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The Role Of Leaders in Improving Bureaucratic Efficiency

Stephen Goldsmith | 04/29/2013 |

[This is the second in a multi-part series on streamlining government services. See part 1 here.]

For thirty years I have labored on behalf of a cause for which no significant natural constituency exists: effective government. Sure, some citizens support larger government and others smaller government but few lead rallies for better government. Even some of those closest to me look dubiously upon these efforts.

I still vividly remember an episode from before I even took office as mayor of Indianapolis. I had run on a platform of lean government, demanding that the city balance its budget. Immediately after my election, we asked city employees to halt all nonessential purchases. The police department then rushed to start an expensive and unnecessary horse barn, managing to get some of the steel up before I took office. To allow the barn to continue operating would have diluted the message from the election. More importantly, I needed to send a clear signal that every dollar counted and we were serious about efficiency. Upon taking office I ordered the steel to come down and the horses to utilize their stables.

Dramatic improvements in service delivery within a bureaucratic monopoly simply will not occur without serious and intentional leadership. The leadership that produces more effective government combines a broad array of management tools with the political and communications skill of the elected leader. It requires both a motivating articulation of a goal and the deft use of symbolism.

We therefore start our discussion of how to produce change by referencing a section from Machiavelli found in the offices of several public officials around the country:

“[T]he reformer has enemies in all those who profit by the old order, and only lukewarm defenders in all those who would profit by the new order, this lukewarmness arising partly from fear of their adversaries, who have the laws in their favour; and partly from the incredulity of mankind, who do not truly believe in anything new until they have had actual experience of it. Thus it arises that on every opportunity for attacking the reformer, his opponents do so with the zeal of partisans, the others only defend him half-heartedly. . . ."

In this essay we address three specific approaches for overcoming the imbalance Machiavelli described: 1) Developing an aspirational and overarching vision for the rationale and uses of the savings; 2) using new structures to force change; and 3) altering internal processes to unleash bottom-up improvements. Large bureaucracies that pride themselves on professionalism place a high value on the consistency that forms into habits that get translated into status quo-hardening folklore. Neither large scale disruptive innovation nor small scale bottom up pervasive change occurs without a strong message from the top.

Communicate a Vision for the Future

Individual taxpayers rarely reap anything material from a single reform, but those adversely affected by change are invariably passionate and focused. Big changes that produce better, faster and cheaper government cannot be sold by discussing tactics or even the resulting savings, but rather must be sold as a means to the larger good of ways in which the savings will be used. Leaders advancing broad-based operational change connect the results to an aspiration with a tangible result — cleaner neighborhoods, better streets, or lower tax rates that attract jobs.

In the 1990s in Indianapolis, we called an efficiency program that included 80 managed competitions “Building Better Neighborhoods,” after the many projects the savings funded. Sometimes the vision doesn’t wrap itself around a single broad initiative. When Indiana Governor Mitch Daniels privatized the Indiana Toll Road in 2006, he called it “Major Moves,” a reference to the hundreds of road projects the proceeds made possible. Using the proceeds from eliminating inefficiency to invest in a better community can prompt citizens to support the reform tactics they otherwise would ignore or oppose.

Some mayors use performance management to rally for change by linking the results of better performance to other high priority objectives. Denver Mayor Michael Hancock launched an initiative called Peak Performance to generate savings that would be invested in the safety net programs for which he campaigned.

Utilizing New Structures to Force Change

Significant change in the quality and cost of government must be induced through new structures that create an environment conducive to change. Elected officials force change when they set up a unit dedicated to innovation and effectiveness and use the unit to sponsor service provision from alternative sources. This disruptive innovation not only provides dramatic new options for public services, but also serves as serves as a wakeup call to existing employees.

Competition forces all of us to be better. For the most part, public employees do what they do to serve the public. They would rather take pride in their work than lapse into waste, sloth or malingering. But human nature is such that they are unlikely to achieve excellence if they are not pushed to think about new approaches. Allowing public-private partnerships, competition and privatization translates into better services and reinvigorates public workers. A recent example came when Chicago Mayor Rahm Emanuel had city employees compete against private companies to see who could pick up recycling more efficiently.

