November 1, 1999
By Anne Laurent
o get a glimpse of the government
to come, pull on your flannel shirt and hiking boots and head for the
national forests in California. As you tromp through the woods, you may
run across Merl Sturgeon and Bill Hay sizing up how much lumber a singed
Sugar Pine will yield. Or you might see Jeni Bradley negotiating with a
landowner to allow the California Back Country Discovery Trail to pass
through his property. Kelly Fike might be out helping a team of people
figure out the environmental impact of a land improvement project. At
first glance, they all look like regular Forest Service employees. But
don't be fooled—although these folks work for the agency, they're also
small-business owners contracting with national forests.
Staff cuts and flat budgets have left the forests increasingly short
of skills needed for safeguarding and harvesting trees, granting grazing
rights and providing recreation facilities for visitors. But instead of
trying to make ends meet by putting longtime, highly skilled employees
out of their jobs, or simply by doing less, or hiring private firms to
fill in, forests in California are turning loose their own employees to
become itinerant businesspeople. Employees in the Forest Service's
Pacific Southwest Region (Region 5) are becoming internal entrepreneurs
plying their services for a fee across the 18 national forests in
California—and sometimes beyond.
These new enterprises are similar to the mostly administrative
reimbursable services offered by agencies for years and the franchises
created by six departments to sell everything from employee health and
human resources assistance to data centers and acquisition help across
government. What's different about these enterprises is that the Forest
Service allows individual employees to form them and that they expand
the internal entrepreneuring concept from back-office and support
services to the core work of the agency. As federal agencies follow
industry's lead by shedding all but their core or inherently
governmental functions, enterprises offer a new way of accomplishing
that work. The enterprise experiment is bringing to fruition government
theorists' predictions of the demise of "full-time forever"
employment and the rise of floating, flexible freelancers.
The internal enterprises allow Region 5 forests to complete vital
projects without further burdening already overtaxed regular employees
and without adding expensive full-time staff. The existence of
enterprises also has helped improve cost accounting across the region,
as well as saved jobs and boosted morale and business skills among new
The advent of enterprising has kicked off a cascade of
cost-consciousness, an important achievement in an agency whose poor
financial management won it a place on the General Accounting Office's
1999 high-risk list. Responsible for covering all salary and overhead
costs of their businesses, enterprisers are deeply aware of costs and
often negotiate hard with other agency organizations for price cuts or
service improvements. That bargaining prods other operations to cut
their prices or improve the quality of the services the enterprises get
Forest managers seeking to hire enterprises gulp hard upon hearing
their fees, often their first encounter with the true hourly cost of
labor in government. But once the shock wears off, they become conscious
of the high cost of full-time employees and begin considering better
ways to use staff. "Using enterprises, [forest supervisors get]
projects completed instead of maintaining a workforce they don't need or
that is outdated," says Kathleen Wolcott, who runs the internal
bank that helps finance all 18 Region 5 enterprises.
Most enterprises went into business in the summer of 1998, and the
majority of them more than covered costs in their first year of
operation. The enterprise experiment's success has caught the attention
of agency executives, and Forest Service Chief Operating Officer Phil
Janik says it will be expanded. "We're definitely looking at the
possibility of expanding to Region 6 [the Pacific Northwest]" next
year, says Janik.
Janik's predecessor, former Forest Service COO Francis Pandolfi, was
an early advocate and remains an enthusiastic supporter of enterprises.
"Enterprising goes a long way toward the goal of doing more with
less," he says. "It should become a model throughout
government. It emulates some of the best and most effective things in
the private sector."
The Mother of Enterprise
Necessity was the mother of innovation at the Forest Service.
