall management system, the political and technical communication practices of the respective cities, and the characterization of coordination patterns with non-city government partners. in each city, attention to federal expectations for transparency, accountability, speed, risk management, and performance were high priorities, resulting in some distinct innovations; but each city addressed these expectations in ways that varied with respect to design, communication practices, and non-city partnerships.

Advancing a New Intergovernmental Partnershipthe management strategies used by three municipalities in Virginia to implement arra have been developed to respond to and work within the federal requirements that are influenc-ing the relationship of the municipalities with the federal gov-ernment for implementing the grant administration process, and beyond. Here, federal requirements are reviewed for:

• increased speed of implementation• increased information for accountability, transparency,

and performance• risk management as a driving factor• increased communication and collaboration

Increased Speed of Implementation

arra provisions placed a premium on speed of imple-mentation. this had implications for the intergovernmental

Alexandria: Lessons Learned

• An incident command approach can facilitate speed of implementation, communication and collaboration, and risk mitigation.

• Individuals with targeted responsibility for coor-dinating key aspects of the task force work facili-tated speed of implementation.

• Efforts to improve and standardize reporting have generated support for continuous improvement in the city.

Richmond: Lessons Learned

• Effective entrepreneurial efforts by IT staff, with the support of leadership, fostered the collabora-tive data-sharing process for managing federal grants.

• A regional grants group provided key technical communication for sharing and risk management.

• An IT-based grants management system provided standardization to reduce reporting errors and improve information sharing within the city, but also may reduce the person-to-person contact between agencies at the city and federal level.

Blacksburg: Lessons Learned

• Collaboration takes time and expectations must be carefully managed.

• In smaller municipalities, a point person for managing technical communication and overseeing the grants management process provides sufficient breadth of information and coordination.

• The strategic choice to stay out of the competi-tive grants processes was a key component of risk management for this small town.


Management

Sang Ok Choi is an Assistant Professor of the Center for Public Administration and Policy at the School of Public and International Affairs at Virginia Tech. His research interest focuses on intergovernmental rela-tions, public management networks, and emergency management.

partnership between local governments and the federal government. in late 2008, in anticipation of a federal stim-ulus package becoming law, municipalities had to move quickly to plan to apply for competitive and formula-based federal grants, loans, and contracts, and prepare to imple-ment these programs to maximize local economic opportu-nities and job creation. localities expected that legislation would be in place shortly after January (arra passed in February 2009), and they needed to hit the ground running.

while not all intergovernmental efforts post-arra will have the same intense expectations for rapid implementation in the midst of economic crisis, the emphasis on speed of imple-mentation and the increased importance of communication and preparation have been advanced as important elements of the emerging intergovernmental partnership.

Increased Information for Accountability, Transparency, and Performance Consolidation of more detailed financial and performance reporting with greater frequency and transparency to the fed-eral government is a key element of arra that is also shap-ing the intergovernmental partnership. expectations for reporting that would foster accountability, transparency, and performance were central to the preparation for and manage-ment of arra at the local level, and will likely continue to influence reporting and accountability across a wide range of intergovernmental policy areas. Since passage of arra, state and local elected officials and their managers have been accountable for reporting:

• Federal funds received under arra• expenditure of funds on activities specified in the grant

applications• the oversight of sub-recipients in the granting process• the reporting of grant administration practices and imple-

mentation of the grants

in many respects, these expectations connected to reporting are not new. accountability, transparency, and performance have always been objectives associated with reporting on

the expenditure of federal funds. Yet, as demonstrated by the case studies, several enabling factors give these expectations new teeth.

Risk Management as a Driving Factor

arra mandates that federal departments and agencies commence with “expenditures and activities as quickly as possible consistent with prudent management” to achieve the goals of the legislation (Pl 111-5, Section 3). OMB guid-ance for federal agencies and grant recipients details the practices required for good governance, risk management, and program integrity. risk management practices are central to this guidance to ensure accomplishment of accountability objectives such as the prompt, fair, and reasonable distribu-tion of funds, transparency, mitigation of fraud, waste, error and abuse, minimal delays, and achievement of program goals. at the local level, grant managers must consider the implications of the funding on the long-term fiscal demands on a state or city.

