out of control government

News Flash: The Federal Government is “Out of Control”

by Tom Gray | on Feb 16, 2012 |  Comments

Boston Bruins goaltender Tim Thomas refused to attend the White House ceremony for his team as Stanley Cup champions because the federal government is “out of control.” Who knew? Of course, we all knew.

Thomas did not define what he meant by “Out of Control,” but we can easily do that for him:

  • Too costly: growing faster than the underlying economy that must pay the bills.

Federal spending grew by $1 trillion (35%) since 2007, yet GDP is lower in 2011 than 2008. Spending exceeds revenue by $1.1 trillion or 42%. No serious effort has been made to reduce costs. No budget has been submitted for three years. The President supervises more than 20 direct reports. Government continues to grow.

 

  • Too distracted: focused on side issues rather than the main concerns of the population.

Polls show the priorities of the population are jobs, economic growth, mortgages, and government debt. 88% of federal spending is in defense, healthcare, pension/Social Security, welfare, and interest. Yet government has been working on temporary subsidies, raising taxes, increasing healthcare costs, funding inefficient energy sources, and regulating the financial sector.

 

  • Too intrusive: issuing more new regulations than perceived to be needed.

4200 new regulations are in the pipeline, according to the Federal Register. Its page count grew 20% from 2009 to 2010.Agency budgets are up 16% and agency employees are up 13% since 2008, while private employment fell 6%. Rule-making is a growth industry!

 

  • Too arrogant: government solutions are the first resort; market solutions and individual responsibility cannot be trusted.

Free healthcare guarantees excess consumption. Sarbanes-Oxley compliance costs increase prices and divert profits from shareowners to accountants. Interest rate controls damage pension plans and retirement investments while they reduce the lending that could support business growth. Ninety-nine weeks of unemployment insurance and other foolish subsidies distort job markets, energy markets, the housing market, etc.

 

The parallels to a distressed business are obvious to turnaround professionals: costs out of control, management working on the wrong priorities, and incompetent management too arrogant to change. The only classic symptom missing is a cash shortfall; foreign lenders continue to finance the US government.

 

How would turnaround professionals attack this problem? What business techniques can transform an “out of control” government? Comment with your ideas, and see them in the next part of this series.

 

Tom Gray is a management consultant focused on small business and telecom and a Certified Turnaround Professional (CTP). He can be reached at 630-512-0406 or tgray@tom-gray.com. For information on the scope of Tom’s activities, see www.tom-gray.com.

 

 

Turnaround Techniques for “Out of Control” Government

by Tom Gray | on Feb 16, 2012 |  Comments

Our federal government is out of control: too costly, working on the wrong priorities, lacking in management skills, and too arrogant to change. See News Flash: The Federal Government is “Out of Control”.  If this were a distressed business, turnaround professionals would use familiar turnaround techniques to get it back in control.

1. Control the checkbook

In a turnaround, the Chief Restructuring Officer (CRO) would set a limit on spending and make sure every expenditure delivered value and fit the strategy before being approved. For the federal government, that limit would be the amount of revenue collected: $2.6 trillion in 2012. This means $1.1 trillion less spending than currently expected.

What’s missing? There is no CRO. Congress is in charge of spending, and sets no limit. What can be done?

2. Create an Inspiring Vision: Describe Success

In a turnaround, the CEO would create a Vision of success consistent with the values of the citizens and the competencies of the organization. For the federal government, the CEO is the President. To gain buy-in, the fundamental values behind the vision must be shared by the vast majority: equal opportunity to succeed without undue interference in their fundamental liberties.

The competencies of the federal government are those functions it does better than any other potential user of citizen funds: defense, foreign relations, currency management, non-local law enforcement, administration of common resources, and establishing  the framework for achieving those fundamental values of the citizens, i.e. rule of law for equal opportunity and protection of liberties.

Note: government competencies do NOT include management of operations or sectors of the economy.

What’s missing?  The Vision of government should be limited to what it does well: equal opportunity rather than equal outcomes via redistribution and subsidies; a framework allowing individual actions and market forces to operate, rather than regulation of what those actions must be. The current Vision is not inspiring because it takes government too far, beyond the citizens’ values and assessment of government competencies. They know the government is not a competent manager, and they know that equal outcomes means redistribution of income.

The other missing item is a clear statement of goals: “When we achieve the vision, the measurements will be x, y, and z. That’s how we’ll know we succeeded.” For the current Vision, are these measurements inspiring or frightening? If they were inspiring, surely they would be publicized!

3. Set a Strategyto implement that inspiring Vision and reach those goals

In a turnaround, the leadership team together sets a Strategy, allocating resources to the priorities implied by the Vision. The strategy defines boundaries – what will be funded and what will not be funded. These boundaries are enforced in the budget. Certain activities are discontinued. Other projects, those contributing to achieving the Vision, receive funds and personnel. This applies to the federal government as well.

What’s missing? There is no clear federal government strategy, and no budget. There are no limits. Non-strategic activities continue to be funded. Nothing is pruned. Funds are not re-allocated to strategic purposes. The strategy is to continue in office – a clear conflict of interest.

4. Motivate compliance and innovative solutions

In a turnaround, the leadership team communicates the Vision and Strategy, removes managers who oppose the vision, recognizes problem-solvers, devises measurements to identify progress on key elements of the strategy, and restructures incentives to reward strategic success while removing rewards for non-strategic behaviors. This would apply to the federal government as well.