True savings will only occur if someone close to the elected official and acting under the executive authority takes on the innovation and efficiency effort as his or her exclusive responsibility. Indiana Gov. Mitch Daniels created an Efficiency Division within the state Office of Management and Budget (OMB) and tasked it with driving constant performance improvement. Seven years later, after dozens of completed transactions that ranged from aggressive fleet reduction to outsourcing prison food service, Daniels could claim hundreds of millions of dollars in compounding savings. (Efficiency Lessons from Our City Halls and Statehouses)

The Daniels effort revolved around performance—developing measures, identifying areas of efficiency, launching program reviews that overcame the agencies’ tendency to work independently of each other – and developing a culture of accountability. The specialized performance team also consistently asked whether a service was needed at all and, if so, which sector would be the best provider.

New York Mayor Michael Bloomberg utilized separate innovation units to drive performance and efficiency. One group, dedicated to operations, consisted of smart young lawyers, public policy specialists and private business types who spent their time measuring and monitoring performance, advancing efficiencies and looking for savings. For example, the team identified, championed and implemented shared service modernizations and consolidations in fleet, accounts receivables, real estate and IT that will generate $500 million in savings annually when completed.

A second group, the Center for Economic Opportunity, operates under Deputy Mayor of Health and Human Services Linda Gibbs. It combines public and private venture funding, an avowed interest in innovation and willingness to tolerate failure to develop new approaches to reducing poverty. For example, its most recent initiative, "Social Impact Bonds" (SIBs), uses creative funding to purchase outcomes rather than the more traditional process of funding awarded in response to a highly prescriptive RFP. Its first effort, a new "Adolescent Behavioral Learning Experience" program, will pay for reductions in recidivism among black and Latino adolescents at the Rikers Island correctional facility.

Data analytics centers are now evolving into one of the most powerful drivers of public innovation. These efforts drive change by mining data that powers predictive analytics which can then be delivered to the field through decision support tools. Several governors and mayors are now actively involved in determining how to set up special initiatives with their authority dedicated to driving reforms through digital analytics. Chicago's SmartData platform aggregates data relevant to the city and processes them in real time through an open-source framework. These data driven efforts help officials target services, allowing them to both anticipate problems such as weather emergencies, and improve services like child welfare outcomes.

These special units share common and indispensable characteristics: 1) goals are important to the elected official; 2) executive authority and attention; 3) resources, including access to consultants and public employees freed from their daily operational responsibilities; and 4) they operate across multiple agencies. These efforts to drive change should be accompanied by concentrated outreach to citizens. In Washington D.C., the mayor solicits customer social media-graded feedback of city agencies and highlights the results both in his staff meetings and by publishing them. Philadelphia's Social Enterprise Partnership brings in citizen innovators to address city problems and provides them with the support and cooperation they need to develop their ideas and test their solutions in a consistent, structured way. Fresh ideas combined with the efforts of multiple city departments with private, nonprofit and academic partners are also engaged. A Few Hundred Innovative Ideas for Urban Governance.

Residents provide an enormously valuable resource for these kinds of improvements. When I was a deputy mayor of New York City, we placed a simple icon on the city's website asking residents to send us their ideas to improve efficiency. Thousands of suggestions rolled in, many as simple as turning off the escalators in city-owned buildings at night. Building a Culture of Efficiency in Government

Across the country, cities including Boston, New York, San Francisco and Philadelphia are now working on ways to transform 311 from just a complaint line to a platform for true citizen engagement. The enhancements can be simple, like outbound text or calls to ask those who requested service in order to grade the response, to more sophisticated apps developed to solve problems. The New Urban Mechanics model focuses on innovations that engage citizens through apps that make engagement easier and more meaningful.

Unlocking Internal Change Forces

We cannot produce meaningful change without altering the conditions in which well-intentioned public employees work. We imprison committed workers in narrow boxes, not allowing them to do anything other than repetitive acts, usually without any incentive for improving the way things are done. Changing incentives and providing better tools can produce catalytic change.

We can produce more effective solutions by liberating employees by either allowing totally new structures and/or by changing the authorizing environment of the legacy system. Think of charter schools, or as we tried in Indianapolis, charter welfare agencies, as examples of the former-- public entities operating under a new set of rules, freed from much of the maze of input controls that take time, suck up money and limit discretion.

Managed competition efforts in Indianapolis, Chicago and San Diego also are examples of the former producing disruptive innovation and substantial savings by opening up services to public-private competition. Yet no one seriously expects larger parts of the government to be contracted out, so the real goal must be to couple competition with efforts to improve the legacy public workforce. But these improvements will not occur, for example, if the public school teacher remains trapped inside the maze that tells her exactly how to teach, which books to use, and how much time to spend on certain activities. Altering these conditions and rewarding performance are indispensable conditions precedent to widespread savings.