Increased Communication and Collaboration

a final requirement of arra that contributes to a new inter-governmental partnership is an increased emphasis on effec-tive communication and collaboration. this has two key aspects. First, implementation of arra, according to many of the people interviewed for this study, bolstered commu-nication with federal officials (both in granting agencies and in the OMB) and improved the overall communication prac-tices, particularly between the cities and the federal govern-ment, and between the state and the federal government. Key to effectively implementing arra, and in overall intergovern-mental relations, is the quality of political communication.

Second, arra expectations for more rigorous oversight of subgrant recipients is promoting more thoughtful partnerships at the local level, with more explicit guidelines for working together.


Management

Looking Forward

Did ARRA work?

arra worked on several levels. First, its requirements for speed, increased information, risk management, and collabo-ration prompted the municipal governments of alexandria, Blacksburg, and richmond to improve their management of federal grants. the money went out quickly, the govern-ments have been timely in their reporting, and there has been minimal waste, fraud, or abuse. the risk of embarrassment and the need to manage that risk proved to be one moti-vating factor in local government success. From the scrutiny and high-profile comments by Vice President Biden about the need to get arra right—implemented quickly, reported in a timely and accessible manner, risks properly managed, and collaborative in nature—to the guidance and support of OMB, to the visible and accessible reports of any given locality available on recovery.gov, city leaders were moti-vated to get arra right.

Second, the requirements for arra fostered new trends in the intergovernmental partnership between federal and local governments. these trends are reflected in the requirements:

• an expectation for speedy implementation of programs• a partnership built upon better information sharing to

promote transparency, accountability, and performance• a gradual shift toward risk management as the framework

for engaging many activities• a preference for collaboration rather than top–down

decision-making

while arra funds were temporary increases in spending, its effects on the intergovernmental partnership may be longer-lasting. For example, the immediate availability of data in one central location, in particular its accessibility to anyone with internet access, has moved the partnership from a more siloed, top-down set of relationships to a more interactive process driven by real-time data.

while the partnership has changed throughout history depending upon spending patterns, funding mechanisms, and ideology, intergovernmental management and relationships have suffered from declining interest in previous decades. the reinvigoration of this interest is a positive result that can foster better public policy outcomes across our federal system.

Is ARRA a Model for Future Intergovernmental Initiatives?

the economic crisis created a unique and urgent situation. the question that comes to mind is whether arra, with its emphasis on speed, information sharing, risk management,

and collaboration, is a one-time opportunity to enliven the intergovernmental partnership. as a model, arra alters the incentives facing local government and federal government executives. with results or progress reports immediately accessible, and the potential for embarrassment from lack of cooperation or limited capacity high, incentives to collabo-rate, to share more information, and to work more quickly are likely to take hold not only in the grants management process, but in other policy areas as well.

each city made changes in its traditional grant administra-tive processes to implement arra, some more elaborate than others, but all reflective of the demands and expecta-tions of the new intergovernmental partnership. in the city of richmond and the Commonwealth of Virginia, highly decen-tralized grant administration systems became more centrally managed in the process of implementing arra. Both retained the role of city agencies or state agencies taking the lead in working with federal granting agencies, but both implemented oversight systems that standardized the ways in which agency proposals and awards were managed, and provided greater access to information for which agencies have traditionally been responsible. in alexandria, implementation of arra promoted a more centrally managed grant administration system, but one that relied heavily upon the expertise and legwork of the city agencies for providing the input needed to propel the process. Blacksburg made minor adjustments in its processes that resulted in more standardization as well. ¥

TO LEARN MORE

Virginia’s Implementation of the American Recovery and Reinvestment Act: Forging a New Intergovernmental Partnershipby Anne Khademian and Sang Choi







