Document Name: Chapter 2 -- Getting Results
Owner: National Performance Review
It is common sense to take a method and try it; if it fails, admit it
frankly and try another. But above all, try something.
Franklin D. Roosevelt 1
It is August 1, 1995, and Skowhegan, Maine, is baking in heat seldom experienced that far north. In a huge white tent set up a few miles out of town at the S.D. Warren Company paper plant, 600 people--workers and managers from firms across the state--swelter in their seats, listening to the featured speaker. He is Bill Freeman, area director of what has been, for industry at least, perhaps the most thoroughly disliked of all federal agencies: the Occupational Safety and Health Administration, or OSHA.
As Freeman concludes his remarks, all 600 rise to their feet in a single motion. They do not boo him. They do not stone him. They cheer loudly, applaud enthusiastically.
Freeman has not always received this sort of greeting from the companies he inspects. A few years ago, Bill Freeman and his team of two dozen inspectors were OSHA's "gold medal" winners. They got the agency's top honors for detecting the most safety violations, issuing the most citations, and levying the most fines--sort of the triple jump in the OSHA Olympics.
But Freeman didn't think he and his team were winning at all. OSHA's gold medal notwithstanding, he was convinced they were losing--losing, that is, in the serious business of reducing the number of work-related injuries in Maine. Maine had the worst record in the nation before Freeman's team got its medal, and it still had the worst record afterward. The fact was that, given the limited resources he had and the complexity of OSHA's inspection regulations, his chances of actually improving Maine's injury rate were virtually nil under existing rules.
Following those rules, Freeman's inspectors would move into a company, spend three months on-site, another three months preparing reports, and then anywhere from six months to two years in court. And when all was said and done, they'd find themselves telling the company to do the same things they'd told them years before after an earlier inspection. The process was so cumbersome that it got in its own way, not just the companies' way; in seven years, Freeman's team had been able to inspect only five mills. Indeed, nationwide OSHA has only 2,000 inspectors to monitor the nation's 6.2 million workplaces--more than 3,000 per inspector.2
Fed up with getting nowhere, Freeman went to the 200 companies that had the highest injury rates in the state and offered them a deal: you and your workers draw up a safety program that meets the law's objectives, and we'll stop playing "Gotcha!" No more months-long "wall-to-wall" inspections, no more "ignorance is no excuse" enforcement, no more by-the-book fines. We'll stop being cops. We'll be partners instead--you, your workers, and OSHA. And any time you need help, we'll be there.
Industry's response was immediate and positive. All but two of the 200 signed up. Employer/worker safety teams in the participating firms are identifying--and fixing--14 times more hazards than OSHA's inspectors ever could have found, including hazards for which the agency didn't even have regulations. After all, who knows where the problems are better than the workers themselves?
The new program is working so well that in two years, the group's injury rates dropped 35 percent.3 Says S.D. Warren's Carl Turner, "There is a direct connection between the 200 Program and the drop in the accident rate; we spent 18 years under the old OSHA program and nothing happened."
More remarkably, Warren's production is up 25 percent, and Warren executives believe it's because their employees feel valued now. "This makes a big difference in how employees feel about the company," says one union official. "Repairing safety items would take forever, if you were lucky; now when I write a repair order it's done in less than 24 hours. We should have done this ten years ago."
The initiative has brought unions and management together as well. Says an official at Georgia Pacific, "We have joint communications and meet together; I never thought I'd see the day." And the effect goes beyond the factory floor. Ed Warren at Boise Cascade says employees are "using safety glasses and earplugs when they use a chain saw at home."
In another time, Bill Freeman probably would have been fired. He broke the rules. He didn't "go by the book." In another time, if you did something different, stepped out of bounds, bent the rules, or acted on the basis of simple common sense, you'd be punished, not rewarded. In short, if you stuck your neck out, you'd get your head cut off. Not surprisingly, people learned not to stick their necks out. Not exactly a way to motivate folks. And a lousy way to run anything, especially a government.
But Freeman seized on the federal initiative to reinvent government and pushed it hard. Result?--not another empty "gold medal," but an award for the agency from the Vice President, a substantial financial award from the Ford Foundation/John F. Kennedy School of Government Innovations in American Government program, an announcement by President Clinton that "Maine 200" will henceforth be OSHA's policy nationwide--and injury rates in Maine that are already down by more than a third.
Freeman and his team are real winners at last.