Internal changes that would better align incentives to performance and savings include:

1. Procurement and revolving funds

Governments should create systemic incentives for savings by allowing agencies and divisions inside the agencies to retain part of any efficiency they generate. New York City’s wastewater plant operators during a meeting where I solicited suggestions for improvements responded, almost in unison, that the procurement rules caused bad decisions. They wanted procurement flexibility, allowing them to purchase in real time rather than observing imposed calendar deadlines, and use it or lose it rules which caused them to stockpile parts well before they might be needed. Procurement today in most places stifles innovation and effectiveness. Procurement that provides flexibility, speed, encourages innovation and good bureaucratic behavior, uses the web to purchase, places everything online for maximum transparency, and utilizes analytic tools to monitor behavior of vendors and procurement officials alike will drive maximum benefit.

2. Better costing information

To find more efficient ways to deliver services, we must know how much an activity costs. If we have no idea of the component costs of filling a pot hole (asphalt, truck, labor, etc), how do we know we have optimized each one?

3. Performance rewards

Creating a meaningful connection between performance, pay and promotion will produce more of that which is rewarded, as it did with a performance pay program initiated by Gov. Daniels. Even highly experienced public officials have trouble getting the metrics and rules of performance correct and reasonable people can differ on what constitutes a best practice. But paying the incompetent or underperforming persons or teams exactly the same as the highest performing suffocates initiative.

4. Unblocking the flow of ideas from the field

Hierarchies suffocate continuous improvement and innovation. Elected executives need to find ways to help employees’ good ideas break through the rigid barriers between them and top management. Today we can digitally manage by walking around through idea blogs and contests and virtual collaboration tools. For example, IdeaHub, an online community for employees of the U.S. Department of Transportation, enables substantial virtual ideation and collaboration within the department. IdeaHub empowers employees to contribute innovative ideas and work together to develop ideas for improved agency performance and efficiency. In the past three years, the program has collected about 6,000 ideas and is a model for other federal agencies, and other levels of government, for how to digitally encourage innovation and ideation from within government.

5. Time and information

Innovators not only need the time to invent, but also access to information across agencies and funding. NYC 311 Director Joe Morrisroe is moving from a "burden-on-citizen" approach to a "citizen-as-sensor" model. Such a step requires not just a claim of transparency but setting aside the time to produce and use information in a format that encourages breakthroughs in conversations with community boards. Significant improvements in how government operates and real cost reduction will result when these outreach efforts evolve into collaborative problem solving with dedicated resources. Similarly, Louisville Mayor Greg Fischer, who comes from a successful entrepreneurial background, uses an innovation team not bogged down by day to day chores, assigned to LouieStat to drive and inform continuing improvements in ongoing projects.

6. Shared services

Most government officials now talk about shared services—the consolidation of functions across governments or government agencies--but few have done it broadly and correctly. As Deputy Mayor working to implement shared services in fleet, accounts receivable, real estate, IT and human resources, I found that each agency had what at first appeared to be a compelling reason why it should be exempted from a shared service. Yet coupled with this desire to not lose control was a reasonable concern that Commissioners did not want their service quality hindered by a shared service monopoly over which they had no control.

Capturing savings from shared services requires setting the bar quite high, strong executive leadership, clear customer service agreements so that participating agencies do not become prisoners of a larger bureaucracy, carefully aligned incentives including shared savings, moving quickly, and finally setting up a real market so constituent agencies can still go to outside market options on occasion.

For example, New York City needed a massive data center consolidation along with shared protocols paving the wave for cloud and commercial of the shelf solutions, but it did not make sense to force every department to employ the central IT agency to do its application software development.

Conclusion

Newly elected officials arrive with differing backgrounds, priorities and degrees of commitment. They aspire to lead well-run enterprises, but most get elected based on the policies they advocate, not their operational experience. Yet these aspirations face passive if not active resistance from within a bureaucracy that values the routine over disruptive innovation; that does not promote based on performance, let alone efficiency; does not terminate for bad performance and provides little support for the risk taker.

Only leadership can counter this syndrome. We define leadership here as rhetoric combined with changes in approach that include creating a culture of savings, inviting private sector operators to participate in government and a willingness to listen to a broad array of individuals. These changes give public employees the support and incentives they need to improve and create small groups explicitly charged with driving change.

Stephen Goldsmith, Daniel Paul Professor of the Practice of Government and Director of the Innovations in American Government Program at Harvard's Kennedy School of Government, is a two-term former Mayor of Indianapolis and former Deputy Mayor of New York City


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