Find
better ways to do the public’s work
By
Stephen Goldsmith
Gov.
Mitch Daniels faces substantial challenges as he moves to invigorate Indiana's
economy and the quality of Hoosier life. Not least of these is reforming
government itself.
Like
Indiana, most state governments have operated on the same model for the last 50
years. This model involves building up hierarchical bureaucracies where layers
of public employees in narrow silos with little authority tell lesser-ranking
employees what to do as government struggles to meet more demands without
sufficient resources. Some states have tried reform by rearranging the building
blocks, merging agencies and the like, without discernable success. Others have
attempted to inject new technologies and performance measures, with limited
progress. Others have privatized.
Daniels's
experience as director of the Office of Management and Budget under President
Bush helps him understand how the very nature of government must change.
Government
itself is being transformed into a fundamentally different model,
"governing by network," in which executives redefine their core
responsibilities from managing people and programs to coordinating resources
for producing public value. Governing by network represents the confluence of
four trends that are altering the shape of public sectors worldwide:
*
The rise in the use of private firms and nonprofits to do government's work.
*
Efforts to join governments horizontally and vertically, and to dissolve silos
and streamline processes from the perspective of the customer/citizen.
*
Technological breakthroughs that dramatically reduce the costs of partnering.
*
Citizen demands for more choices in public services.
Networks
encourage the kind of experimentation so critical to innovation by enabling
government to explore a greater range of alternatives involving a variety of
providers. They also enable a government to concentrate on its core mission by
leveraging the expertise of top providers. By using outside partners to deliver
a service or accomplish a task, managers can hire, fire, assign and reassign on
short notice.
As
governments rely less on public employees and more on a web of partnerships and
contracts to do the public's work, how well an agency manages networks
contributes as much to its successes and failures as how well it manages its
own public employees.
Yet
many obstacles block the path to success. Excellent governors such as Jeb Bush
of Florida have seen good ideas go astray due to opposition by long-standing
government employees. Networked government requires a form of public management
different from what we've become accustomed. Newly appointed cabinet
secretaries can provide insights that even talented professionals who have
worked many years inside existing narrow structures can't see. A government
agency shouldn't let its historical processes, current organizational charts or
existing capabilities dictate what should be transitioned to a networked
approach.
When
I was mayor of Indianapolis, I found thousands of committed public servants
operating in established patterns, who over the years accepted practices and
restrictions that needed challenging. By rethinking government, the Daniels
administration will provide opportunities for state employees to suggest new
ideas, and work more efficiently and productively.
In
addition to increasing the effectiveness of the work force, government needs
people with new network skills. Building such a capacity requires not only
far-reaching training and recruitment strategies, it requires changing the very
definition of "public employee."
To
succeed, a new administration needs public support. Every change will be
opposed by a vested interest or defender of the status quo. The people who feel
aggrieved by change find appealing messages to shop to the media and
legislature. The beneficiaries are less involved, because the benefit may not
yet be clear at the time of change. Those who believe, as I do, that government
must be broadly reformed, need to advocate in behalf of new tools for a new
governor, giving him the flexibility to make the transformation upon which his
outcomes can be measured.
Fundamentally,
the question is not how to do a government activity better; it is how to ensure
that government provides maximum public value to Hoosiers with the limited
revenues available. This approach, when combined with the leveraging force of a
network, and effective contract management, will help Indiana leap ahead of the
pack in the quality of its government. And the quality of its government will
enhance its reputation as a good place to create a job and raise a family.
The challenge: how to provide maximum public value with the limited revenues available.
Goldsmith, former
Indianapolis mayor and author of "Governing by Network: The New Face of
the Public Sector," is a professor of government at Harvard University.
By Geoffrey F. Segal
With
Gov. Mitch Daniels, the state has a governor well aware of the powers of
competition. Last month, he told The Star, "I'm a proponent of competition
that looks for opportunities for the private sector and the incumbent public
providers to compete. When that's the arrangement, I don't care who wins as
long as the taxpayer does."
Like
Daniels, Florida Gov. Jeb Bush believes competition leads to better, more
efficient state government. Bush has successfully used private sector
competition, initiative and innovation, where appropriate, to reform how
Florida's government operates. In the process he has drastically reduced its
size, scope and cost.
Since
1999, when Bush first took office, Florida has entered into 138 contracts for
services with private contractors. His ambitious use of competitive sourcing,
where the government and private sector compete to determine who can deliver
the service best, has netted the state significant benefits. In the same period,
property taxes have fallen by 11 percent and an additional $8 billion in tax
cuts have been delivered to taxpayers and businesses.
Florida
has avoided deficits and actually increased its cash reserve while spending
record amounts on education and transportation. The government is smaller and
more nimble now, too. There are nearly 4,000 fewer state employees, but without
gains in the universities and courts, caused by higher enrollment and
workloads, the falloff would have been about 6,000 greater -- all without
quality of services suffering; in many cases it improved.
In
Florida, the initiatives range from the mundane (cleaning state buildings and
food service at state prisons), to progressive and innovative (an online
professional licensing system and state employee human resources). Barton
Protective Services employees now collect fees on the state's tollways, saving
more than $2 million a year, and Health Management Systems Inc. administers
Medicaid billing with similar savings.
Nearly
all of the state's highway maintenance is contracted out, which has netted
millions in savings and tremendous quality improvements.
Despite
this success, all has not been rosy in Florida. A 2003 report from the
Governor's Inspector General noted several shortfalls in the administration of
contracting. Each of the IG's critiques rang true -- lack of understanding of
goals or purpose, lack of training or experience of employees conducting
competitions, and a lack of follow-through and performance evaluation after
implementation.
