CHAPTER 3 ________________________________
Planning and Resource Decision-Making at the Federal Level

Over the last 35 years, the American private sector has increasingly moved away from the classic command-and-control, hierarchical, top-down decision-making structures and cultures characteristic of the postwar era. Organizations have become more flexible, team-based, and capable of strategically responding to rapidly emerging market opportunities and the vicissitudes of global economics. The federal government, particularly in the last 20 years, has also put increased emphasis on strategic planning, team-based problem-solving, and customer-focused program assessment.

Nonetheless, classic command-and-control structures remain in place in many agencies. While internal agency cultures vary markedly, management behaviors relative to the planning and resource allocation processes are surprisingly consistent and have changed little over decades. This chapter identifies the structural and regulatory bases for these behaviors and provides recommendations for enhancing federal productivity.

The Conundrum of Measuring Public Sector Productivity

When total quality management principles are applied, a strong case can be made that the inputs/outputs definition of productivity used by the U.S. Bureau of Labor Statistics (BLS) is sufficient to measure productivity in the private sector, the logic being that creating quality at the point of origin reduces rework and inspection costs (inputs), while raising customer satisfaction and demand rates (outputs)—a win-win for both producers and consumers. The outcome of consistently providing quality, sought-after products and services is profit margins that sustain the company and ensure its long-term growth and viability.

In the public sector, a consistent pattern of profits is typically not the desired outcome for a program. Outcomes are often outlined in legislation as broadly based national security, health, international affairs, or social policies that reflect political priorities that may not be well defined. Measuring program performance in public environments requires that outcomes be an integral part of the productivity measurement equation. The work of Walter Balk in the 1970s and 1980s on public-sector productivity measurement and the more recent discussion by Martin Cole and Greg Parston in Unlocking Public Value emphasize the difficulty of measuring outcomes in assessing program effectiveness in public environments.

Cited as an example in various texts, including Cole and Parston’s, is the issue of crime rates. When submitting a budget request for additional police officers, a police chief might attribute a reduction in crime to a proportional increase in the number of patrols in an area. If more patrols (outputs) equal lower crime (outcomes), then hiring more police (inputs) will continue to improve outcomes. But is this necessarily the best way to lower crime and use taxpayer dollars? What role might a strong economy have had? An improved education system, harsher sentencing laws, and declining birthrates in the area? Would crime in the long term be lowered more by establishing a sustainable environment with a strong economy and well-educated citizenry? We can see that it is difficult to establish a hypothesis that specific outputs are the cause of a specific outcome when assessing productivity in areas of public policy.

That is not to say that outputs that include quality assessments cannot be measured against costs relatively easily in some federal operational environments. Department of Defense (DoD) facilities involved with armaments manufacturing or repair of ships or airplanes have well-established metrics and accounting tools for measuring the relative productivity of operations in terms of production rates, production quality, and cost, much like their private-sector counterparts. Many federal agencies produce products or provide services (such as advice and guidance directly to customers) that can be assessed separately from the impact these outputs may have on the larger outcome issues, such as the adequacy of the national defense or the social safety net. The measurement of outputs becomes particularly difficult in areas such as research, foreign affairs, and national security, in which a significant portion of the work involves applying intellectual capital to address broad outcomes directly, rather than attempting to meet predefined repetitive production schedules.

Regardless of the difficulty or the context, measuring federal operational performance is an imperative increasingly emphasized over the last two decades. Examples include Vice President Al Gore’s National Performance Review (NPR) in the 1990s, passage of the Government Performance and Results Act (GPRA) in 1993, President George W. Bush’s 2001 President’s Management Agenda (PMA), and various agency-level risk assessment programs with requirements to report to the U.S. Office of Management and Budget (OMB), consistent with a 1995 OMB memorandum outlining risk analysis principles.

Open and Closed Organizations

Thirty years ago, informal surveys of my adult, working professional students typically found little difference in public- and private-sector organizational structures or the reporting relationships between federal, state, and local government employees and those in the private sector. Tom Burns and G.M. Stalker’s description of closed model organizations, characterized by routine tasks occurring in stable conditions; task specialization; an emphasis on means over ends; conflict adjudicated from the top; hierarchy, with its superior/subordinate relationships; and other features was evident regardless of employer. Open model organizations, which are fluid, results-oriented, and team-based; emphasize free-flowing vertical and lateral communications; and have the ability to rapidly assemble teams of appropriate experts from throughout the organization, were limited primarily to academic and research environments.

Today when I survey, students from the private sector routinely say the open model is more characteristic of their work environment than the closed. Students working for government, particularly the federal government, characterize their environments as more closed model.

