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Transforming Organizational Structures -- Part 1

                       Accompanying Report of the 
                      National Performance Review
                      Office of the Vice President
                             Washington, DC
                             September 1993


Executive Summary 1

Introduction 5

Recommendations and Actions
ORG01: Reduce the Costs and Numbers of Positions Associated with Management Control Structures by Half 23

ORG02: Use Multi-Year Performance Agreements Between the President and Agency Heads to Guide Downsizing Strategies 25

ORG03: Establish a List of Specific Field Offices to be Closed 27

ORG04: The President Should Request Authority to Reorganize Agencies 29

ORG05: Sponsor Three or More Cross-Departmental Initiatives Addressing Common Issues or Customers 31

ORG06: Identify and Change Legislative Barriers to Cross-Organizational Cooperation 33


  1. Summary of Actions by Implementation Category 37
  2. Illustrative Table of Areas of Management Control that Should be Considered as Potential Targets for Streamlining 39
  3. Accompanying Reports of the National Performance Review 43

Implementation Categories

Each action is followed by a number in parentheses that indicates the necessary avenue for effective implementation. Appendix A organizes all actions according to these categories.

(1) Agency heads can do themselves

(2) President, Executive Office of the President, or Office of Management and Budget can do

(3) Requires legislative action

(4) Good idea, but will require additional work, or may be better suited for future action


DOD Department of Defense

FAA Federal Aviation Administration

FACA Federal Advisory Committee Act

 FCCSET       Federal Coordinating Council for Science, Engineering,
              and Technology
 FQI          Federal Quality Institute
 FTE          Full-Time Equivalent
 IPA          Intergovernmental Personnel Act
 IRS          Internal Revenue Service
 NPR          National Performance Review
 OMB          Office of Management and Budget
 OPM          Office of Personnel Management
 PMC          President's Management Council
 SMWT         Self-Managing Work Team
 TQM          Total Quality Management
 USDA         Department of Agriculture

Executive Summary

Management expert Tom Peters says that well-performing organizations should operate with 25 to 75 workers for every one supervisor. Some high-performance organizations have exceeded 100:1. Others, such as General Motors' Saturn, have abolished management positions as we traditionally know them. And the federal government? It has seven workers for every supervisor.

This 7:1 ratio reflects the outdated nature of federal management practices as well as its organization of departments and agencies. Other examples of outdated practices abound. Consider this: while the needs of Americans have changed dramatically in the last halfcentury, the federal government's structure of 30,000 field, district, and regional offices has changed little since its creation during the New Deal.

Within that structure, outdated practices and relationships remain. In Washington and in the field, offices are burdened by many who are far removed from delivering services to customers (e.g., oversized head-quarters staffs, multiple layers of supervision, and many specialists in the arcane rules of federal personnel, procurement, budget, and finance). The Department of Housing and Urban Development (HUD), for instance, has 13,000 employees--4,000 of them in Washington. In addition, 10 regional offices supervise state and local offices.

Models from an Earlier Era.

In an earlier era, the federal government followed the example of corporate America in building our public institutions. From the 1930's through the 1960's, we built large, top-down, centralized bureaucracies patterned after that day's corporate structures. Within these structures, tasks were broken into simple parts, each the responsibility of a different unit of employees, each defined by specific rules and regulations. As a result, government worked well. But times have changed. Now, at a time of rapid change, high technology, tough global competition, and demanding customers, we must once again follow corporate America's lead. Top-down bureaucracies no longer work very well in either the public or private sectors. As cutting-edge businesses have done, we must streamline our operations, cut management controls, and empower our workers.

"Organizational structure" refers to the formal and informal patterns of relationships by which an institution organizes work and distributes power. The federal government's organizational structure is rigid, hierarchical, and segmented. It also dilutes individual responsibility. The net effect is insufficient responsiveness to citizen concerns and costly inefficiencies arising from excessive controls that ultimately fail to provide accountability to the public for achieving results.

Barriers to Change.

Despite a clear need to change the structure within many agencies, barriers exist. Individuals and institutions resist perceived threats to job security and management authority. And internal and external rules and regulations restrict structural changes. For example, the personnel system compartmentalizes work through hundreds of job classifications and discourages teamwork through the way it constructs its individual performance management system. Furthermore, legislation in some cases discourages effective cross-organizational work by imposing constraints, such as not allowing agencies to share the funding of joint efforts.

A combination of institutional and legislative constraints often prevents change. For example, while some agencies, such as the Social Security Administration, have had limited success in reforming their field structures, most have not. The Veterans Affairs Department has tried and failed to close underused hospitals. The Agriculture Department has had problems closing field offices in which the costs of administration exceed those of services delivered.

Guiding Principles.

From private and public sector case studies, we find common guiding principles and strategies for implementing change in an organization's structure. To succeed, the agents of change should:

Strategies for Change.

These four principles underpin, in turn, four strategies that explicitly address organizational structure and have successfully changed large private and public bureaucratic organizations:

Streamline Structures

The first strategy is to delayer headquarters and streamline field structures. This approach targets administrative costs and positions: such as managers, personnel specialists, budget analysts, procurement specialists, and other headquarters staff positions. These central control positions cost about $35 billion a year in salaries and benefits for the more than 660,000 people involved. Some positions, such as inspectors general, personnel, and procurement specialists, have grown in number while overall federal employment has remained steady. In addition to central control structures in headquarters, many agencies have outmoded field structures. While over 34,000 field offices exist, their service delivery patterns differ by agency. Therefore, careful study is needed to ensure closures contribute to improved service delivery, not just cost savings.