Use of Dashboards in GovernmentBy Sukumar Ganapati

the use of dashboards in federal government agencies increased dramatically following the Obama administration’s Open Government initiative issued in January 2009, which espoused the principles of transparency, participation, and collaboration. Federal agencies now use dashboards both for internal organizational management and to disseminate performance measures for transparency and accountability.

in February 2009, a month after President Obama’s inau-guration, his administration implemented recovery.gov, incorporating a dashboard for transparency and account-ability in federal stimulus funding under the 2009 american recovery and reinvestment act. Subsequently, the U.S. Chief information Officer, Vivek Kundra, implemented the it Dashboard in June 2009 for accountability and transparency in federal it investments. the Open Government Directive, issued in December 2009, required the creation of an “Open Government Dashboard.”

in august 2010, in advance of the 2010 GPra Modernization act (GPraMa), the Office of Management and Budget (OMB) launched Performance.gov, a central website with dashboards to track key performance metrics of federal agencies. Performance.gov is currently open only to federal government employees. Several additional federal agencies (e.g., the Food and Drug administration, the Centers for Medicare and Medicaid Services, the United States Patent and trademark Office) have implemented dashboards to track performance metrics. as described by tim O’reilly, “the dashboards are an incredibly ambitious undertaking.”

Stephen Few defines a dashboard as a “visual display of the most important information needed to achieve one or more objectives; consolidated and arranged on a single screen so the information can be monitored at a glance.” Dashboards summarize key performance metrics of organizations. they typically integrate data from different sources and display

performance measures through informative graphics. the visualization allows readers to understand complex data in less time than it would take to read similar material located in the text of a full report. at the same time, the dash-boards should be self-contained. Dashboards can be static (providing metrics at a particular time, e.g., PDF files) or dynamic (providing metrics in real time, e.g., interactive web dashboards).

in terms of their use, dashboards can be of three types:

• Operational (for monitoring in real time)

• Tactical (for analysis and benchmarking)

• Strategic (for tracking achievement of strategic objectives)

there are two key elements in dashboard implementation and use:

• Dashboard design: The design is not meant only for aesthetics, but also for easy grasp of actionable data and information. leading dashboard experts highlight three core principles of design: the dashboard should fit on a single page; the dashboard should be simple; and it should use the best display medium (i.e., the graphic visual) for communicating data effectively.

• Dashboard performance measures: Federal agencies follow GPraMa requirements in reporting their perfor-mance. an agency must carefully select performance metrics to reflect its strategic goals. the measures should be useful to agencies in improving performance (e.g., the face–to-face techStat sessions used in conjunction with the it Dashboard to discuss it investments). the measures should also serve the broader goal of public accountability.

this report examines the emerging implementation and uses of dashboards in the federal government. the intent is to identify practical principles in using dashboards in federal


Management

Sukumar Ganapati joined the Public Administration faculty at Florida International University in August 2004. His research mainly deals with the role of institutions in the urban context, particularly with respect to hous-ing, community development, and information technology. He obtained his Ph.D. in Planning from the University of Southern California in 2003.

agencies. Case studies of selected federal dashboards are included. the dashboards are both cross-agency and agency-specific. the case studies include:

• the it Dashboard operated by OMB’s Office of e-Government & information technology

• two financial transparency dashboards (USaspending.gov and recovery.gov)

• two agency-specific dashboards (Food and Drug administration’s FDa-traCK and the U.S. Patent and trademark Organization’s (USPtO) Data Visualization Center).

the case studies offer insights into the uses of dashboards. Four lessons can be learned from them.

Lesson One: Data Quality is Key to the Credibility of Dashboard Performance Measuresthe dashboards in the case studies (especially the cross-agency ones) have faced data quality issues. this compro-mises dashboard performance measures and could eventually damage the dashboard’s credibility. to overcome some of the data quality issues, standardized data defini-tions and training of key agency personnel are required. adopting a standard schema, such as the extensible Business reporting language (XBrl) used in business appli-cations, for federal financial dashboards such as recovery.gov or USaspending.gov would enhance data quality and reporting efficiency.