This is not to say that the federal government is less committed to teamwork. Teamwork has been particularly emphasized since the early 1990s when, for a time, real momentum developed throughout the federal government to adopt the strategic planning, process simplification, and team-based problem-solving methods of the total quality movement. While exceptions exist, teams in federal environments are typically of the process action team variety: assembled to enable the employees working in the process to address specific problems identified by management relative to process flow, customer support, or quality. The rapid movement of experts among teams—often as part of multiple teams working concurrently—to focus on emerging client priorities is characteristic of large consulting firms. This was and is not the norm in federal agencies.

The reality is that management practices between the private and public sectors have diverged significantly over the last decades in response to specific environmental priorities. Private-sector migration to flexible, team-based structures is a response to extremely diverse, rapidly changing consumer markets in which output/input metrics adequately measure productivity against companies’ consistent long-term outcome requirement: profitability. Federal agencies have become increasingly sensitive to the need for effective performance measurement, with an emphasis on oversight and reporting through defined strategic plans and performance metrics necessitated, in part, by the need to integrate outcome parameters into the productivity equation. Maintenance of largely command-and-control structures with well-defined and long-established specialized hierarchies remains the best way to monitor the cost-effectiveness of federal operations and to allocate congressionally mandated financial and human resources, while remaining aligned with political and policy priorities.

Understanding Management Behavior in Federal Environments

Federal managers play by the rules. The corruption endemic in many foreign governments is virtually unheard of among federal managers. While reasonable risk-taking to enhance the accomplishment of mission is tolerated within legal parameters, any misuse of government funds or resources for personal benefit is dealt with harshly.

Federal managers almost universally believe the products and services they provide positively contribute to the well-being of the United States and its residents and allies. They take great pride in delivering quality to those they service. They operate within a set of prescribed rules relative to planning and resource allocation. They understand the processes for requesting and tracking resources and how best to present their case to secure the resources necessary to maintain the health of their programs. They know that successful program execution requires pragmatic resource management.

Federal managers often make decisions knowing that there are few current metrics available to measure actual workload and project accurate staffing requirements to meet the defined strategic objectives. Rapidly changing mission requirements, the pace of technological change, and the imperative to minimize overhead costs have made it difficult for many agencies to devote the resources necessary to develop and identify accurate and current workload data and align meaningful, realistic staffing standards and budgets with strategic objectives.

Shifting political priorities further complicate the process when funding is augmented or cut based upon political criteria and not past performance. While identifying resource requirements is difficult enough in complex operational settings such as shipyards, squadrons, and check-processing centers, it becomes particularly problematic in areas where work involves the application of intellectual capital. For all the recent emphasis on performance measurement, establishing budgets and staffing controls is rarely a surgically precise exercise.

Committed to program excellence and aware of the need for additional resources to maximize program performance, managers respond to the annual, supplemental, and unfunded requirements budget calls by documenting their case. They are also aware that the lack of metrics that clearly establish minimal budget and staffing requirements in defined program areas will likely result in agencywide, horizontal “fair share” downsizing cuts during lean times. When those cuts come, those already operating at maximum capacity to accomplish their most minimally defined missions will appear to be the most inefficient managers, while those who have expanded their mission and resources to include services beyond the minimum will be able to continue meeting their minimum objectives after they absorb their fair share cuts. Charles Levine referred to this as the efficiency paradox. Managers also realize that vertical cuts, where entire programs are eliminated in lieu of everyone “sharing the pain,” are highly unlikely, either because the programs are mandated by statute or because they have advocates who will fight at the political level to continue them.

Today’s Federal Reality

Complicating the allocation of resources, leadership turns over rapidly in federal environments. Military and United States Foreign Service officers typically rotate every two to three years. Political appointees average even shorter tenures. The retirement tsunami of the last few years has also contributed. Yet regardless of the tenure of leaders, top-down resource controls, an emphasis on internal process integrity driven by congressional and OMB oversight, and constantly changing information technology mandate that real change must be supported and initiated by senior management with a goal of embedding the change philosophy in all levels of the agency. What is needed is a change model compatible with today’s federal reality.

Organizational development (OD) training and team-building methods have been in use in many federal agencies for years. Many federal managers consider team-building and other behavioral training of the OD variety to be harmless feel-good or “touchy-feely” tactics that are not easily incorporated into their daily reality. Comprehensive, bottom-up, culture-driven change, as originally posited by Wendell L. French and Cecil H. Bell, Jr., in their classic Organizational Development, has been no more successful in the federal government than in the private sector.

Within a few years of gaining momentum in the federal government in the early 1990s, the total quality management (TQM) movement lost steam, largely relegated to the same closet as earlier major program initiatives such as governmentwide implementation of DoD’s program-planning-budgeting system (PPBS) in the 1960s and 1970s, President Jimmy Carter’s zero-based budgeting in the 1970s, and more targeted efforts to incorporate the In Search of Excellence principles recommended by Thomas J. Peters and Robert H. Waterman, Jr., in the early 1980s.