Each agency must make its own administrative reduction decisions based on its knowledge of mission and priorities. However, employees affected by the streamlining, many of whom worked with dedication over the years, should be given every opportunity to redirect their careers, elect separation incentives, accept new assignments and training, or receive quality outplacement services.

Reengineer Work Processes

This strategy, which often is referred to as "starting over," calls for beginning with a blank sheet of paper and then designing the optimal way to perform a necessary process, regardless of the preexisting system. The process often produces radical change, with functions eliminated or redesigned. Private sector experience indicates that reengineering can sharply reduce internal processes and generate significant change. Federal experience, such as at the Defense Department and Internal Revenue Service (IRS), suggests great potential for improving performance and reducing costs.

Create Boundary-Crossing Partnerships

Real life needs do not always conform to the existing bureaucratic design of a program. Citizens often need services from more than one department at a time. Problems such as unemployment, crime, the environment, workforce training, and natural disaster relief demand a multi-department response. Cross-boundary partnerships are essential to helping the government address complex problems in a comprehensive fashion without adding programs or creating agencies.

Create Self-Managing Work Teams

In growing numbers of corporations, work teams have replaced traditional management, often dramatically increasing productivity and enhancing the quality of work life for employees. Not all teams are alike in the responsibility and accountability they possess. But highly developed teams control functions once reserved for management: hiring, firing, and promoting; designing work processes; establishing production schedules; setting goals and performance measures; and maintaining quality control. The Agriculture Department, IRS, and the Defense Logistics Agency have successfully piloted work teams.

Actions to be Taken.

To transform itself, the federal government must do no less than change its fundamental culture (i.e., values, beliefs, and practices). Acting on these four strategies for organizational change would serve as a strong foundation for cultural change. Accordingly, NPR recommends the following actions:


The Existing System

The existing organizational structure of the federal government is rooted earlier in this century, a time when massive, multilayered bureaucracies were seen as the most effective and efficient approach to managing large, complex organizations.(1) Constraints on transportation, modest education levels within the workforce, and the limited technical ability to collect, display, and transmit information were but some of the factors that led to the creation of a strong, centralized management system where managers did the thinking and workers were expected to do the assigned work without question.

We have but to look around us to see that times have changed. Through their participation in a transformed market place, today's citizens have had their expectations heightened. They know good service when they see it.

Not surprisingly, each group judges government's performance by these new standards and does not accept the rationalization that government is somehow "different" and, thereby, exempt from a need to change. Yet, neither the government's organizational structure nor its companion management philosophy has kept pace. Work is still largely accomplished through a byzantine system of rules and regulations and a control-based management style.

In recent years, a range of initiatives have dramatically transformed many state and local governments, mirroring a similar metamorphosis in the private sector. Yet the traditional cultural values held within the federal government, with a few notable exceptions, resist change and preserve a culture of mistrust and control, operating within a rigid and hierarchical structure. This segmented system separates staff within and between agencies who work on related problems by creating artificial organizational boundaries. This situation exists despite the best efforts of a long series of prestigious commissions and blue ribbon panels tasked by one political party or another to "fix" the government. The traditional organizational values are also premised on improving efficiency by creating internal monopolies--e.g., a single procurement or personnel office to service an entire agency--for better control and economies of scale. But in the private sector, the creation of monopolies is seen as a form of built-in inefficiency.

A Transformed Organizational Structure

A transformed federal government needs a new set of principles to shift its values and organizational structure to better focus on customer service. Developing a new set of principles served as the basis for the transformation of successful high-performing organizations in both the private sector and state and local governments. It is time a set of organizing principles be adopted by the federal government. Four of the more important organizing principles for the reinvention of federal agencies are:

--Organize work around results that customers consider valuable. Traditional divisions and program groupings within agencies and departments must be dissolved. Work processes and streamlined structures will be cross-functional and team focused.

--Shift accountability from the use of rigid, centralized management control systems to a reliance on quasi-market techniques, such as competition among providers, and concentrate resources on ensuring high-quality results. The federal government needs to shift from its overreliance on administrative controls of inputs to a greater reliance on results. A key approach is to rely more on competition and other quasi-market tools to ensure high-quality results. The implication is that there then would be fewer layers of management and staff review. The resulting control systems will be leaner and flatter and will direct their resources primarily to supporting front-line activities.

--Create partnerships within and between agencies and encourage crossing internal and external boundaries to integrate service delivery and policy development. The government should operate much like a "boundaryless company" where the primary loyalty of employees is serving citizen needs and where cross-agency work is commonplace.(2) All relevant contributors and stakeholders should be included in planning and decisionmaking to ensure that approaches to getting the work done are both effective and efficient.

--Empower employees with the authority, skills, and information required to do the job, and redefine the managers role to be coach and facilitator. Relieved of many controls and encouraged by their leaders, employees must be able to operate more effectively as individuals and teams and genuinely serve their customers. Employees should operate more in teams that share responsibility for producing results. Managers should help employees maximize their capacities and removing barriers that impede their effectiveness.