Lesson Two: Best Practices Resources Are Necessary in the Design and Use of Dashboardsagencies have different design approaches to dashboards. whereas the USPtO dashboards are visually rich, the FDa-traCK dashboards are essentially tables. the recovery.gov and USaspending.gov dashboards feature maps. although design may be idiosyncratic and vary based on technical capacity within the organization, a set of best

practices or standards would enhance design quality. the Usability.gov website, developed a decade ago, enhanced government websites by providing standardized guidelines. a website for standardizing dashboards or giving best practices would be equally useful. Focus group feedback would assist in enhancing the usability of the dashboards as would the creation of communities of practice within government.

Lesson Three: Performance Measures Should Reflect Organization GoalsPerformance measures differ based on agency needs. Cross-agency dashboards have common measures. the essential approach should be to align performance measures to orga-nizational goals. this increases the usability of dashboards. responding to different audiences requires reporting different performance metrics. indeed, performance measures in some dashboards (e.g., recovery.gov, USPtO’s Data Visualization Center, FDa-traCK) evolved in response to different audi-ences’ needs.

Lesson Four: Dashboards are Only Tools; Effectiveness Depends on Use Dashboards are only tools to visualize performance data. their effectiveness depends on how organizations use them to enhance internal performance and external accountability and transparency. Organizations should be cognizant of both the strengths and weaknesses of dashboards. Dashboards need to be useful to the organization’s purposes. in internal organizational management, this implies that dashboards are used in the decision-making process (e.g., the face-to-face sessions based on the Federal it dashboard and FDa-traCK to identify weak projects). at the external accountability level, use of dashboards means that agencies are exposing their performance metrics to public scrutiny. in this context, both the dashboard performance measures and the under-lying data need to be publicly accessible for credible organi-zational accountability.


Management

The IT Dashboardinformation technology investments in the federal govern-ment have been estimated at $79 billion in 2011. to ensure greater transparency, OMB (under the Federal Chief information Officer’s leadership) launched the it Dashboard on June 30, 2009, as a public website to provide information about it investments. Data for the dashboard are drawn from the exhibit 53, required to be submitted annually by federal agencies in response to OMB Memorandum M-02-01 (Guidance for Preparing and Submitting Security Plans of action and Milestones). exhibit 53, which reports it invest-ments, also requires agencies to identify major investments called “Capital asset Plans” (exhibit 300). the dashboard includes general information on over 7,000 investments (from exhibit 53), and detailed data for over 800 major investments (from exhibit 300) reported by 27 agencies. in essence, the dashboard displays basic investment information (e.g., invest-ment name, description), CiO’s information (e.g., name, contact e-mail, photo, bio), awarded contracts (e.g., obli-gation amount, vendor name, type, contract start and end dates), performance information (e.g., measurement indicator, baseline, actual results, target, rating), and cost/schedule ratings (milestone description, percent completed, planned completion date, planned cost, actual cost, cost variance).

Federal Financial Transparency Dashboardsthere are two principal sites for federal financial trans-parency: USaspending.gov and recovery.gov. these sites are mainly oriented toward disseminating federal finan-cial data. the sites incorporate dashboards with financial indicators. USaspending.gov was launched in December 2007 in response to the Federal Funding accountability and transparency act, which required OMB to maintain a single, searchable website that contains information on all federal spending awards (FFata, P.l.109-282, as amended by section 6202(a) of P.l. 110-252). recovery.gov, launched in February 2009, was mandated by the american recovery and reinvestment act of 2009 to “foster greater accountability and transparency in the use of funds made available in this act.”

USAspending.gov

the USaspending.gov site provides data about contracts, grants, loans, and other types of spending in the federal gov-ernment. the spending data required are:

• name of the entity receiving the award • award amount• award information (transaction type, funding agency, etc.) • entity location • Unique identifier of the entity receiving the award


Management

Recovery.govthe recovery act was passed in February 2009 in response to the economic crisis. to enhance accountability and trans-parency, the recovery act established the accountability and transparency Board as an independent agency to track funding and to maintain a public website for disseminating funding information. the Board launched recovery.gov, an online mechanism for tracking the stimulus funding. the recovery.gov site was launched on February 17, 2009, the day the President signed the recovery act. the site was expected to give user-friendly tracking tools in the form of charts, graphs, and maps that provide national overviews or display specific zip codes. the site is also meant to be a mechanism for the public to report suspected fraud, waste, or abuse related to the stimulus funding. the site also reports the number of complaints of wrongdoing and the number of triggered investigations.

