Reinventing Government: Especially the U.S. Internal Revenue Service Bob Stone (bob@psg.us)

Sponsored by KalDer

Ankara, April 3, 2006

Copyright © 2006 by The Public Strategies Group, Inc.

Origins of Reinvention

Clinton 1992 campaign promise followed:

Quality movement in business ~1980

In Search of Excellence 1982

Isolated government efforts mid-1980s

Broad reform in New Zealand, Australia, UK in late 1980s

Reinventing Government 1992

What Needed to Change

Crazy regulations (thermostats)

Impossible procurement (radios)

Can’t hire, promote, or fire

Washington knows best

How to Change Government

1. Have a simple uplifting message that you repeat over and over

2. Find and reward people who are doing what you want

3. Don’t waste a minute on waste, fraud, and abuse

The National Performance ReviewClinton-Gore reform to restore trust in government by making it work better and cost less

Put customers first

Empower employees to get results

Cut red tape

NPR Phase 1: Report

Six-month effortStaff of 300 civil servants at White House,

plus teams in every agency1200 recommendations to President,

cutting 252,000 people and $108 billionPresident approved everything

NPR Phase 2: Setting 66,000 Fires and Fanning the Flames

“Find and reward people who are doing what you want.”

Hammer awards helped us find 66,000 people to reward

Created lots of internal and external publicity

Often intervened to protect reinvention and reinventors

People Doing What We Want U.S.Customs was getting amazing results in

Miami:Compliance increasingWaiting lines goneImporters happy

Lynn Gordon’s “Compliance Model”–Assume most “customers” are honest–Help those who want to comply–Go after those who don’t

We tried to spread this model to all regulatory and enforcement agencies

Showing off the Compliance Model to Business

• Customs• OSHA’s (Worker Safety) Maine 200• Food and Drug Admin in Missouri• Environmental Protection Agency’s 33/50

Program

Business reaction: IRS! IRS! IRS!

IRS in 1994• More customers, lower customer satisfaction

than any organization in America• Unhappiest workers in government• No sense of “customers”, rather “tax

evaders”• Long tradition of tax lawyers in top job• “World’s best tax collector”

First Steps• Customer Service Task Force• Hire successful business leader• Meetings with taxpayer reps (the

“IRS..IRS..IRS people”• Problem-solving days• Better telephone hours

Meanwhile, Congressional hearings inflame nation and sharpen appetite for reform

Rossotti’s New Mission Statement for IRS

“Provide America’s taxpayers top quality service by

•helping them understand and meet their tax responsibilities and by

•applying the tax law with integrity and fairness to all.”

Note: No mention of collection or enforcement.

Guiding Principles• Understand and solve problems from

taxpayer’s point of view• Enable managers to be accountable • Use balanced measures of performance• Foster open, honest communication• Insist on total integrity

Goals• Service to each taxpayer• Service to all taxpayers• Productivity through a quality work

environment

Taxpayers as Customers?

• “We’re making it easy for deadbeats to get away with not paying.”

• “Taxpayers are adversaries who are out to pay as little as possible.”

• “We can be a kinder, gentler IRS or an effective IRS that collects the taxes—but not both.”

Two Biggest Challenges to Transformation

• Convince honest taxpayers that the IRS was on their side

• Convince IRS workers that most taxpayers were not adversaries

Transformation of the IRS

Provide America’s taxpayers top quality service by helping them understand and meet their tax responsibilities and by applying the

tax law with integrity and fairness to all

Guiding Principles Goals

Revamped Business Practices

Organize by

Customer Group

Balanced Measures of Performance

New Technology

Levers of Change

Old Organizational Structure

• Organized by work specialty• Did not allow IRS to meet differing

needs of taxpayers• Created unclear accountability

Wage & Investment

Income

Small Business &

Self-Employed

Large & Mid-size Business

Tax Exempt & Gov’t Entities

Filers 90 million 40 million 180,000 2 million

Average tax liability per filer

$3000 $17,000 $2 million $40,000

IRS transactionsper filer

1-4 4-60 60+ 60+

Prepare own returns

60% 20% 0 0

IRS Workers 21,000 39,000 9,000 3,000

Taxpayer Characteristics

New Organizational Structure

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Key Benefits of Reorganization

• Clear accountability• Closer connection to taxpayers• Improved competence through

specialization

New Business Practices• Pre-filing emphasis on education and partnership• Greatly expanded use of e-services• Pro-active compliance actions• Improved coordination and use of 3rd party

information• Single point of contact• Ombudsman--and many many others

Information Technology•Secure e-enabled environment•Security and privacy technical infrastructure•Analytical data warehouses•Data integration•Improved information exchange

Extraordinarily difficult task, bumpy road to completion, not done yet

Measuring Results“What you measure is what you get”

1998 law:IRS must change its measures:Balance customer service with overall tax administration responsibilities

Balanced Scorecards• Traditional ratings based on revenue• New ratings based on—

– Customer satisfaction– Employee satisfaction– Business results

--in equal parts

Balance is EssentialCustomer

Satisfaction• in specific transactions

• taxpayers perceptions andexpectations of the IRS?