What’s missing? Congress and the President define rewards as be re-elected, regardless of achieving a strategy or keeping expenses within budget, both of which do not exist. Political appointees identify with the President’s goal (re-election), and the Civil Service rules prevent incentive rewards to lower-level employees. Their reward is keeping their jobs by pleasing their politically-motivated supervisors. No federal government employees have any economic incentives for innovative solutions or compliance with strategy or budget. Patriotism and personal values may motivate them to work hard and long, but only on those activities which provide job security by pleasing their bosses.

5. Manage implementation

In a turnaround, once there are clear goals to work for and clear rewards for doing so, the energy of the work force drives success. Management concentrates on removing roadblocks, enabling teamwork, providing resources, and channeling activities into strategically-beneficial projects. Once the organization is aligned in support of a common Vision and Strategy, there is always a basis for assessing the relative of activities and contributions.

What’s missing? The federal government is not aligned, because the Visions too broad and there is no Strategy. Every activity has its own interest group. There is no way to measure the value of an activity, and hence no basis for encouraging or redirecting activities other than whether it supports the goals of the boss. As we have seen, those goals are ultimately about re-election, not achieving Vision through Strategy.

What’s to be done with this out of control government? Can this organization be saved? Uncle Sam needs your ideas for turnaround techniques – send a comment and see it in the next part of this series!

Tom Gray is a management consultant focused on small business and telecom and a Certified Turnaround Professional (CTP). He can be reached at 630-512-0406 or tgray@tom-gray.com. For information on the scope of Tom’s activities, see www.tom-gray.com

Turning Around a Government “Out of Control”

by Tom Gray | on Feb 16, 2012 |  Comments

Turnaround professionals have the business techniques to turn around our out of control federalgovernment (see News Flash: The Federal Government is “Out of Control”), but the government we have today is missing some key elements to make those techniques effective (see Turnaround Techniques for “Out of Control” Government). Finding those missing ingredients is not so hard. The real challenge is electing enough officeholders with the will to put them in place!

Here is a turnaround plan that provides the missing elements:

1. A Vision consistent with the values of most citizens, and fitting the competencies of the federal government:

  • Equal opportunity to succeed without undue government interference in our lives.
  • Preference for relying on individual responsibility and market forces to achieve desirable outcomes, with government action (subsidies and favoritism) being the last resort, not the first.
  • A society marked by economic growth based on effort, innovation, and competition; equal opportunity; respect for the individual; a safety net for the truly poor; and a government limited to doing what it does best and living within its means.

 

2. Clear goals for the elements of the Vision. Examples include:

  • Percentage decline in government regulations
  • Government spending as a percentage of its receipts

-  Note: a 30% spending cut is needed to match receipts in 2012.

  • Government spending as a percentage of GDP
  • Unemployment and inflation percentages
  • GDP growth rate
  • Percentage of government spending dedicated to redistribution and subsidies
  • Others consistent with the Vision

 

3. Strategy designed to achieve the Vision and Goals – in writing to enable public progress review

 

Process: The Strategy would be published 100 days after the Presidential election; the budget would be submitted to Congress 60 days later; annual State of the Union speeches would be supplemented by a written progress report on achieving this initial strategy and goals.

 

Given the Vision proposed above, some obvious Strategy elements are suggested below:

  • Provide healthcare, social security and welfare only to the truly poor: 15 to 20% of the population. For the rest, tax credits for private healthcare insurance would decline with income.
  • End subsidies and other “state aid” to corporations
  • Privatize government operations, introducing competition to provide such services wherever possible. For the Post office, see Turning Around the Post Office (USPS) Requires Privatization. Proceeds from asset sales would be used to pay off debt.
  • Federal workforce: freeze wages, benefits, and headcount; require partial payments by employees to pensions and healthcare; introduce bonus incentive system for above average performance on strategic activities only.
  • Defer overhaul of the tax code until the effects of other strategic activities can be seen. Only then can the revenue goal be determined – perhaps no new revenue will be needed. Once tax overhaul begins, all other strategic activities will halt.

4. Motivation Tools

Once there is a clear strategy to work toward, motivation will shift from pleasing the boss (re-election) to achieving that Vision and strategy, if it is inspirational. Those government employees who contribute the most deserve to be rewarded the most, if the goal is not equal outcomes but equal opportunity. Revising Civil Service rules to enable performance bonuses for achieving strategic annual objectives would introduce incentives for excellence to the federal workforce.

5. Manager for Implementation

In other organizations, the CEO is responsible for Vision, Strategy, and external relations. Often, there is a COO responsible for operations. The President is the CEO of the federal government. He or she is also the COO, with more than 20 direct reports including 15 cabinet departments plus those in the “Office of the President”. We elect Presidents for their vision (CEO), not for their executive management skills (COO). Yet their duties require them to coordinate operations over a huge span of control. The advisory role of the Office of Management and Budget does not solve this problem.

The above Strategy places even more importance on Operations, due to the fundamental changes it calls for. Who will make these happen within the Executive Branch? Perhaps there is a role for a COO supervising the operational functions of the Cabinet departments, while the Cabinet secretaries supervise the policy functions of their departments. Such a COO would drive privatization, asset sales, reorganization, and workforce initiatives such as headcount freeze, compensation, benefits, and incentives. He or she would be the one to “control the checkbook.”

Are these effective turnaround techniques for an out of control government, i.e., if implemented, would they work?

Tom Gray is a management consultant focused on small business and telecom and a Certified Turnaround Professional (CTP). He can be reached at 630-512-0406 or tgray@tom-gray.com. For information on the scope of Tom’s activities, see www.tom-gray.com