This was originally published as an exclusive commentary for Washington Monthly.
Barack Obama must begin rebuilding federal agencies fast--or risk seeing his entire agenda undermined.
Every two years the federal government conducts a "Human Capital Survey" of its own employees. Nearly a quarter of a million civil servants participate, providing anonymous, detailed, and often quite revealing answers to questions about their own agencies: What's the level of morale and teamwork? Do their skills match their missions? Do they have the resources to get the job done? How able and trustworthy are their leaders? Are high-performing employees promoted, and the lazy and incompetent shown the door?
When the answers to these questions are processed and released by the Office of Personnel Management they fuel some watercooler banter, and that's usually about it. Administration officials mostly ignore the results. Congress, which mandated the survey, pays little attention; the press, virtually none. The nonprofit Partnership for Public Service (headed by one of the authors of this article) uses the data, with some statistical refinements, to prepare a more detailed and accessible set of agency rankings dubbed "Best Places to Work in the Federal Government." But even this version is mostly inside baseball, discussed largely by civil servants themselves. To the average American, and even to most public policy mavens, what bureaucrats think about their bureaucracies is the very definition of dull.
Yet there's a reason why top private-sector companies conduct similar surveys of their employees: such data can provide precious insight into an organization's strengths and weaknesses, and an early-warning sensor for trouble ahead. Had anybody bothered to look at the results of the 2002 federal survey (released in 2003), they would have found that the cabinet agency ranked dead last was the Federal Emergency Management Agency. Inside a dusty control room, buried deep in the federal government's bureaucratic machinery, this warning light was blinking furiously. Few people noticed--until, of course, Hurricane Katrina hit two years later, and FEMA's feebleness was inside baseball no more.
Today, across our federal government, other warning lights are flashing. And if the president-elect and his team are wise, they will pay attention, because some of the most dysfunctional agencies happen to have jurisdiction over some of the most urgent challenges the new president is likely to face. Consider:
Health care costs: The president-elect has vowed to do something about the spiraling costs of health care. But he won't get far without reforming Medicare and Medicaid. Annual costs for these two programs have nearly doubled since 2000, to $624 billion. Official OMB projections, which may be unduly rosy, foresee them rising to $790 billion by 2013-- more in one year than the entire multiyear tab for the financial bailout program that left Congress in a state of deep sticker shock. And because much of private-sector health care takes its price cues from the big public programs, especially Medicare, the quality of federal management in the health arena will exercise enormous leverage over the American economy in the years to come. The agency that manages these two programs is the Centers for Medicare and Medicaid Services, part of the Department of Health and Human Services. It ranks 186th out of 222 units within the various cabinet agencies in the Partnership for Public Service's latest rankings.
Mortgage bailout: Part of the job of cleaning up the mess caused by the mortgage crisis will fall on the Office of Thrift Supervision. It oversees federally chartered savings and loans, like Washington Mutual, whose demise in September was the biggest bank failure in U.S. history. Critics have accused the agency of ignoring questionable accounting at IndyMac, the high-flying California thrift, until depositors forced a federal takeover with a panicky run on the bank this summer. The Office of Thrift Supervision placed 192nd out of the 222 agency subcomponents in the Partnership for Public Service's rankings.
Airline safety: The Federal Aviation Administration, which grounded thousands of flights this spring after agency whistleblowers went public with charges that they'd been discouraged from cracking down on maintenance problems at Southwest Airlines, ranks 204th out of 222.
Weapons spending: The Defense Contract Management Agency oversees about 18,000 private companies providing billions of dollars' worth of goods and services to the military. It is the lead Pentagon agency managing weapons acquisitions at a time when, according to the GAO, average cost overruns for weapons systems have steadily increased, from 6 percent in 2000 to 26 percent in 2007. It ranks 206th out of 222.
Nuclear terrorism: The Defense Nuclear Detection Office, which is supposed to make sure terrorists don't smuggle nukes into the country? Number 208 out of 222.
Immigration reform: The Bureau of Immigration and Customs Enforcement (formerly the INS), which polices the border and will manage any immigration reform measure that might emerge from the new Congress? Number 213 out of 222.