These
systemic flaws threatened to derail current initiatives and call into question
existing contracts.
The
system was fractured and confusing, lacking a central point of accountability.
Communication failures and the lack of organization largely prevented agencies
from learning from each other and applying best practices.
The
solution, while critical, was quite simple. Florida needed a centralized,
standard process for determining what services would be available for
competition and an actual process driving the competition.
To
accomplish this, Bush created a new organization to develop a policy to guide
the process. The Department of Management Services would be the central point
of accountability and a clearinghouse for lessons learned. The new Center for
Efficient Government would not only be responsible for developing the new
policy but also would serve as a trained, specialized unit for carrying out the
various initiatives. CFEG works directly with agencies, assisting them with
business-case analysis and training them in the new process for undertaking
competition.
CFEG
has created a new transparent, accountable, results-based process for managing
competition initiatives that is largely modeled after Britain's private finance
initiative and includes a series of "gates" where projects are
reviewed at critical stages throughout the project lifecycle to ensure that
goals are met
Another
benefit of a centralized approach is that CFEG can now take an enterprise-wide
approach to initiatives. They have the ability to reach across agency lines and
seek statewide solutions to common problems or initiatives.
Under
the new process, Florida is pressing forward with more competitive sourcing
initiatives. Several projects are under review, including an innovative
approach to various economic-self sufficiency programs where technology will
help improve services while savings hundreds of millions of dollars.
Florida's
process, which ensures a transparent, accountable and results-based approach to
government reform, is a model for Indiana and other states to copy.
New
process allows state to reach across agency lines and seek statewide solutions
to problems.
Geoffrey
F. Segal is director of government reform at the Reason Foundation. He served
as an adviser to the Center for Efficient Government in Florida.
By David Osborne and Peter Hutchinson
Albert
Einstein once said, "Insanity is doing the same thing over and over again,
expecting a different result." The approach most governments take to
solving their fiscal problems certainly meets that standard. Every year brings
a fiscal crisis. Governments respond with one-time patches, accounting gimmicks
and only reluctantly with real cuts or revenue increases. When they are done
they announce they have solved the problem. But next year it's back -- another
crisis and another round of the fiscal insanity.
The
price Americans are willing to pay for government is relatively fixed, while
costs to educate, medicate and incarcerate are skyrocketing. It's true for the
country and for Indiana. Business as usual will no longer deliver the results
citizens want at a price they are willing to pay.
That
was the situation in the state of Washington in 2002. Gov. Gary Locke faced a
huge shortfall. The Seattle Times described the challenge on Nov. 17, 2002:
"The usual, political way to handle a projected deficit is to take last
year's budget and cut. It is like taking last year's family car and reducing
its weight with a blowtorch and shears. But cutting $2 billion from this
vehicle does not make it a compact; it makes it a wreck. What is wanted is a
budget designed from the ground up."
Locke
wanted to focus on the big question: What
should state government do (and do well) and what should it stop doing
altogether? In August 2002, his chief of staff asked our company, The Public
Strategies Group Inc., for help. We helped design and implement a process that
turned the traditional budget process on its head. Instead of asking agencies
how much they needed and then cutting their requests; this dramatically
different approach involved a top-to-bottom review of every government activity
in order to decide how best to use government revenue to purchase results that
citizens value most.
Judging
what Washington citizens were willing to spend was the first task of a guidance
team, made of up senior cabinet members and several leaders from business and
private think tanks.
A
slumping economy and anti-tax sentiment in the state led the team to advise the
governor against raising taxes, so Locke chose to build the budget on expected
revenues only.
Senior
staffers worked with the team to identify key results in which citizens most
wanted improvement: student achievement, work-force quality, higher education,
health, security of the vulnerable, economic vitality, mobility, safety,
natural resources and cultural/ recreational opportunities.
The
next challenge was to decide how to allocate the available resources. The two
teams set aside 10 percent of the budget for overhead functions, such as
pension contributions, debt service and internal services. Then they parceled
the rest out among the 10 results, using a citizen's point of view -- based on
perceived value -- rather than an analysis of past practice.
The
team then put together 10 "results teams" made up of knowledgeable
people from throughout state government. Their job was to procure the best
possible results for citizens given available resources.
First
these teams created a set of indicators to measure progress toward their
assigned result. Then they looked at the evidence of what works and what
matters most in producing the result. This challenged the teams to look beyond
"what we've always done" to discover "what really matters."
Finally,
the process turned to existing state activities. Each results team was given a
portion of the 1,300 state activities funded by the traditional budget. They
ranked these activities based on their relative contribution to achieving the
result. They then used their budget allocation to "buy" down the list
until they ran out of money. The result: ten sets of recommendations for state
government that linked key results, success indicators, strategies and purchase
plans.
The
governor followed the purchase plans closely in finalizing his budget proposal.
Locke had warned that the budget would be painful, and it was. If passed it
would result in elimination of health insurance for nearly 60,000 of the
working poor, suspension of cost-of-living increases for state employees and
teachers, 2,500 layoffs, early release of low-risk felons, and suspension of a
citizen-passed initiative to lower K-12 class sizes.
While
the legislative debate was difficult and some amendments were made, the budget
passed largely as Locke had proposed it.
In
addition to solving immediate budgetary problems, Budgeting for Outcomes, as we
call it, can help public leaders win back some of the support that government
has lost in recent decades.
Washington
won the Council of State Government's Innovation Award for implementing this
budgeting system. The state is now doing so for the second time, while South
Carolina, Michigan and Oregon are implementing their own versions.
Osborne and Hutchinson are partners in The Public Strategies
Group in St. Paul, Minn., and co-authors of "The Price of Government:
Getting the Results We Need in an Age of Permanent Fiscal Crisis."