Overcoming Barriers to Change

Despite the compelling case for dramatically changing the structure of the Federal government, many barriers exist. People naturally resist change since it disturbs their comfort levels and exposes them to the unknown. Historically, attempts to reform government have resulted in attacking a laundry list of problems without getting at their root causes. Veteran bureaucrats can recall solving the same problems many times before, only to have them become "unsolved" again. Reform efforts, particularly during periods of austerity, usually mean across-the-board cuts that leave organizations with the same responsibilities but fewer resources. However, NPR's streamlining recommendations are intended to change culture and behavior by targeting central control structures that add little value to achieving results.

The existing segmented federal structure rewards dysfunctional behavior. When surveyed by the Office of Personnel Management (OPM), less than half of federal employees said that they had confidence and trust in their second-level supervisor, although immediate supervisors fared better. Forty-four percent of federal workers surveyed expressed trust in their organization, but only 30 percent thought their organization treated all employees fairly.(3) NPR recommendations in this and other reports address outdated structure, the resulting dysfunctional cultural behaviors, and the effects that current structures and processes have on employees' attitudes toward their organizations.

Three Sets of Barriers.

The three most commonly cited barriers to change are existing regulations, laws, and concern that "we haven't done it that way before."

First, federal entities often quote their own regulations as reasons not to try new ideas or "think outside the boxes." Agencies often have discretion in how they implement laws, but are frequently restrictive in their interpretations. Regulations are then developed with an emphasis on reporting and policing, rather than accountability. The Forest Service, in a pilot project, found that 70 percent of its regulatory "barriers" were self-imposed, and not required by legislation. Other NPR reports (notably, Reinventing Human Resource Management; Mission-Driven, Results-Oriented Budgeting; and Reinventing Federal Procurement) have identified specific ways in which agencies have historically interpreted legislation in a more restrictive manner than necessary. As a result, new ideas and innovation are difficult to implement within this rigid framework and the regulations themselves become an excuse for abandoning more innovative management styles.

Second, legislation is cited by both employees and management as a justification for agencies not to cooperate across organizational lines. However, legislation usually does not prohibit but rather inhibits inter-organizational cooperation.

The third barrier, a fear of the unknown, is significant. But most of NPR's recommendations are modeled after successful experiences that have occurred on a small scale in some agencies, or have been implemented in states, localities, the private sector, or other countries that have pursued culture changes analogous to those sought by NPR. The strategies highlighted in this report were chosen because they offer the most hope and best leverage for genuine change on a large scale.

Strategies for Change

Creating a new culture in the federal government will require massive changes in the basic beliefs, values, and practices of federal employees and managers, and, ultimately, American citizens.(4) This new culture--serving customers, empowering employees to achieve results, fostering excellence--must be embedded in all dimensions of governmental operations. However, two fundamental arenas for change will be the internal structure of individual agencies, and the symbols of the old culture of hierarchy, central control, and mistrust.

For the most part, NPR has not pursued the traditional reorganization strategy of "moving boxes" between or within agencies. The traditional approach was intended to rationalize service delivery. However, that approach has historically been difficult on a large scale. As a result, NPR's objective has been to improve operations within agencies as the primary vehicle for achieving culture change. Experiences in some states and other countries suggest that this internal culture change needs to precede any successful efforts to "move boxes." One tangible arena for beginning culture change is to change the symbols of the old culture--the "perks" of reserved parking, larger offices, special dining rooms.

While there are many approaches to promoting organizational culture change, this report focuses on four strategies that explicitly address organizational structure and have successfully changed large bureaucratic organizations in the private and public sectors:

These four strategies for transforming organizational structure and culture are interrelated. Implementing one strategy successfully usually involves using the rest. For example:

As a result, genuine reinvention will require the use of more than one strategy. However, the focus on these four strategies in no way discounts the value or the use of other approaches. In the final analysis, it is principles, not solely strategies, that lie at the heart of transforming the federal culture and organizational structure.

Streamline Headquarters and Field Structures

As the recommendations for the National Performance Review (NPR) are put in place and the systems of over-control and micromanagement in personnel, procurement, and financial management are pared back, we must also pare down the organizational structures that go with these systems. Employees and line managers must be empowered to focus more on results than red tape and must authorize those closest to the customer to make decisions. A key strategy for doing this is to streamline agencies' central staff offices in Washington, D.C., and in regional offices. The federal government spends an estimated $35 billion annually for salaries, benefits, and the administrative costs of its management control functions. Roughly, one in three federal employees is involved. The job of many of these people is to create and enforce rules. Without dramatically reducing the influence of these people on line managers and workers, reinvention and culture change cannot succeed. As a result, streamlining headquarters and regional offices where most of these control functions are located is essential, and additionally will save money without cutting services.

It's Not the People.

An aggressive attack on the management control structure must not become an attack on the civil servants employed in these structures. They have been doing the jobs they were asked to do. They deserve an opportunity to redirect their careers, to be retrained and perhaps relocated, and to directly provide services rather than controlling the people who do. If an employee whose job is eliminated cannot retire through an early retirement program, and does not elect to take a cash incentive to leave government service, then every effort will be made to find another job offer, either within the government or in the private sector.(5)


The primary objective of streamlining central control structures is to make an organization more effective and responsive. However, one result will clearly be a reduction in the number of employees in positions related to excessive central controls and layers of bureaucracy, many of which are in the management ranks. For these targeted reductions to work effectively, many of the other reforms recommended by NPR will have to be implemented, including: streamlining control systems in the areas of budget, procurement, and personnel; making better use of technology; empowering employees; expanding the use of self-managing work teams; and incorporating market forces into the internal operations of the bureaucracy.