Disaster preparedness: And what about FEMA? Well, it's no longer dead last on the large-agency list. But that's because it's no longer on that list; instead of being a stand-alone agency, it's been merged into the Department of Homeland Security. On the list ranking departmental subunits, it's 211 out of 222. Unfortunately, Homeland Security itself is a mess, ranking second to last among large agencies.
We could go on, but you get the picture. The president-elect is about to take over a government with a few broken key components. Even some agencies ranking relatively high on the OPM survey, moreover, simply don't have the management and manpower in place to handle the daunting new missions coming their way. The State Department is in the top 20 percent, but experts worry that it is stretched too thin to orchestrate increasingly complex international relationships and shore up our battered reputation as Obama pledges to do. Experienced staff have been flooding out of the State Department in recent years; it now has roughly as many foreign service officers as the armed services have full-time musicians. The Treasury Department is at the middle of the pack, and no bureaucratic basket case. But a passing grade (on a generous curve) may not do the trick. Like State, Treasury has seen an exodus of some of its star staffers in the last few years. And now it is being tasked with untangling the monumental financial muddle that it took our sophisticated private sector a decade to create.
No president in recent memory has come into office with so many and such varied crises to deal with--from two intractable ground wars to a possible global recession--plus an ambitious policy agenda of his own, including passing and (the hard part) implementing universal health care. The president-elect can be forgiven for not wanting to spend precious time, energy, and political capital on the thankless, glamour-free chore of upgrading the capacity of federal agencies. Few of his predecessors, after all, made performance improvement much of a priority. Obama didn't break the federal government, and he has plenty of things he'd rather focus on than fixing it. Maybe it's not fair, but it's still a fact: if the president-elect waits until the rest of his agenda is well launched to worry about federal performance capacity, the rest of his agenda will never get off the ground.
Huge new federal responsibilities, stretched and sclerotic workforces, and fresh memories of the Bush administration's operational failures have combined, we believe, to make top-flight management a political imperative for the incoming administration in a way it has not been for previous ones. To put it bluntly: even with brilliant policy ideas and flawless political instincts, Barack Obama's administration is likely to fail if it doesn't reverse the erosion in federal capacity.
The federal government is basically a big, complex machine made up of people--about 1.9 million of them if you count just the career civil servants, millions more if you include the rapidly increasing ranks of private contractors doing Washington's work. Most federal employees work well outside the Beltway. Many are vastly able, deeply devoted, and heroic in their steadfast service. Some are simply incompetent. But all work within a system that has suffered from the cumulative damage of years of neglect alternating with waves of inconsistent and frequently ill-conceived efforts at reform.
A big part of the problem is that government work has become segregated from the rest of the American economy. Beginning in the 1970s, the private-sector economy became more global, more diverse, more sophisticated, more technologically complex, and a lot more competitive. People endowed with native wit, education, ambition, and plain old luck discovered ever-wider opportunities and ever-richer rewards. Others fell behind. Laws, institutions, and habits that had constrained the highs and lows of working life--from collective bargaining rules to norms regarding executive pay--were swept away. Inequality increased, through boom and bust, until by the turn of the century the economic distances separating Americans were wider than they had been in living memory.
This didn't happen in government. Today's public sector mostly missed the transformation that swept over the rest of the working world. Government jobs still operate under the rules that defined the middle-class economy in the decades following World War II. Risk is dampened. So is opportunity. Rewards at the top are not all that different from those below. Nearly all workers, from the cabinet secretary to the cabinet secretary's secretary, earn middle-class salaries. Change is gradual. Layoffs are rare. Promotions come slowly.
Set aside the debate over which working world is better and which is worse. The point, for present purposes, is that they are different, and the difference undercuts government's capacity to create value. Government is not smart enough, because private alternatives drain away an ever-increasing share of the best people, and not supple enough, because workers sheltering in public employment's middle-class bastion quite rationally resist change.