EmployeeSatisfaction

• General level of satisfaction?

BusinessResults

• Perceived effectivenessof management?

•Are we providing the right working environment

• Quality•Assess/collect the proper tax?•Quality customer service?

• Quantity•Did we manage efficiently?

Measures from LMSBMeasures from LMSB

MeasureMeasure FY01FY01 FY02FY02 FY03FY03 FY04FY04

TargetTargetFY04FY04

ActualActualStatusStatus

% Employee % Employee SatisfactionSatisfaction

5353 5757 6262 6565 6868 GreenGreen

% Customer % Customer SatisfactionSatisfaction

8181 8585 7777 8282 7676 YellowYellow

% Quality% Quality 8080 7878 8989 9090 8787 GreenGreen

Returns Returns ClosedClosed

37343734 48514851 45274527 29052905 39213921 GreenGreen

WHYis change so

HARD??

The Super Bowl Barrier

“We won the SUPER BOWL last year.

Why are you telling us we have to change???”

--Manager from Naval Sea Systems Command

The Super Bowl Barrier

Recent Winners2004: NE—first to repeat since Denver 98-992003: Tampa Bay goes 7-9 next year2002: New England goes 9-72001: Baltimore goes 10-6, loses in playoffs2000: St Louis goes 10-6, loses wild card

Winners can’t relax: only 8 of 39 winners repeated

To Overcome the Super Bowl Barrier

Acknowledge and honor past success

Norms of Behavior

Organizations develop norms that support their survival.

If the norms are disregarded the organization disintegrates.

Where they are followed slavishly, as they were in the IRS, they ensure adherence to the status quo.

Some IRS Norms Tax lawyer as commissioner

Managers don’t talk to taxpayers

Revenue is the only goal

Office doors are closed

Communicate through the chain of command

Taxpayers are out to cheat us

If nobody in the organization violates the norms of the organization…

RESULTS WILL BE NORMAL… OR

“If you always do what you always did,

you’ll always get what you always got.”

--Saying from the quality movement

Why Rossotti Succeeded

• Gifted business leader• Had widely understood (and felt) mission and goals• Personally modeled behavior he wanted, smashing

norms as he did• First got organization chart right• Brought in a few from outside, mostly used IRS internal

reform leaders to lead transformation• Partnered with workers union, tax preparers, small

business representatives, and Congress• Totally committed to balanced scorecard at all levels

Further Reading• Many Unhappy Returns, by Charles Rossotti, 2005--

Amazon.com• Reinventing Service at the IRS, by Al Gore and Robert

Rubin--on line at http://govinfo.library.unt.edu/npr/library/reinvent-all.pdf

• Confessions of a Civil Servant: Lessons in Changing America’s Government and Military, by Bob Stone—Amazon.com

Or email me: bob@psg.us

NPR Phase 3: Changing Government Forever

Catalytic StrategiesConcentrate on the 32 agencies with greatest impact on AmericansManage all with balanced scorecard: customer satisfaction,

employee satisfaction, operational results

Spread e-Government: change government the way Amazon.com

changed bookselling

Some Operational Results

Cut injuries 20 percent in 50,000 hazardous workplaces

Restored hundreds of “brownfields” to economic reuse

www.recreation.gov

Sweeping transformation of IRS

Things NPR did wrong Not doing enough collaboration, teaching,

and acknowledgement

Not cutting headquarters, including some departments

Not reforming the personnel system (but we helped it get started)

Not following through to fix some major problems

Why Bush succeeded (where he succeeded)• Ideology sometimes reinforced reinvention—e.g.,

FDA, OSHA, EPA, BLM• Put gifted leader in charge (e.g., Powell)• Built on past success (e.g., electronic government)

Why Bush failed(where he failed)

• The MBA President: hands off—completely• More incompetents and ideologues than usual• No crazy fanatics for reform in White House• OMB responsible for reform leadership• Many devastating budget cuts (e.g., FEMA, Veterans

Administration, and Homeland Security!!)

What Government Needs Most:

Better bosses!

Stone’s Universal TruthsFour ideas that apply in any culture• Workers know work better than managers

or politicians• Customers know what they want better

than anybody else• People are capable of things they (and

you) never dreamed of• Move fast

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