The structures of central management control include oversized headquarters both in Washington, D.C., and in field offices, multiple layers of supervision, and many specialists in the arcane rules of federal personnel, procurement, budget and finance. For example, the Department of Housing and Urban Development has about 13,000 employees, of which 4,000 are in its Washington, D.C., headquarters office. In addition, it has 10 regional offices supervising its state and local offices.

Streamlining central control structures should be directed toward reducing the costs of doing business, not just reducing the number of employees. Traditionally, attempts at streamlining based on staff reductions resulted in the preservation of management and administrative positions at the expense of line positions--either by service reductions or by contracting out for line services. The emphasis on reducing administrative costs and specific types of positions provides incentives to reduce high-salaried positions rather than low-salaried positions, and to reduce administrative rather than line positions.

Reverse Trend of Growing Central Management Systems.

An August 1993 study by the Merit Systems Protection Board indicates that over the past decade personnel specialist positions have continued to grow in number while federal employment has remained relatively constant.(6) This is also true of specialized procurement positions, which grew by 64 percent, from 19,428 to 31,794. At the same time, procurement costs (in constant dollars) grew only 6.5 percent, from $188 billion to $200 billion, during the same time period, 1980 to 1992.(7)

The growth of management control systems must be reversed because:

Although streamlining will focus on reducing headquarter and regional staffs, line positions are not completely off limits. A portion of line workers' time is consumed by responding to excessive rules and regulations or by responding to headquarters demands. With fewer rules, regulations, and requests, some line resources will be freed up and available for reduction or more likely, reassignment. For example, Forest Service staff involved in a test project reported that they spent 45-60 days on budget tracking before they reformed their system. They now spend one day a year to achieve the same results.(10)

Avoid Monopolies.

Government reformers traditionally seek economies of scale by consolidating and managing along functional lines--one procurement office, one personnel office, one information management office--each with its own hierarchy and chain of command. Abstract numerical analysis can convince decisionmakers that such functional "stovepipe" organizations will yield substantial savings.

But in the real world--in or out of government--that organizational strategy fails. Rather than economies of scale, it bears the diseconomies of fragmented authority, and the customer suffers. The local line manager--whose mission is to serve social security recipients, protect the environment, or operate a military base--is completely dependent on an array of monopolies that have different imperatives. He or she cannot replace a leaking steam trap because the procurement office is saving up steam trap requisitions to get a volume discount. He or she cannot quickly hire or promote talented people because the personnel office puts a premium on carefully crafted, technically perfect position descriptions. He or she cannot buy an easy-to-use personal computer because the information management office is working on a state-of-the-art global computer architecture that will be installed any year now. He or she cannot assure local contractors they will get paid for their work because all invoices are being centrally processed someplace in the Midwest.

Rather than consolidating staff-level organizations into monopolies, authority should be consolidated in the hands of the line manager. Put the person who is on the scene and responsible for the mission in control of all the functions that go into accomplishing that mission. Giving control means, for example, allowing the line manager the authority to choose among internal providers of service. For example, if one personnel office is unresponsive and expensive, he or she should be able to shift business to a competing personnel office. These techniques are further discussed in other NPR accompanying reports.(11)


A variety of indicators can help identify layers of bureaucracy that could be cut. For example:

None of these situations mandate delayering. Rather, they signal opportunities for streamlining and improving organizational performance. Where possible, using criteria directly tied to agency mission sends a strong message of intent, such as Postmaster General Marvin Runyon's question: "Do they touch the mail?"

Increase Span of Control.

A challenging goal of doubling the span of management control from the current seven workers per supervisor to 15 workers per supervisor will also support the goal to reduce structures of central management control. Management expert Tom Peters recommends that well-performing organizations should operate in a range of 25 to 75 workers for every one supervisor. Some high-performance organizations have exceeded 100 to one.(12) Some companies, such as General Motors' Saturn, have abolished management positions as we know them.

Implications for Streamlining.

Delayering, increasing the span of control, and reengineering work process (discussed in the next section) often lead to reduced workforces. As streamlining decisions are made, guidelines used in the private sector may prove useful:

Field Office Structures.

There are over 34,000 federal field, district, and regional offices spread throughout the United States. According to a 1992 OMB survey, 88 percent of these offices and installations are located in six cabinet agencies (the Departments of Agriculture, Health and Human Services, Justice, Treasury, Transportation, and Interior). These and other offices provide a diverse array of functions, including direct service to customers, administrative support, and policymaking. Several departments have multiple, independent sets of office structures, such as the Immigration and Naturalization Service and the Federal Bureau of Investigation in the Justice Department. Many of the 30,000 federal offices have sound reasons for remaining at their current size and location. However, some offices could be located elsewhere, consolidated with other offices, collocated with offices of another agency, or closed.