Agency-Specific Dashboardsa few federal agencies have implemented dashboards to track their agency-specific performance metrics. two such dashboards are included here: the FDa-traCK and USPtO’s Data Visualization Center. the two dashboards have different approaches in terms of their design and use, as discussed below.

FDA-TRACK

the Food and Drug administration (FDa) is an agency within the Department of Health and Human Services (DHHS). it has a public health mission, to ensure the safety, efficacy, and security of human and veterinary drugs, biological products, medical devices, food supply, cosmetics, and products that emit radiation; and to regulate the manufacture, marketing, and distribution of tobacco products. the FDa imple-mented FDa-traCK in april 2009 as an agency-wide perfor-mance management program in direct response to President Obama’s Open Government initiative.


Management

USPTO’s Data Visualization Center

the United States Patent and trademark Office (USPtO) is an agency within the U.S. Department of Commerce. its main task is to grant U.S. patents and to register trademarks. it advises the Secretary of Commerce and federal agencies on intellectual property (iP) policy, protection, and enforce-ment. it also provides training, education, and capacity building programs on iP issues and iP enforcement. in 2009,

the USPtO launched several initiatives in response to the Obama administration’s Open Government Directive. One initiative is the USPtO Data Visualization Center, a perfor-mance dashboard, launched on September 7, 2010. the site has been evolving, with new sets of performance measures added since its inception. the USPtO dashboards are not just for internal management, but also show the agency’s perfor-mance to stakeholders and the general public. ¥

TO LEARN MORE

Use of Dashboards in Governmentby Sukumar Ganapati






Research Abstracts

recently Published iBM Center reports

Managing recovery: an insider’s View

G. Edward DeSevethe author of this report, G. edward DeSeve, served as the implementation Coordinator with three titles: Special advisor to the President for recovery implementation, assistant to the Vice President, and Senior advisor to the Director of the Office of Management and Budget. Based on his expe-rience, DeSeve identifies seven primary lessons from implementation of the recovery act, which provides a template for agency planning in the future. then, in a particularly intriguing conclusion, DeSeve suggests how government leaders can address future major challenges on the scale of the Y2K crisis, Hurricane Katrina, or the SarS epidemic. DeSeve offers guiding principles for how to successfully meet future challenges when acting on big problems.

a leader’s Guide to transformation: Developing a Playbook for Successful Change initiatives

Robert A. F. Reisnerto assist government leaders in better understanding the characteristics of successful transforma-tions, the iBM Center asked robert reisner, an expert in government transformation, to interview a select group of federal executives who have recently undertaken major transformation initiatives in their organizations. Based on these interviews, a series of five interrelated steps that government executives should consider when they undertake any transformation initiative: develop a compel-ling transformation game plan; align the transformation game plan with your mission; center your game plan with a reliable innovation process; transform strategically; and design implementation to sustain transformations.

reverse auctioning: Saving Money and increasing transparency

David Wyldthis new report contains original research on the potential of reverse auctions as a government cost-saving tool that also saves time and increases transparency. Professor wyld presents a case study of how the U.S. Department of State has used reverse auctions to save money and increase competition, a numerical analysis of the scope of government procurements appropriate for reverse auctions, and estimated potential savings to be derived by government in increased use of reverse auctions.



Research Abstracts


a Guide to Data-Driven Performance reviews

Harry Hatry, Elizabeth Daviesthis report examines federal agencies that are using data-driven performance reviews to improve agency effectiveness and efficiency. it draws from practices of agencies, including state and local governments. the report is a “how to” guide for setting up and running data-driven perfor-mance reviews. it lays out who needs to be involved, how to organize the meetings, what kinds of performance information should be collected, how to run the meetings, and how to follow up afterwards.