In many European and Asian countries the high status of public service helps offset modest financial rewards. But in the U.S., decades of bureaucrat bashing have exacerbated the economic factors and driven away untold thousands of talented Americans who might have tolerated lower compensation if abuse hadn't been part of the package. Celebrating private enterprise and denigrating bureaucracy run deep in America's political DNA. Some recent administrations have viewed federal organizations and the workers who staff them with something approaching contempt. Others have made at least some efforts to improve how federal agencies operated. But it has been a long time since federal workers had a real champion in the White House. No president since John F. Kennedy (some would argue since Theodore Roosevelt) has been willing to spend much political capital to improve the human capital that constitutes the core of the federal government.
Almost all the incentives in Washington discourage tending to the operations and maintenance of executive branch agencies. New presidents enter office eager to drive their marquee campaign proposals through Congress, rather than to engineer performance improvements for some predecessor's signature program. This preference fits the bias of permanent Washington. Reporters, lobbyists, think tank analysts, and other Beltway denizens devote their attention to the major nodes of power--the White House, Capitol Hill, the Supreme Court--where laws and policies and regulations and rules are developed. The myriad federal agencies, where these elegant abstractions interact with the real world, largely escape notice except when things go wrong in some dramatic and readily comprehensible way--coal miners die in a preventable accident or secret documents are leaked to spies. But even then, the commentariat's indignant denunciations are usually couched in moralistic rather than managerial terms.
The people best positioned to improve agency performance, at least in principle, are the political appointees the president puts in charge. In most agencies political appointees have far more formal authority and informal influence than even the most senior and experienced career bureaucrats. But incentives, again, don't line up on the side of reform. Presidential appointees parachute in for stints that average less than two years. Consequently, most aim to make their mark with quick wins--new programs, fresh policy initiatives--that show up in the media. Then they scramble back to private life to cash in on their upgraded reputation. Few stay around long enough to really understand the culture and processes of their agencies, much less transform them. And even if they want to make performance the priority, few have the management skills necessary to turn agencies around.
This, at any rate, has been the pattern in Washington for decades. But there are reasons to think that the new administration cannot--and thus, will not--continue its predecessors' tradition of ignoring the quiet decline in federal performance capacity. Eagerly or otherwise, it will need to attend to management and personnel.
First, thousands of strong careerists are on their way out the door. A big cohort of unusually talented people signed up for federal service in the 1970s. In their youth, Kennedy gripped their souls with stirring words about public service. In their young adulthood, the Great Society and Richard Nixon's improbably activist administration created the kinds of challenges that make a job meaningful and fun. The compensation gap between public and private work was still narrow. Some of these stalwarts left as public service lost status, the pay gap widened, and excitement ebbed. But many were committed enough to the mission to stay on, and this group has kept the lights on in agency after agency in spite of high-level neglect. Now they're getting older, and heading for the exits at last. Roughly a third of the federal workforce is expected to leave in the next five years. The status quo in recruitment and management offers little hope of replacing them with anything like the same caliber of talent.
Second, the conventional wisdom that there's no payoff to sweating the management details and no penalty for ignoring them has been oversold. You only need to look at FEMA's trajectory to see why. In the George H. W. Bush administration, FEMA's reputation for incompetence was cemented by its calamitous response when Hurricane Andrew hammered Florida in 1992. The GOP's share of Florida's popular vote in the presidential election that same year was 41 percent, down dramatically from 61 percent four years earlier. Bill Clinton invested in turning FEMA around. He elevated the agency to cabinet status and entrusted it to James Lee Witt, a dependable ally and savvy manager who actually knew something about emergency management. In his reelection bid Clinton touted his record on disaster relief to reinforce his image as a new kind of Democrat, focused on results. Florida was one of the two states to flip to Clinton's column, and he increased his share of the vote in eight of the nine states that had been hit by catastrophic flooding in 1993. Bush the Younger's insouciance about FEMA management, the consequences for the people of the Gulf Coast, and the tipping point for the loss of Bush's public support is a story at once too familiar and too sad to repeat.