The current field office structure was for the most part developed in the 1930's to facilitate popular acceptance of New Deal legislation. Mostly unchanged since then, the field structure does not reflect substantial changes in government services rendered, consumer services demanded, and modern technology. Federal policy and U.S. demographics have evolved more rapidly than the field office structure, causing a mismatch between workload and staffing and a surplus of unnecessary offices and layers of oversight. As consumers demand new services, and agencies are given new missions, office structures need to be rationalized and optimized within resource constraints. This will require agencies to reexamine their missions and reengineer their service and support structures.

Periodically, since the 1950's, agencies have tried to reform their field structures. Some, such as the Social Security Administration, successfully transformed their field structures and trimmed staff while enhancing service. But most have not been as successful. For example, the Department of Veterans Affairs has tried and failed to close underused hospitals. Likewise, the Department of Agriculture has faced difficulties in closing offices where the administrative costs to run the office exceed the costs of the services delivered. In addition, the Department of Housing and Urban Development has been forced to maintain offices that it does not want. And the list goes on.

The predominant barriers to change include: congressional concerns about the adverse effects on local economies; agency concerns for maintaining services while trying to fulfill multiple missions; and the lack of a generally accepted process to identify offices for closure.

Fortunately, federal models exist where these barriers have been overcome. For example, the Department of Agriculture's recently developed plan for closing selected field offices is well designed and participative and used objective measures as a basis for decisionmaking. The best federal models focus on both customer need and the mission of the agency, assess future needs in relation to existing structures, permit organizational boundaries within and between agencies to be crossed, and maintain service levels.

Agencies Must Lead the Effort Themselves.

A central office, such as the Office of Management and Budget (OMB), has little chance of meaningfully determining where cuts should be made so the right culture changes occur and the wrong service cuts do not occur. Supervisory and administrative positions are woven throughout each agency in a variety of ways, using various job titles and budget codes. Some use centralized staff with identifiable budgets, while other offices disperse support staff and their related costs throughout the agency. For this reason each agency must make streamlining decisions based upon its unique knowledge of those positions that most directly support agency missions and priorities.

Separation Incentives.

Agencies must also be allowed to use separation incentives to permit them to delayer and reduce positions in targeted areas and at the same time make every effort to help affected employees find another job. Some agencies may have a very high level of response to separation incentives from employees in the targeted positions. These agencies could meet their goals by only offering separation incentives to their central management staffs. Other agencies may have a low response to separation incentives and will need to offer incentives to a much broader number of employees, including line positions. For these agencies, as line managers and workers retire or voluntarily separate from government service, the agencies should provide necessary training to staff in central management control positions and reassign them to line service positions.

Performance Agreements.

An agency's knowledge of its own organizational structure should be translated into performance agreements with the President that identify multi-year budget and staff reductions for central management functions such as personnel, management, legal, audit, procurement, financial services, and other administrative areas. These agreements should identify the systemic changes that will be implemented in order to make the reductions feasible. The reciprocal side of the performance agreement should be assistance from the Executive Office of the President in using its executive powers and developing a legislative agenda to help agencies obtain needed flexibility and minimize second-guessing and over-regulation. The Office of the President can also help minimize overreactions to isolated problems and mistakes that have traditionally led to new governmentwide controls.

Reorganization Authority.

While many of the changes proposed by NPR are targeted to internal changes within agencies, there are some proposals that would require major reorganizations. The Reorganization Act Amendment of 1984, which has lapsed, provided for expedited review of presidential reorganization plans. Congress had a limited period of time to consider the President's plan and pass a joint resolution to approve it, or else the plan died. Under that law, the President could move agencies and/or functions within the existing framework of executive departments. For example, the President could propose consolidating an agency or function under the Department of Agriculture with a similar agency or function under the Department of Commerce. Such authority could expedite action on several recommendations.(13)

Reengineer Work Processes

Process reengineering is the fundamental redesign of work so that the emphasis is on dramatic improvements in performance. Michael Hammer and James Champy, leading proponents of this strategic approach to organizational change, say "It isn't about making patchwork fixes . . . it does mean abandoning long-established procedures and looking afresh at the work . . . required to deliver value to the customer."(14)

The traditional manner of organizing is to create functional specialties, such as personnel and procurement, that segment work across divisional lines. This typically creates destructive competition, lack of effective integration of different functional specialties, and ultimately customer disenchantment. Reengineering shifts from a task orientation to a focus on process and results.

The process reengineering methodology begins with a blank sheet of paper and then designs the optimal way of performing the process regardless of the pre-existing system. Process reengineering has been defined as "starting over," as root assumptions underlying the existing processes are challenged. Radical change of the fundamental organizational framework is often the result as unnecessary functions are eliminated and others are redesigned and automated.(15) It is not incremental improvements in tasks; it is quantum leaps in performance. And, according to Hammer and Champy, "the best candidates for business-process reengineering are organizations in crisis--whether about money, quality, or service."(16)

The basics of reengineering include:

Process reengineering often succeeds because it maximizes the use of technology. Some business leaders assert that reengineering is enabling American industry to finally realize the benefits of technological investments of the past two decades.(18) While technology is critical to process reengineering, it is not where process reengineering begins. Rather, a key tenet is to redesign work processes first and then automate the new processes, as appropriate.(19) NPR's accompanying report on Reengineering Through Information Technology provides more detail and examples of areas ripe for action.

