Posts Tagged: reengineering

Management / Political — 0 Comments
10
Jul 11

Government’s Proper Role, Ever-Expanding?

We are in a critical time for government budget economists.  Congress and the White House are currently seeking to control budget deficits through spending cuts, tax increases, or a combination of the two.  In Thursday’s Wall Street Journal, Professor Paul C. Light suggests a comprehensive program to save an impressive-sounding one trillion dollars. His plan imports private sector tried and true management techniques:

  • Reduce by one-third senior and midlevel federal management layers and presidential appointees.
  • Freeze hiring of all senior and midlevel managers.
  • “Harvest” all monies owed to the government: eliminate mistaken or fraudulent payments to federal beneficiaries, providers and contractors;  collect  import fees, leases, fines, unpaid loans,  delinquent taxes.
  • Streamline operations: eliminate duplication, overlap, multiple administrative and payroll systems.
  •  Eliminate automatic time-on-the-job increases, pass/fail appraisals and grade inflation; assess and demand 3% per year productivity improvements.
  • Insist on comparative qualitative employee appraisal:  that is, only 10% of employees are most highly rated.
  • Cut the number of contract employees.  See The Easy Way Washington Could Save $1 Trillion

To avoid the political implementation problems, Professor Light would create the Government Reorganization Authority (GRA), a quasi independent authority modeled on the Resolution Trust Corporation (RTC).  The RTC was created during the 1989 savings and loan crisis and given full authority to hire, fire and pay executives at will in service of cleaning up failed savings and loans.  RTC was given a seven year limitation to effect the cleanup.  Creation of a GRA with a seven year sunset  and  broad powers to hire, fire, collect debts, etc. might be the modern equivalent of  the RTC.

A Better Idea than the GRA?

Why do we even need the government functions that Professor Light wants to creatively downsize?  Professor Light assumes that we must continue to perform these governmental functions, but at the same time he proposes to shrink the size of the supporting bureaucracy and make it more efficient.

In contrast, my starting point would be to eliminate these government functions altogether.  We have discussed reengineering government in previous blogs.  See e.g. Reengineer First, Privatize Second, Time to Revisit Public Sector Reengineering and Why Not Reengineer Government?  Instead of deciding to reduce the size of the bureaucracy, we should decide whether it should exist.   Remember the truism of government: bureaucracies will thrive and flourish well beyond their original mission.  Further, they will arrogate power unto themselves in fields unrelated to the original mission.

Do we need Departments of Energy, Agriculture and Education?  All three are creations of now questionable value and overlap with other agencies.   Readers should ask themselves in each case: do we have a comprehensive energy policy? Are we still paying farmers not to grow crops and are food prices higher or lower? Are our students better educated?

Do we still need the Food and Drug Administration?  Could not the free marketplace monitor and assess the quality and value of food and drugs? Could not threats of litigation police manufacturer behavior?

The National Labor Relations Board?   Our court system and the arbitration process can certainly handle workplace infractions; it happens all the time. The same logic applies to the Equal Employment Opportunity Commission.

Each of these departments, boards, agencies and commissions have deeply entrenched spending constituencies which assure their continued existence.  Unfortunately, sacred cows are expensive to feed and maintain.

Start the Conversation Now

Eliminating or combining governmental departments or functions would not be easy, but it would be a more intellectually honest approach to the problem of ever burgeoning government deficits.  Given the current crisis, now is the perfect time to begin the conversation.

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Municipal Finance / Political / State Finance — 0 Comments
19
Jul 10

Reengineer First, Privatize Second

At the suggestion of one of my readers, I am going to try a slightly different format for this post.   I enjoy responding to Global Economic Trend Analysis, an excellent and well known blog written by Michael Shedlock (“Mish”).  Recently, I weighed in on his Transit Union Plays Nuclear Terrorist Card which analyzes the brazenness of public unions and the need to privatize government activities.  Here, in edited form, is my first comment:

One of Shedlock’s continuing themes is waste in government, especially at state and municipal levels.   His solution has been to privatize as much as possible.  Mish applauds Chris Christie, the recently elected NJ governor, for commissioning a study to evaluate privatizing state functions.  At the top of the list was privatization of motor vehicle inspectors.

I am a fan of privatization; however, there is a predicate step.  Before even the question, “should we privatize a function?” we should be asking, “do we really need to perform the function at all?”   Privatizing is a great idea after you have made a fundamental decision whether or not you need the service performed. The modern state is involved in too many questionable functions to begin with.