Third, the American public has had it, and they're not going to take it anymore. The electorate doesn't much care that the performance deficit has deep roots, or that previous administrations of both parties have failed to fix it. They're expecting Obama's administration to deliver the goods. Voters want government to be part of the solution. With the temple of free-market fundamentalism crashing down all around us, we're hungry for competence in public service. But we're not sure that we'll get it. A March 2008 survey by the AARP asked 1,400 Americans which issues they consider to be "very important." The issue cited most often, more than the economy, more than the war in Iraq, more than energy prices, was "government competence."
Before the drifting confetti is swept from littered ballrooms after the inaugural festivities, the realization will sink in with the new president (if he and we are lucky): he now owns this government. His agenda and his reputation are hostages to its capacity to perform.
So what can he do? There are actually some pretty good options. It's not that nobody knows how to fix what ails Washington; it's that previous administrations have been able to get away with lip service, window dressing, or desultory efforts. The next one can't. Here's what needs to be very near the top of the president-elect's to-do list:
Appoint managers. Not cronies. Not ideological soul mates. Not campaign stalwarts. Not even inspiring symbols, or soaring intellects, or wise old men and women. Nice if you can get those attributes as part of the package, of course. But the taste and talent for actually getting things done has to be the central criterion for senior hires. The president gets to fill roughly 4,000 posts with political appointees. He needs to pick people who know how to lead and manage. This imperative applies to all federal agencies, but especially to those obscure front-line operations--including FEMA, the Defense Contract Management Agency, the Office of Thrift Supervision, and other outfits currently on the skids and too long treated as backwaters.
Hold leaders accountable for managing well. Political appointees can't be expected to treat management and workforce issues as top priorities unless they are convinced these are the president's priorities. Obama has to signal clearly, early, and often to his political appointees that making long-term improvements to basic government operations is a central part of their jobs. Once they see that their peers really are celebrated for managing well, and sanctioned or replaced for letting management slide, they'll get with the program--most of them quite happily. The president should appoint one of his most trusted and talented and relentless supporters to head the Office of Personnel Management, to provide day-to-day reinforcement for this mandate. But he also needs to drive home, to his entire leadership team, that in the Obama administration management drives mission and policy hinges on personnel.
Fix the workforce. The president can't succeed without top-flight managers, but even the best managers can't win without reversing the decay in the federal workforce. Obama needs to review the long list of sensible reform ideas that previous administrations considered but lacked the will, nerve, or political capital to enact. Then he needs to decide which ones he's willing to fight for, and push hard to make them happen within the first year, early enough for the reforms to do his administration some good. Our favorites include: lowering hurdles to lateral entry so that experienced workers (including mid-career baby boomers hungry for work with meaning) can serve a stint in Washington; making compensation more market sensitive and performance based; getting smarter about sorting out federal tasks between employees and contractors; and creating an ROTC equivalent for the civil service. Maybe most importantly, Obama needs to use the bully pulpit to restore the prestige of public service, and to inspire a new generation of the best and brightest to serve at a moment when their country so urgently needs them.
Focus on performance. Since it's hard to improve what you can't measure, creating reliable and action-oriented performance metrics is key to making Washington work better. The Clinton and Bush administrations each made some efforts at performance management, but the new team needs to push this much harder. And brace for criticism, some of it likely to be deserved. There are plenty of stupid ways to measure and motivate performance. Indeed, just about every dumb idea--murky goals nobody can measure, crisp metrics that miss what's valuable, sloppy or abusive systems that invite game playing, too much focus on material rewards and penalties--has been tried by some government somewhere. But that's actually good news for Obama. We're starting to get a decent sense of the best way to shape and apply metrics. Performance management is mature enough for a smart administration, committed to creating value for the citizenry, to actually implement.
Barack Obama made many promises during his campaign, a large number of them inspiring and a few perhaps silly, but none is more central to the hopes of his presidency than his pledge to "make government cool again." Here's hoping that this is a promise the new president keeps. It would trigger an influx of top talent that our government hasn't seen in years, while unleashing the latent potential of current employees. Better performance will bolster public support, boosting the odds of getting Congress to stick with the Obama agenda even after the honeymoon ends. Can this administration, in these parlous times, meet or maybe even exceed expectations? If it takes its inherited performance problem seriously enough, and early enough, then--with a little bit of luck--yes, it can.