Seven Management imperatives

The IBM Center for The Business of GovernmentPeriodically the iBM Center staff steps back and reflects on the insights provided by its authors of more than 300 research reports and by some 300 senior government executives interviewed over the past 13 years. Based on their insights, we teased out what seem to be seven management imperatives that will determine the success of public leaders in what is increasingly being called the “new normal”—an environment of uncertainty, demands for more, and dramatic budget cuts. we believe government leaders and managers should incorporate these seven imperatives into their management practices to execute their organization’s mission successfully.


Anne M. Khademian, Sang Ok ChoiBased on an analysis of the implementation of recovery act grants in Virginia, the report offers a series of rec ommendations to improve the federal grants process in the future. the authors conclude that the approach used to implement the recovery act may also serve as a new bench-mark for rapid informa tion sharing. in fact, Congress seems pleased enough with the data collec-tion approaches used in the recovery act to be con sidering expanding the same type of reporting requirements to all federal spending.


Research Abstracts

assessing Public Participation in an Open Government era: a review of Federal agency Plans

Carolyn J. Lukensmeyer, Joseph P Goldman, David Sternthis report focuses on how well these agency plans increase public participation and collabo-ration. the authors compare what the large agencies say they plan to do, against the criteria used by professionals who conduct high-quality public participation initiatives in the non-profit world. the report provides details of best practices being applied by federal agencies in engaging the public on-line, face-to-face, and through formal mechanisms, as well as what agencies are doing to change their cultures to support greater participation by the public. it also offers a series of specific recommendations for what next steps the white House and agencies might take to spread these best practices across the government.

implementing Sustainability in Federal agencies: an early assessment of President Obama’s executive Order 13514

Daniel Fiorinothe purpose of this report is to describe the initial implementation of executive Order 13514. the report aims to examine the eO as a strategy for promoting sustainability in federal agen-cies, assess its early implementation—its strengths, weaknesses, and areas for improvement offer recommendations for the next phases of implementing the eO. Our goal is that this report will provide the groundwork for subsequent evaluations to be conducted later in the eO’s implemen-tation process. the concept of sustainability is a unifying principle of executive Order 13514 and it represents a significant effort to articulate the concept of sustainability and incorporate it into national policy.


Sukumar Ganapati

this report examines some of the early agency dashboards and offers constructive lessons to federal managers on how to use them effectively. One approach the Obama administration has latched onto to make sense out of the deluge of data is the use of on-line “dashboards” of perfor-mance data that track the key performance metrics of various federal agencies and programs. the administration has touted the benefits of dashboards as a way of organizing and filtering performance data so it makes sense to decision makers so they can understand and act on it.

to obtain printed copies free of charge, please specify the number of copies needed and return this form to the Center either:

BY MAIL iBM Center for the Business of Government 600 14th Street, nw Second Floor washington, DC 20005

BY E-MAIL Order requests can be e-mailed to the Center at: [email protected]

name ______________________________________________________________________________________________________

title __________________________________________________________________________________________________________________________________

Organization ________________________________________________________________________________________________________________________

address ______________________________________________________________________________________________________________________________

City _______________________________________________________________________ State __________________________ Zip _____________________

telephone ___________________________________________________________________________________________________________________________

e-mail ________________________________________________________________________________________________________________________________

Publications can also be downloaded in Acrobat format from the Center’s website: www.businessofgovernment.org.