Established in 1905, the agency manages 192 million acres in 155
national forests and 20 grasslands in 44 states, the Virgin Islands and
Puerto Rico. Its holdings are 9 percent of the nation's total surface
area and 29 percent of all federal lands. Since the 1950s, the Forest
Service's chief function has been to oversee the harvesting of timber on
national forests. But environmental laws enacted in the 1960s and 1970s
have shifted the agency toward a new emphasis on protecting and managing
ecosystems. The change has altered the way forests are managed, the
makeup of the workforce, and the size and content of the workload. For
example, timber sales, once the source of 90 percent of forest receipts
outside appropriations, fell 55 percent from fiscal 1992 to 1997. At the
same time, recreational visits to the forests rose nearly 36 percent. On
Sept. 30, the Clinton administration proposed new forest management
rules formally recognizing the shift toward ecosystem management and
away from timber production.
Against that background came staff reductions of 25 percent since
1992 and budgets that have remained flat or fallen when inflation is
taken into account. "I've been here for four years and each year
we've gotten $1 million less than the year before," says Margaret
Boland, deputy forest supervisor of the 1.8 million-acre Los Padres
National Forest, which is 50 miles north of Los Angeles. "In 1995,
the forest's appropriation was $16 million, now it's $13 million.
Staffing was reduced probably by about 20 percent from 1995 to 1999; we
now have about 200 people."
The mission shift, downsizing and budget constraints have brought
forest employees new roles and more work. Managers accustomed to having
one or more experts in every field in every forest now are asking
employees to wear several hats, reducing the time and expertise they can
devote to any one task.
To catch the work and skills falling through the cracks, managers
need a flexible workforce of highly skilled people who don't have to be
fully employed by just one cash-strapped forest. "The shift in
Forest Service emphasis and program mix promotes the enterprising
idea," says David Radloff, chief of reinventing government efforts
at the Forest Service. "It gets you out of thinking, 'person A
works for person X,' to thinking, 'A has skills needed in three
different places, so let's get him out from under X and let the market
match them up and move them and let the people who need A pay for
The idea to create enterprises arose simultaneously, but
independently, in 1994 at Forest Service headquarters and in Region 5.
It was part of the agencywide reinvention plan and a Region 5 effort to
improve administrative services that was spearheaded by then-regional
financial management director Mike Duffy. Radloff, then beginning his
job as reinvention chief, started an enterprising skunkworks team, which
included Pacific Southwest Regional Forester Lynn Sprague and John
Phipps, forest supervisor in Region 5's El Dorado National Forest. Both
also were key players in Duffy's search for excellence in administrative
organizations. Duffy and Radloff knew each other, and in 1996, Duffy met
with the skunkworkers about Region 5's enterprising idea.
"Two months [after the meeting] I was in Washington briefing
Radloff and Doug Farbrother [then a member of Vice President Al Gore's
National Performance Review staff] and a month later we became a
reinvention laboratory," Duffy recalls. Duffy became the lab's
chief scientist, catalyzing useful connections throughout the agency and
brewing up the business approach. He put together a laboratory staff and
an enterprise steering committee, figured out financing, won the union's
cooperation and began explaining the idea to regional managers and
campaigning for their cooperation.
"The regional leadership met quite a few times to discuss it,
with a lukewarm to cool response," Radloff says. "At one
point, Lynn Sprague said, 'I've decided we're going to give this a try.
We're going to go slow and put systems in place to support it. Managers
don't have to support it, but you can't sabotage it.' That was the
leadership support needed to give it a try." Since then, the lab
has held two open seasons during which it announced it would accept
business proposals from individuals or groups of employees. The steering
committee makes sure proposals are within the agency's mission and
aren't in direct competition with the private sector. In the last round,
15 of 18 were approved to go on for Reinvention Accelerator Training. Of
those 15, eight dropped out during training and seven went on to present
So far, three training sessions for prospective enterprisers have
been conducted by business consultant Gifford Pinchot, grandson of the
first Forest Service chief by the same name and originator of the theory
of "intrapreneuring," a form of private sector enterprising.
Training takes 45 days, nine of them in the classroom and the rest
completing homework assignments.