Here are two examples.  I have lived through many NJ motor vehicle inspections and I am still not sure of their purpose. The driver must stop the car to check the brakes, honk the horn and start the windshield wipers. An emissions test is also required. Why not just eliminate the entire process and every two years have an approved mechanic certify the car roadworthy or not.  Similarly, NJ may not have enough state parks, or some may argue there are too many.  Why not examine park usage and achieve savings by closing some of the parks before privatizing them?

In New York, candidate for governor Andrew Cuomo has promised to revisit the 1000 state agencies and commissions that have proliferated in the state. This is only a promise.  Let’s see if he follows through over the opposition of his union constituency.

Please consider:

http://www.prophetwithoutprofit.com/2009/09/29/why-not-reengineer-government/

http://www.prophetwithoutprofit.com/2010/03/10/can-we-afford-our-criminal-justice-system/

http://www.prophetwithoutprofit.com/2010/06/03/time-to-revisit-public-sector-reengineering/

My second comment, again edited:

One more thought on Governor Christie and reengineering the state government. The growth of state government is analogous to your garage or attic. Clutter grows because you put that old lawnmower, bike, chest of drawers, or dishes aside because someday you promise yourself that the item will be useful in the future. The clutter grows and you swear that you will spend a weekend or a day off taking the items to Goodwill or throwing them out. That day is usually postponed indefinitely.

State government grows the same way, with proliferations of new programs, agencies, and commissions.  In many cases, they are  supposed to be temporary. One day we realize that these temporary programs are now permanent and have a life of their own. No one wants to clean out “the government attic” because there is now a constituency that “needs” this governmental service. This constituency will produce impassioned pleas to newspaper editorial boards and take out ads. I would suggest that we are at the financial tipping point where the government “attic” needs to be cleaned out. It is a matter of both good will and financial necessity.

Conclusion

Reengineering government is now a financial necessity.  It would be a win for the taxpayer,  as not only would there be obvious savings, but also the possibility of better delivery of government services.  Before privatization, I would hire experts to decide what is a core governmental function, what functions can be effectively outsourced and privatized and what functions can be eliminated.  This requires “zero based” thinking and slaughtering of some sacred cows.  Do we have too many schools, state colleges, museums, state parks, transit lines?  Do we have too few?

Heresy perhaps, but somebody needs to ask the question rather than accept the status quo.

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Municipal Finance / Political / State Finance — 0 Comments
3
Jun 10

Time to Revisit Public Sector Reengineering

Almost a year ago, I discussed the failure of government to analyze and remake itself.  See Why Not Reengineer Government? The private sector has embraced this core agenda and has emerged leaner, more profitable and productive.  For political reasons states and cities have been slower in this effort, despite the obvious need to do so.   Only with their budgets publicly in shambles are the savvy politicians slowly and reluctantly embracing reengineering.

State budget gaps have spawned two distinct approaches.   The first is the financial meat cleaver: slash budgets, furlough or lay off employees, and end grants to counties and municipalities.  But Andrew Cuomo, NY State Attorney General and candidate for governor proposes a more thoughtful approach.

How Many Agencies??

New York has more than 1000 byzantine state agencies designed like Rube Goldberg machines.  Let’s take a look at this phenomenon:

Robert A. Caro’s 1974 biography of Robert Moses, “The Power Broker,” chronicled the rise and expansion of the state’s largely autonomous system of public authorities, entities like the Niagara Falls Bridge Commission and the Metropolitan Transportation Authority. These bodies are responsible for the bulk of New York’s debt, and they control most of the state’s infrastructure.

But even state agencies, which are controlled by the governor’s office, have become Rube Goldberg-like bureaucracies. Mr. Cuomo’s report notes that the Health Department has had at least 87 administrative subgroups imposed upon it by legislation over the years, including 46 councils, 17 boards, 6 institutes, 6 committees, 5 facilities, 2 task forces, 2 offices, 2 advisory panels and a work group. One entity is called the Task Force on Health Effects of Toll Plaza Air Quality in New York City.  See Cuomo to Propose Eliminating Many State Agencies.

Now the state is functionally bankrupt.   Cuomo proposes a Spending and Government Efficiency Commission (another agency!) to overhaul and consolidate state government.  To eliminate and consolidate agencies, Cuomo would delegate broad powers from the legislature to the governor.  As a reference for how revolutionary this all is, Governor Al Smith effected the last such overhaul in 1919.

Furloughs and Cuts

California, Wisconsin, Maryland, Hawaii and other states have jumped on the other bandwagon, slashing budgets and furloughing employees. Not surprisingly, public sector unions are passionately resisting.  As indicated in my first post on this issue, California has 489 state agencies that cry out for consolidation or elimination.

Necessity is a Bad Mother

We have discussed the concept of “it doesn’t matter, until it matters.” No one cared about bloated public employee payrolls, rich compensation and benefits packages and proliferating governmental authorities, commissions and agencies.  We could afford it! Unfortunately, now we cannot.