While reengineering focuses on work processes, it also often requires major changes in an organization's culture: eliminating unnecessary functions, introducing multidisciplinary approaches, creating crossboundary partnerships, and reducing the number of managerial layers. One lesson learned by the Defense Department is that the biggest barriers to culture change are centered in the accounting and personnel systems and the perverse incentives these systems create must be dealt with first before systemic culture change can occur in other arenas. Organizations that initiate process reengineering but do not undertake these supporting changes face a greater chance for failure. Many of NPR's recommendations for fundamental change in personnel, budget, procurement, and management tasks rely on the potential of process reengineering for success.

Examples of Reengineering.

Examples of process reengineering in the federal sector show tremendous promise. Federal agencies and departments have used process reengineering for streamlining specific processes and to facilitate broader cultural change. For example, examples of process reengineering in the Internal Revenue Service demonstrate clear productivity gains and how quickly such improvements can happen.

Process reengineering can be implemented quickly with relatively little training and can demonstrate immediate results when all levels of management support the effort.

Create Cross-Boundary Partnerships

The search for solutions to today's complex domestic problems must cross organizational boundaries. Issues such as unemployment, crime, the environment, workforce training needs, and natural disaster relief require a multi-agency government response. Yet government programs are often assigned to agencies in an illogical manner that inhibits cooperation and fails to focus on the customer or achieving results. Citizens such as farmers, veterans, and business people must sometimes travel to multiple sites to fill out numerous forms to gain access to government services. To provide citizens with integrated service delivery--"one-stop shopping"--government must find ways to coordinate, and in some cases completely reengineer, its service delivery strategies across all levels of government.

Coordination is not just a service delivery issue. The federal government also establishes and administers policies that cut across agency jurisdictional boundaries. Environment, food safety, and scientific research are all areas that can benefit from cross-agency approaches to policy development. The challenge is to find ways to integrate and coordinate policy development and service delivery in the existing segmented federal organizational structure. The traditional approach is to consolidate agencies. This has intuitive appeal but is generally very difficult politically. An increasingly viable alternative, however, is to use cross-boundary partnerships. The power, speed, and flexibility provided by boundarycrossing teams can improve performance in a segmented structure and provide higher quality services more effectively to more citizens-- without the difficulties that major reorganizations often entail.

"Virtual" Organizations.

Experimentation in the private sector with a concept sometimes known as "virtual corporations" uses boundary-crossing mechanisms to replace mass production with mass customization. Products and services are produced quickly and efficiently, through streamlined processes and to the specifications of the customer. The hallmarks of a virtual organization are the extensive use of flexible teams, information technology, and customer feedback.(20) The basic premise is to "let the task form the organization."(21)

This same concept can be applied to the public sector by encouraging cross-boundary work groups with a clear purpose, independent members, multiple leaders, multiple communication links, and a focus on integrated service delivery or policy development. A good example of a virtual organization is "one-stop-shopping" career centers where an unemployed person could simultaneously register for unemployment, housing assistance, and job retraining.(22)

Some technicians, authors, and social scientists have extended the "virtual" concept to the macro-level: What would a seamless, electronic government look like? The infrastructure of electronic government--as well as cross-boundary efforts--would rely on teams, networks, electronic communication, and flexible administrative systems. An important tool for cross-boundary work is computer conferencing, which allows meetings at any time or any place. Computer conferences are organized around specific topics, which may have multiple agenda items. Participants can add or read public or private messages, or access items through word searches, whenever and wherever they log on. The main difference between computer conferencing and electronic bulletin boards is the emphasis on supporting participants as a group. Computer conferencing software provides the "virtual space" where people meet, while the human dynamics inside the virtual space are aided by an on-line group facilitator.

The link between cross-boundary success and maximum use of the new technologies is well established in parts of the federal government. Some agencies have put a variety of computer tools, sometimes called "groupware," into computer-based decision rooms to support complex decisionmaking and change management. The Decision Analysis Center at the Department of Commerce and the Team Technology Center at the Federal Aviation Administration (FAA) are two examples of sophisticated, computer-supported resources for cross-boundary work. FAA's systems engineering staff is currently examining ways to incorporate "virtual databases" into communication vehicles across the aviation community.

With a vision of electronic government in place, the reality of groupware and decision rooms encourages solutions to problems across agency boundaries. For example, NPR initiated a nine-city computer conference to discuss "virtual" organizations. Participants concluded that in a true electronic government, whatever agency "doors" citizens enter, they should find a federal employee who knows how to match needs and services.

To make cross-boundary work successful in the federal government, organizational leaders must collaborate across traditional lines, support cross-agency initiatives and use the new telecommunication tools. A key strategy to foster this cross-organizational collaboration is through the introduction of boundary-crossing mechanisms, or partnerships. These partnerships may take different forms, depending on the task at hand and the parties involved.(23)

Existing Cross-Boundary Partnerships.