How to Order recent Publications

REPORT TITLE QUANTITY

Managing recovery: an insider’s View

a leader’s Guide to transformation: Developing a Playbook for Successful Change initiatives

reverse auctioning: Saving Money and increasing transparency

a Guide to Data-Driven Performance reviews

Seven Management imperatives


assessing Public Participation in an Open Government era: a review of Federal agency Plans

implementing Sustainability in Federal agencies: an early assessment of President Obama’s executive Order 13514


• Conversations with government executives

• Sharing management insights, advice, and best practices

• Changing the way government does business

THE BUSINESS OF GOVERNMENT HOUR

ON THE AIR Saturdays at 9:00 am, Fridays at 2:00 pm on CBS Radio (1580 AM)*


ON THE WEB Download current and archived shows: businessofgovernment.org

11103 IBM BOG cov FALL 11 INSIDE; 4/C: CMYK

Five Easy Ways to Connect

CONNECTING RESEARCH TO PRACTICE

businessofgovernment.org

Magazine Radio BlogReports


BlogRadio Books Magazine ReportsBlogRadio Books Magazine Reports

Books

BlogRadio Books Magazine ReportsBlogRadio Books Magazine Reports BlogRadio Books Magazine Reports

11103 IBM BOG cov FALL 11 OUTSIDE; 5C: CMYK + PMS 201 with UV Coating

* Spine is 1/4”. Adjust width appropriately to page count.

The Business of G

overnment

About IBM Global Business ServicesWith consultants and professional staff in more than 160 countriesglobally, IBM Global Business Services is the world’s largest consulting services organization. IBM Global Business Services provides clients with business process and industry expertise, a deep understanding of technology solutions that address specific industry issues, and the ability to design, build, and run those solutions in a way that delivers bottom-line business value. For more information visit www.ibm.com.

For additional information, contact:Jonathan D. BreulExecutive DirectorIBM Center for The Business of Government600 14th Street, NW Second Floor Washington, DC 20005

(202) 551-9342e-mail: [email protected]: www.businessofgovernment.org

L I S T E N T O

THE BUSINESS OF GOVERNMENT HOURweekly conversations with government leaders

Saturdays at 9:00 am, Fridays at 2:00 pm on CBS Radio (1580 AM)*


600 14th Street, NW Second FloorWashington, DC 20005

About the IBM Center for The Business of GovernmentThe IBM Center for The Business of Government connects public management research with practice. Since 1998, we have helped public sector executives improve the effectiveness of government with practical ideas and original thinking. We sponsor independent research by top minds in academe and the nonprofit sector, and we create opportunities for dialogue on a broad range of public management topics.

The Center is one of the ways that IBM seeks to advance knowledge on how to improve public sector effectiveness. The IBM Center focuses on the future of the operation and management of the public sector.

FA

LL

/WIN

TE

R 2

01

1

The Business of GovernmentBUSINESSOFGOVERNMENT.ORG FALL/WINTER 2011

Dr. Paul AnastasU.S. Environmental Protection Agency

Linda GibbsCity of New York

Robert HaleU.S. Department of Defense

Beth McGrathU.S. Department of Defense

David MatsudaU.S. Department of Transportation

David LebrykU.S. Department of the Treasury

Dr. Kathleen MerriganU.S. Department of Agriculture

Dr. Nick NayakU.S. Department of Homeland Security

Jonathan Woodson, M.D.U.S. Department of Defense

3 From the Executive Director

4 From the Managing Editor’s Desk

6 Conversations with LeadersA Conversation with Dr. Kathleen Merrigan

A Conversation with Jonathan Woodson, M.D.

A Conversation with Linda Gibbs

20 Profiles in LeadershipDr. Paul Anastas

David Lebryk

David Matsuda

Dr. Nick Nayak

32 InsightsShaping the Future of the National Guard

38 PerspectivesChanging the Way the U.S. Department of Defense Does Business

50 ForumLeading in an Era of Complex Challenges

66 ViewpointsManaging the Complicated vs. the Complex

The Rise and Fall of the Space Shuttle: Leadership Lessons

The Cyber Underground Economy: Unconventional Thinking for a Fundamentally Different Problem

84 ManagementA Guide to Data-Driven Performance Reviews

Virginia’s Implementation of the American Recovery and Reinvestment Act: Forging a New Intergovernmental Partnership


97 Research Abstracts


The Business of Government Magazine - Fall/Winter 2011

Documents

Transcript of The Business of Government Magazine - Fall/Winter 2011