"We got 45 days' boot camp, learning to figure our daily rate,
do spreadsheets, etc.," remembers Jeni Bradley, owner of Recreation
Solutions, a trail planning and consulting enterprise. "They took
our brains out and did something to them and put them back in and we
never can go back [to our old ways of thinking] again." At the end
of training, enterprisers produce full-fledged business plans, which
they present orally and in writing to the steering committee. The
committee rejected one proposal from the most recent group because
neither the business offering nor its prospective market was adequately
To prevent supervisors from altering enterprisers' work priorities
and to guard the businesses from downsizing efforts at individual
forests, Duffy arranged for them all to report to him. The reporting
arrangement also means the enterprise bank doesn't have to rummage
through the books of all 18 regional forests to find enterprise records.
The enterprise bank's bookkeeping system tracks how much funding belongs
to each enterprise and how much money is available for use at any time.
The funds pass in and out of the Forest Service working capital fund, so
balances remain available without regard to fiscal-year limitations.
The lab charges each enterprise a $5,000 licensing fee plus 1 percent
of its revenues to pay for the banking, advisory and other services it
provides. The lab currently is creating a form of workers compensation
insurance for enterprisers, who could lose their businesses if they were
injured or ill and unable to work. Each will be assessed an insurance
fee in the future. In addition, the lab provides a safety net for
enterprises. If they temporarily run short of cash, the bank provides
loans at 10 percent interest. Should a business falter, the lab also
steps in. "If the businesses can't cover costs, we'll work with
them to restructure their offering," Duffy says. "If that
doesn't work, we'll place them with another enterprise. If that doesn't
work, we'll place them back with their old organization."
Freed to Buy Furniture
Forest Service employees go into enterprising for different reasons.
Some, like Bradley, already were working for more than just their home
forests, so they knew there was a market for their services. "I was
on the Modoc National Forest [staff] as a recreation officer and I was
going on details to other forests constantly," she says. Others,
like Merl Sturgeon, owner of Timber Expert and Measurement Services
(TEAMS), were facing losing their jobs. Sturgeon had been told that
Modoc no longer could afford him. "This meant Merl had to move out
of his traditional job, and there was a market for a highly skilled
person to move beyond the boundaries of the forest," Radloff says.
No matter how employees came to enterprising, their reasons for
sticking with it usually include more independence, a clearer yardstick
for measuring success, and more control of the work than they ever had
as regular employees. "We essentially are our own unit and can
coordinate and create our own jobs," says Peggy Scott, an
accounting technician with Incident Financial Services, a six-person
billing and legal liaison business. "We really have ownership in
how we succeed or fail," adds Debbie Klippenstein, coordinator of
the business. Christopher O'Brien, managing partner of Diamond Mountain
Heritage Services, a forest archeology consulting group, relishes
controlling his own destiny. "We're doing it for the freedom to
make it or break it based on what we do," he says. For Bradley,
enterprising offers a chance to make a difference. "For the first
time in my 24-year career, I now believe I can change the way government
does business," she says.
Changing ways of doing business on a less grand scale also is
attractive. For Incident Financial Services employees, desks and chairs
became the emblems of independence. "When we moved in, we could buy
our own furniture," says Lisa Halop, who helps forests build cases
against private companies and individuals responsible for starting fires
and other acts of vandalism. "We could set it up any way we wanted
to and we didn't have to go get it from the storeroom like everybody
else. It may sound like diddly squat, but that's real business,"
Enterprisers' newfound freedom is meaningless, however, if no one
will buy their services. The fees enterprises must charge to cover their
costs "take the breath away from a manager," Radloff says.
"Enterprisers are calculating prices based on true costs: salary
and fringes (retirement, future use of annual leave, insurance)."
Managers aren't used to hearing the true cost of an hour of work,
Radloff explains. "The enterpriser has to sit down and talk the
manager through it."
"When I do marketing, I ask them what total percentage of time
they think the typical employee puts in in effective project hours. Some
say 80 percent," says Kelly Fike, owner of Streamline, an
environmental analysis training business. "Billable hours are more
like 45 percent. I'm dealing with career government bureaucrats and
nothing ever brings them face to face with full costs."