I wish Andrew Cuomo well, but I have some gnawing concerns. Do we really need another commission to effect governmental restructuring?  Why not employ a politically independent consulting firm that is expert in reengineering?  What about privatizing governmental functions altogether?  Will a newly elected Governor Cuomo have the political resolve to convince a reluctant legislature?

If Cuomo merely intends to combine one thousand agencies into fewer ones without further examination of necessity, then he has missed a timely and historic opportunity.  We need a reassessment of what role we want government to play.  Zero based budgeting and a holistic and philosophical look at the role of government would be an excellent starting point.  Certainly, our political establishment has lost touch with the core role of government on its way to creating this unwieldy bureaucratic behemoth.

Necessity will be a bad mother and a frugal one too.

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Business / Political — 0 Comments
29
Sep 09

Why not Reengineer Government?

I have been accused by some of my readership of being unduly negative, offering problems but no solutions.  In service of a remedy, a proposal: faced with huge deficits and proposed federal and state tax increases, why not reengineer government?

What is Reengineering?

Reengineering is the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service and speed.  Back in the 80’s I met the man who coined the term, Dr. Michael Hammer.  At the time, American companies created elaborately overstaffed and redundant bureaucracies. One department of a corporation had no idea what another department was doing.  Many times they were both doing the same thing.  It was also the dawn of leveraged buyouts and corporate takeovers.  Either companies became “lean or mean” or they were takeover targets.

The need for reengineering was encapsulated in Gordon Gekko’s speech (Wall Street-1987) at the Teldar Paper shareholder meeting:

Teldar Paper has 33 different vice presidents each earning over 200 thousand dollars a year. Now, I have spent the last two months analyzing what all these guys do, and I still can’t figure it out. One thing I do know is that our paper company lost 110 million dollars last year, and I’ll bet that half of that was spent in all the paperwork going back and forth between all these vice presidents. The new law of evolution in corporate America seems to be survival of the unfittest.

Applying a good measure of common sense Dr. Hammer and his team examined business processes and determined where overlapping functions could be eliminated and consolidated.  His focus was to eliminate unnecessary work and make the core functions operate more efficiently.  The result often was better service, fewer but more focused employees and ultimately happier customers.

A Stroll by the Department of Commerce

Around the same time, during my work on a case in Washington, DC, I went on a stroll past the US Department of Commerce. In an ugly, New Deal building overlooking the Mall, there were thousands of offices, some with window planters. These folks looked like they had settled into their careers for the next 30 or 40 years.  What did these people do? More importantly now, what do we need them to do?

Between 2004 and 2008 employment in the US Department of Commerce increased 10%, from 30,000 to over 33,000 employees.  The mission of the Department is stated as:

a. Participating with other Government agencies in the creation of national policy, through the President’s Cabinet and its subdivisions.
b. Promoting and assisting international trade.
c. Strengthening the international economic position of the United States.
d. Promoting progressive domestic business policies and growth.
e.Improving comprehension and uses of the physical environment and its oceanic life.
f. Ensuring effective use and growth of the Nation’s scientific and technical resources.
g. Acquiring, analyzing, and disseminating information regarding the Nation and the economy to help achieve increased social and economic benefit.
h. Assisting states, communities, and individuals with economic progress.

I am using Commerce for illustrative purposes, as they oversee many valuable functions such as the census count, the national weather service and the patent and trademark office.  But do we need a federal bureaucracy to promote economic programs, coordinate faith based community programs, advance scientific technology?  It also raises the question of overlapping functions with other federal agencies such as State, Treasury, Defense, and Labor.

The Golden State – California Dreaming

California is mired in a deep budget crisis threatening to bankrupt the state. Nonetheless, the legislature has chosen the path of budget cuts rather than reengineered state agencies. A could be the question of why governmental regulation is even needed in all these areas. One enterprising blogger has catalogued 489 separate California state agencies.  There are commissions, bureaus and agencies on seemingly everything from funerals and cemeteries to cultural resources to the status of women. At one time each agency, commission, council or bureau served a purpose.  But each now has its own political constituency fighting for its preservation.

The Reengineering Solution

Unfortunately, Michael Hammer passed away last year. However, many carry on his work.  One does not have to be an expert to see that applying the principles of reengineering would improve governmental efficiency and public service. Most importantly, it would ameliorate the need for increased taxes.  Government is quick to criticize business for its excesses. It is time for business and concerned citizens to make government also earn its way.  Perhaps, Michel Douglas could be enticed to make a new movie: Sacramento: the Sorrow and the Pity or Nightmare on Capitol Hill.

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