Cross-boundary partnerships are not a new concept in the federal government. In fact, a number of them have a successful track record and can serve as models for addressing complex problems. These models include temporary, ad hoc groups that address specific issues and then disband, and long-term partnerships that are charged with integrating service delivery and solving problems of common interest. For example:

A series of NPR recommendations--on ecosystem management, increased law enforcement cooperation, "bottom-up" grants to states and localities, and improved services to people in poverty--all call for cross-boundary partnerships to identify and act on solutions to complex problems.(25)

Encouraging government agencies to partner across organizational boundaries is not merely a jurisdictional problem. There are major cultural barriers that prevent full collaboration, even in areas of mutual interest. There must be dedication and commitment on the part of management, clear direction, and in most cases training in the use of group management techniques to ensure success. With commitment and clarity, the effectiveness of cross-boundary partnerships can be greatly enhanced by new telecommunications tools such as electronic bulletin boards, computer conferencing, teleconferencing, and interactive information services.

Introducing Cross-Boundary Partnerships.

Boundary-crossing partnerships are useful when one or more of the following situations exists: service delivery is fragmented; service quality is poor; cross-fertilization of ideas and expertise is appropriate; service delivery or policy development will improve with cross-boundary work; customer needs are naturally clustered (e.g. welfare, job training, housing) and policy areas overlap.

Examples of the use of boundary-crossing partnerships in the federal sector show a series of common elements among successful efforts and common problems among efforts that were not considered successful. These experiences and recent research findings suggest a set of guidelines for success:(26)

Overcoming Legislative Barriers.

Restrictive legislation is sometimes cited by both employees and management as an excuse for agencies and departments not to cooperate across organizational boundaries. However, a closer examination often shows that legislation does not prohibit collaboration. Nevertheless, some provisions inhibit inter-organizational cooperation and customer focus:

Self-Managing Work Teams

In recent years, a major trend in corporate restructuring and streamlining has been the shift from traditional supervision to reliance on self-managing work teams.(27) Self-managing teams are groups of workers who are collectively charged with accomplishing a whole task as well as collectively managing the team. The group is accountable to management; however, the management role has changed from traditional supervisor to more of a "coach." The span of control generally increases significantly. While a traditional supervisor may be responsible for five to 10 employees, the "supervisor" of a selfmanaging team may be responsible for 25 or more employees.

Clearly, self-managing teams produce leaner management. They also tend to increase motivation and productivity by increasing the responsibility and participation of workers. They enhance work effectiveness by giving employees greater ownership of their product. Self-managing teams are initiated by: delegating tasks and authority to whole teams; equipping team members with the skills needed to function in a team environment; and modifying or providing systems and tools to assist in team decisionmaking and ensuring accountability.

There is a great variety of self-managing work teams. In some, all members of the team can perform each other's job. These teams are often found in production facilities in the private sector; for example, in automobile factories. However, there are effective teams in office environments where there is not a high degree of interdependence and where employees are not expected to perform one another's job.

Teams also vary in their levels of responsibility and authority. Fully empowered teams tend to exist when an organization's culture supports participation. Such teams have "coaches," not traditional managers, and the team is responsible for quality control, production scheduling, hiring and firing, continuous improvement, and training programs. In other organizations, teams may have less authority and will evolve and mature over time as they increase skills, learn to balance authority and accountability, and gain management trust.

Perks and Symbols.

The use of teams tends to increase the quality of work life as team members increasingly participate in and are responsible for an important part of their life--their jobs. Also, "perks" that tend to differentiate workers from managers are generally reduced. For example, the federal government officially permits and defines supervisory perks such as the amount of square feet of workspace, the quality of the carpets, the expense of the furniture, and the type of parking space in relation to the grade level of the supervisor. Compare this to a team-based manufacturing company, Saturn, whose policy on "symbols" states:

Saturn believes that symbols should be positive to promote our philosophy and culture . . . and will strive to minimize the differentiation between people in the elements of successful organizations such as pay, purchase of GM products, common cafeterias, parking, identification, entrances, etc.(28)

Transforming the culture of central control and mistrust entails changing the symbols of that culture, too. The Administration has already saved millions of dollars by reducing the use of limousines and executive aircraft. But the symbols of the old hierarchical control culture are far more pervasive and costly than just the perks frequently associated with high-level Washington positions. Special dining rooms, reserved parking spaces near the door, higher quality furniture and carpet for managers and supervisors (the higher the rank, the better the furniture) all convey to front-line employees that they are less important members of the team--that management is on top and labor is on the bottom. Self-managing teams are an important step toward eliminating the symbols of hierarchy, control, and mistrust. They create positive symbols that convey to federal workers the new partnership that comes from a culture of shared goals and trust.

Establishing Self-Managing Work Teams. ]

Self-managing teams produce impressive results, but they come with a set of conditions necessary for their success:

Organizations should consider using self-managing teams in work environments that seem to be smothered in excessive layers of control; those where success can best be achieved through a coordinated effort (rather than those where work is highly differentiated); those where customers require greater responsiveness from the organization; and those where the specific tasks are conducive to a team approach. Self-managing teams are a very effective method for making the best use of employees' intellectual talents while at the same time improving their quality of work life.(29)

The self-managing work team concept is not incompatible with the federal civil service system. There are notable examples of successful teams in the federal government:


  1. "Organizational structure" is the formal and informal pattern of relationships that determines how work is organized and how power is distributed within the bureaucracy.
  2. See Hirschhorn, Larry, and Thomas Gilmore, "The New Boundaries of the Boundaryless Company," Harvard Business Review (May-June, 1992).
  3. See U.S. Office of Personnel Management, Survey of Federal Employees, Publication OS-92-06 (Washington, D.C., May 1992).
  4. For an excellent view of corporate culture, see Edgar H. Schein, Organizational Culture and Leadership: A Dynamic View (San Francisco: Jossey-Bass Publishers, 1985).
  5. See NPR's Accompanying Report Reinventing Human Resource Management, HRM14: Provide Incentives to Encourage Voluntary Separations.
  6. See Merit Systems Protection Board, Federal Personnel Offices: Time for Change? (Washington, D.C.: August 1993).
  7. Interview with Office of Management and Budget, Office of Federal Procurement Policy staff, Washington, D.C., July 1993.
  8. See, for example, case studies in Tom Peters, Liberation Management (New York: Alfred A. Knopf, 1992), such as "Cleaning out the rat's nest," p. 88. For experiences of other countries, see New Zealand and United Kingdom.
  9. Peters, Tom, Thriving on Chaos (New York: Harper and Row, 1988),
  10. 427.
  11. U.S. Department of Agriculture, Forest Service, Summary of Experience (Washington, undated). Also, interviews with Rod Collins, business manger for Ochoco National Forest, Washington, D.C., June 16, 1993.
  12. See, for example, NPR's Accompanying Reports Department of Defense, DOD04: Outsource Non-Core Department of Defense Activities, DOD05: Create Incentives for the Department of Defense to Generate Revenues, and DOD06: Establish and Promote a Productivity-Enhancing Capital Investment Fund; and Improving Financial Management, FM06: "Franchise" Internal Services.
  13. Peters, Thriving on Chaos, p. 430.
  14. See NPR's Accompanying Reports Department of Health and Human Services, HHS03: Develop a National, Uniform Inspection System to Ensure a Safe Food Supply, and HHS05: Restructure the Management of Railroad Industry Benefit Program; Department of Justice, DOJ01: Improve the Coordination and Structure of Federal Law Enforcement Agencies, and DOJ02: Improve Border Management; and Department of Transportation, DOT04: Establish a Corporation to Provide Air Traffic Control Services.
  15. Hammer, Michael, and James Champy, Reengineering the Corporation: A Manifesto for Business Revolution (New York: HarperCollins Publishers Inc., 1993), p. 30.
  16. See Carr, David K., et al, BreakPoint: Business Process Redesign (Arlington, VA: Coopers and Lybrand, 1992).
  17. Corbin, Lisa, "Reengineering: The Next Management Revolution," Government Executive (September 1993), pp. 26-32.
  18. Harker, Patrick T., "Reinvent Government? Better Have the Tools to Reengineer!," Productivity and Management Review (special issue, forthcoming, 1994).
  19. See Business Week, April, 1993.
  20. U.S. General Accounting Office, Information Management and Technology Issues, GAO/OCG-93-5TR (Washington, D.C.: U.S. General Accounting Office, December 1992); and Davenport, T.H., Process Innovation: Reengineering Work Through Information Technology, (Cambridge, MA: Harvard University Press, 1993).
  21. Davidow, William, and Michael Malone, The Virtual Corporation: Structuring and Revitalizing the Corporation for the 21st Century (New York, NY: HarperCollins Publishing Co., 1992). An article for Forbes (December 7, 1992, p. 102) noted that a virtual corporation's "sphere of influence extends upward through its suppliers and downward through its distribution and retail channels and even to the end-user. The most descriptive term for this new relationship is codestiny. All of the players in the process or creation, delivery and use will willingly surrender a measure of freedom and mobility in exchange for shared beneficial results."
  22. Gilmartin, Raymond, CEO of Becton-Dickinson, as quoted by Brian Dumaine, "The Bureaucracy Busters," Fortune (May 18, 1992).
  23. See NPR's Accompanying Report Department of Labor, DOL08: Create One-Stop Centers for Career Management.
  24. Lipnack, Jessica P., and Jeffrey S. Stamps, The TeamNet Factor: Bringing the Power of Boundary-Crossing Into the Heart of Your Business (Vermont: Oliver Wight Publications, Inc.) 1993.
  25. See NPR's Accompanying Report National Science Foundation, NSF01: Strengthen Coordination of Science Policy. This recommendation expands the role of FCCSET.
  26. See NPR's Accompanying Reports Reinventing Environmental Management, ENV02: Develop Cross-Agency Ecosystem Planning and Management; Reengineering Through Information Technology, IT04: Establish a National Law Enforcement/Public Safety Network; Strengthening the Partnership in Intergovernmental Service Delivery, FSL01: Improve the Delivery of Federal Domestic Grant Programs; and Department of Health and Human Services, HHS01: Promote Effective, Integrated Service Delivery for Customers by Increasing Collaborative Efforts.
  27. Lipnack and Stamps, p. 199.
  28. Wellins, Richard S., William C. Byham, and Jeanne M. Wilson, Empowered Teams: Creating Self-Directed Work Groups That Improve Quality, Productivity, and Participation (San Francisco: Jossey-Bass Publishers, 1991).
  29. "Memorandum of Agreement, Saturn Corporation and United Auto Workers," (1985, 1991) p. 4.
  30. See also Belasco, James A., and Ralph C. Stayer, Flight of the Buffalo (New York: Warner Books, Inc., 1993) p. 49; and Senge, Peter, The Fifth Discipline (New York: Doubleday/Currency, 1990) p. 273.