Radloff expects that enterprising eventually will give managers
throughout the agency a much better handle on the true costs of doing
the Forest Service's business. "It's difficult for managers to
compare costs because they don't have sufficient records," he says.
"They can add up the salaries but there are all kinds of other
costs they don't have a good handle on. When a manager considers using
an enterprise, he is doing so largely based on instinct, intuition and a
little bit of analysis—Is that price within what I really think I
should pay? Anywhere someone is buying an enterpriser's time, he's
asking [cost] questions elsewhere."
After using enterprisers, managers more carefully weigh the cost of
full-time employees. "We look at the cost differences between
maintaining a full-time employee and paying an enterprise," says
Los Padres deputy supervisor Boland. "We're in a high-cost area, so
adding people is [expensive] for us. Enterprises are much more
cost-effective for a one-time kind of thing you can have somebody come
in and do." Shilling's rule of thumb is: "My average cost is
about $100,000 per person per year with fringes. I can pick up an
enterprise team for $5,000 to $10,000 and it comes out very high
quality." Bill Kay, Sturgeon's partner in TEAMS, points out that
forests can save money by hiring highly skilled enterprisers instead of
detailing full-time employees to do unfamiliar tasks. "Those people
may not know timber sales and they may not know the country so there's a
lot of training involved," he says. "We can compete because
they don't have to pay for our training. They just turn us loose. We
provide a turnkey package."
Managers sometimes struggle to find the money to pay enterprisers. It
isn't always easy to shake loose funds not already tied up in salaries
for existing staff or earmarked for a specific project. One source of
unspoken-for money is unfilled jobs. "Many of us, with retirements
and turnover, always have some vacancies," Shilling says. "If
we have a vacancy, and we still have it budgeted, we can accrue some
savings. I have 54 staff slots but only 39 or 40 people right now. Of
course the money has to be in the right appropriation. If the money was
appropriated to build a dam, I can't use it to pay an enterpriser."
The agency grants forest managers considerable discretion, so they
always seem to be able to free up some money. "If you're talking
tens of thousands of dollars, [a manager] can probably hire an
enterprise team," Radloff says. Bradley concurs. "We have
found there are more dollars out there than anyone thought," she
says. "They can come up with pots of money to get a project. What
they can't come up with is unending money to cover an employee during
the winter when there is no work."
No Displaced Employees
That enterprisers could be hired to do work already being performed
by regular full-time employees hasn't escaped the notice of California
forest employees or their union. Lonnie Lewis, National Federation of
Federal Employees Region 5 vice president, voiced objections when
enterprising first began. "We have employees doing particular work
and an enterprise could come along and say it will do that work, leaving
the employees nothing to do," he says. To allay non-enterprisers'
fears of job loss, Lewis negotiated a deal with Region 5 that no
employees would be displaced because of enterprises. But Lewis is quick
to observe that enterprises create opportunities for the Forest Service
to keep skills it otherwise would lose to downsizing. "We've got to
consider the efficiency of the organization as well as the welfare of
the employees," he says. Lewis encouraged Bradley and Sturgeon to
"Merl was going to be gone this year or next if he hadn't
founded an enterprise," Radloff says. He came in with no private
industry experience, 30 years in the Forest Service, and he has become
re-energized, and his world has grown from the forest to all the region.
He's a perfect example of how enterprise benefits employees and the
Their benefits notwithstanding, as enterprises shake up old systems
and break traditions they are winning some enmity in the bargain.
"That's the idea of a market mechanism, to shine a light on
inefficiency and move people to better customer service and the best
product for the money," Radloff says. "It's an enemy-maker,
but over time, shining a light on inefficiency is a benefit to everyone
and eventually people will come to see that."