This was indeed unfortunate, because the TQM movement’s emphasis on strategic planning and top-down, process-driven change through well-trained and clearly focused process-action teams was compatible with closed-model federal reality and congressionally mandated planning and program assessment and was distinctly different from the OD change model with which it was regularly confused.

The nature of top-down policymaking and the resource allocation process mandates that today’s federal managers require a coherent infrastructure of defined strategic objectives aligned to a rational resource allocation process, in which program execution, to the extent reasonably possible, applies measurement metrics that assess both outputs and outcomes.

Where Do We Go from Here?

So how can the new Obama administration maximize performance in today’s federal government environment? Here are some pointers the U.S. Office of Management and Budget and other departmental management officials might want to consider:

1. Do not reinvent the wheel. Considerable time and effort has been expended over the last 20 years to develop logical performance measurement tools. Use what works within the context of a closed-model, resource-driven reality.

2. Accept the closed-model reality. Profit is not an outcome of most federal programs. The cost-effectiveness of program execution is often in the eyes of the beholder and is hardly transparent. Effective resource management requires strong position management programs that, to the extent possible, rationally align strategic objectives to optimal organizational structures, strategic human resources planning programs to address turnover, and reasonable workload metrics. Whereas private-sector managers tend to be keenly aware of their labor costs and the impact these have on profits, in federal environments managers below the most senior levels typically have little knowledge of how resources are allocated and revert to the squeaky-wheel approach when defending their resource requests.

   In federal agencies, real analysis of workload and identification of optimal organizational structures to support strategic program execution ranges from sophisticated, using a variety of metrics, to (in many cases) virtually nonexistent, ad hoc in response to emerging realities, and typically limited to mandatory submissions as part of budget and full-time equivalency (FTE, representing staff work-year authorizations) requests. Unless resource analysis tools and programs aligned to execute strategic objectives are established, adequately funded, and monitored, true outcomes-based productivity measurement is impossible, given the complexity of federal operations.

3. Create cultures that support change. Investing in people to enhance their skill in identifying process improvements to improve output/input performance ratios is a first step toward positive change. Even employees responsible for producing intellectual capital (vs. specific products or services) are always aware of internal communications problems and process redundancies. The greatest demotivator found in most federal agencies is convoluted and incoherent processes that do not provide the necessary information to efficiently accomplish the work but do overwhelm staff with unneeded, unwanted communications. And untold productivity is lost when employees are required to manually bridge the data gap among software applications that cannot talk with each other.

   Resurfacing the TQM emphasis on program analysis through process action teams working toward well-defined process improvement goals is particularly important. Recognition incentives should be coupled with transparency in how these productivity enhancements will impact career stability and minimize resistance.

4. Define leadership in terms of top-down reality. Management training and incentive programs must be clearly aligned with accomplishment of strategic objectives, while consistently improving outcomes-based productivity (even if the outcomes are broken down into individual output metrics). This has already been happening in federal agencies, and it must be continuously supported and increasingly linked to emerging position management assessment criteria. Particular emphasis should be placed on minimizing fair-share resource-reduction practices and using workload metrics as the basis for more precisely realigning resource priorities. When such measures are in place, senior managers can better reward those subordinate managers who most cost-effectively manage their resources and discourage the “give me more” mentality that has long been reinforced under the efficiency paradox.

The foundation has been laid to establish true performance management cultures aligned to the federal closed-model reality. With appropriate training and incentives, federal leaders can continue to successfully enhance performance, in alignment with emerging administration priorities.

Recommended Resources

Balk, Walter L. Improving Government Productivity: Some Policy Perspectives. Beverly Hills, CA: Sage Publications, 1975.

Burns, Tom, and G. M. Stalker. The Management of Innovation. London: Tavistock, 1961.

Cole, Martin, and Greg Parston. Unlocking Public Value. Hoboken, NJ: Wiley, 2006.

Executive Office of the President and the U.S. Office of Management and Budget. The President’s Management Agenda (Washington, D.C., 2001). http://www.whitehouse.gov/omb/budget/fy2002/mgmt.pdf (accessed November 24, 2009).

French, Wendell L., and Cecil H. Bell, Jr. Organizational Development: Behavioral Science Interventions for Organization Improvement. Englewood Cliffs, NJ: Prentice-Hall, 1973.

Levine, Charles. “More on Cutback Management: Hard Questions for Hard Times,” Public Management Forum 39 (March/April 1979): 179-183.

Peters, Thomas J., and Robert H. Waterman, Jr. In Search of Excellence: Lessons from America’s Best-Run Companies. New York: Harper and Row, 1982.