In their first year, enterprises already have shone a spotlight on
inadequate job classifications. Stuck in jobs whose outmoded
classifications only permit promotion to a certain level, enterprisers
are running into problems getting into pay grades that reflect all the
skills they've gained and work they do as business owners. "There's
no pay grade for CEO of a government business; you're just paid as a
wildlife biologist, or whatever," says Steve Dunsky, a Region 5
videographer who sells his services across the Forest Service but has
opted not to become an enterpriser. "You can plow money back into
equipment, but there aren't grade level increases even though the
enterprisers are working 50 percent harder than they were [as regular
Geralyn Bolong, an associate with Compensation Resolution Brokers,
which resolves workers' compensation cases for forests, was a GS-11
before joining the enterprise, but her new classification comes out as a
GS-9. Of the four-person staff, two were downgraded, one received a
promotion and one remained in the same grade. Bolong says she would
accept the downgrade if she could keep her GS-11 pay level, despite the
fact that the lower grade could reduce her retirement benefits.
"What's more important is enjoying what I do and the people I work
with," she says.
To challenge human resources staffers to become more responsive and
creative in working with the enterprises, the reinvention lab chose to
buy HR services from another office rather than to hire its own
personnel specialists. Enterprisers already are pushing the office to
become more businesslike. Bradley has asked for a price schedule for
special services. "If they say it's going to cost an extra $500 to
get a job classification within 30 days, we'll say fine," she says.
"If I can hire quickly to win a $100,000 project, $500 is not going
to mean anything to me."
The internal businesses also are challenging the long-standing Forest
Service tradition of relying on employees across the agency to leave
their regular assignments to fight fires during the summer. "Our
team won't go on fire duty because the Washington office told us we
aren't going to to recover our full costs while we're gone,"
Bradley says. "Quite a few of us have good fire qualifications, but
we could go bankrupt if we went out on fires and no one paid our
overhead costs." It's clear the decision to flout tradition and
duty wasn't easy. "I was just in San Bernardino [site of raging
fires in early September]," Bradley says. "On CNN I heard [a
Forest Service official] say, 'We're totally out of resources,' and I
thought, 'No you aren't, you're just not willing to pay for them.'"
Enterprises risk running afoul of the growing sentiment in Congress
that government agencies should not duplicate work done in the private
sector. So far, no companies have complained, but enterprises are
careful about appearing to compete. "I am aware of the 
Federal Activities Inventory Reform Act [which requires agencies to list
all federal activities that could be commercialized]," says Jody
Sutton, owner of the Content Analysis Enterprise Team, which analyzes
public comment on Forest Service projects and coordinates public
involvement. "If a client wants to go with a third party, I pull
out. I can't compete with them. It's against the law."
Forest managers, on the other hand, see advantages in using
enterprises over contractors. "We get a customized deal from people
knowledgeable about what the Forest Service needs," says Los
Padres' Boland. "We don't have to go through the mating dance of
working with a company—telling them the language, what the hot buttons
are, etc. That doesn't mean [we won't] use outside companies."
Sutton and several other enterprisers often hire private contractors
for large projects. "I would hope that Congress would see there is
plenty of work for everybody and that we try to employ third parties as
much as we can," she says. "I see enterprising as just another
way of getting work done internally."
Radloff and Duffy predict enterprises will multiply and eventually
compete for business. In fact, Radloff foresees a day when enterprises
do most Forest Service work. Duffy is more cautious. "Initially, we
looked at about 80 percent of the organization being enterprises and the
other 20 percent in the leadership," Duffy says. "I've come to
realize that while that's doable, a lot of employees who do valuable
work won't fit in enterprises. They want to break at 10 a.m. and 3 p.m.
and go home at 4 p.m., and they still are providing a valuable
It's too early to say how enterprises and the old Forest Service
structure will co-exist. "One worst-case scenario would be that due
to the cultural structure of the organization, the interest in
enterprises would be lost," says NFFE's Lewis. "On the other
side of the coin, we could lose our identity as the Forest Service. We'd
become enterprisers, not Forest Service employees. I've worked for the
Forest Service for 43 years. I'd hate to see us lose our identity."