Franklin D. Roosevelt's message to the government was, in effect: do something; if that doesn't work, do something else. Over the years, however, the message to front-line federal workers--and, for that matter, to the people and companies they regulated--mutated so profoundly it reversed upon itself. It became, "Do it this way. If that doesn't work, do it this way anyway. Don't get any bright ideas."
Our own government had become a mine field--for employees and their customers alike. Even if we picked our way through it carefully, following the map we were given, there was always a chance--often a good chance--we'd stumble upon a new mine. They seemed to grow of their own accord. Good, honest, hard-working people ended up sideways with their government, often not so much because they were off track but because there was no way to know which way was the right way. Each time they thought they'd figured it out, the map would change.
People want to do the right thing. Problem is, the government often makes it almost impossible to figure out what the right thing is and, once you've figured it out, impossible to actually do it. Think of it this way: most folks understand why there is a speed limit, respect it, and try to obey. But what if the speed limit wasn't posted or, if it was, it changed so often you never knew whether you were obeying it, and troopers were forever pulling you over and giving you tickets for violating this ever-changing, often mysterious speed limit? And then, just to keep you on your toes, they'd give you a ticket for your car being dirty, leaving you wondering what that had to do with highway safety. Not only would you be pretty steamed but, chances are, the highways would be in chaos. That's what life with the federal government's been like for years, especially for America's businesses.
In February 1995, President Clinton put the challenge facing the federal government simply. The issue, he said, was "How do we do our part to protect the legitimate interests of the American people, without literally taking leave of our senses and doing things that drive people up the wall but don't make them safer?"4 And then he provided the answer: completely overhaul the way the federal government regulates people, businesses, and state and local governments--focus on results, not rules.
There's an old saying that describes how our government works: "The President proposes, the Congress disposes." To that, the American people might add, "and the agency imposes." It is those myriad everyday bureaucratic impositions Americans want fixed. And that's what the regulatory overhaul begun by the National Performance Review is designed to do. President Clinton's message to federal agencies was simple: "We are not asking people to spend their time, their money, and their resources fooling around with us if they don't have to and there is no public purpose served by it."5
In what has become a hallmark of the reinvention initiative, this year's efforts at regulatory reform began with asking and listening to the people who know most what needs to be done: the government's customers and the front-line workers who serve them. Agencies held more than 300 meetings around the country. Plus, there were hundreds more local meetings as part of the 1995 White House Conference on Small Business. Here's what people said.
It's Not So Much the "What" as the "How"
We all want clean air and water. We all want safe food and toys our children won't be hurt playing with. We want workplaces that don't injure us. We want our savings protected. And much more. That's why we have laws. And while we may have our disagreements about some laws, the real problem is what happens after the laws are passed.
Actually, there are four problems. First, Congress passes laws, but seldom repeals them--whether or not they're relevant anymore, whether or not they work. So an awful lot of laws remain on the books after they are no longer useful. Second, after laws are passed the agencies responsible for carrying them out are required to produce regulations describing how they will achieve what Congress passed the law to do. But between Congress's vagueness and agencies' mania for covering every eventuality, the result has been regulatory overflow: at last count, the total number of pages in the Code of Federal Regulations--the encyclopedia of federal laws and rules--was more than 130,000 pages. Its 202 volumes take up 21 feet of shelf space. Third, even after the regulations are approved, there are legions of lawyers and others who seek out and find loopholes in them, and legions more of agency regulators who seek to fill those holes with--you guessed it--more regulations. Fourth, agency employees are duty-bound to enforce regulations once they're approved. That's their job. Common sense interpretation is expressly forbidden.
Americans acknowledge that many laws and regulations have made things better. The environment is dramatically cleaner now than it was 25 years ago. Highways and cars are safer. So are kids' toys. Even though the number of people working has grown substantially, the rate of work-related fatalities declined more than 50 percent since OSHA was created in 1970.
But Americans also say that many regulations have created more problems than they solved and even frustrated the very goals they set out to achieve. They say the regulations are often incomprehensible and sometimes simply nonsensical. And even when their purposes make sense, the enforcement procedures are often inflexible and costly. Sometimes the rules miss the point altogether, like requiring a refinery to install $31 million worth of equipment in waste pipes to control benzene when, in fact, its benzene emissions came from its barge-loading dock.6
In addition, the punishments for violations sometimes far exceed the violations themselves, not to mention common sense, like fining a company thousands of dollars for failing to require workers to don hard hats as they rushed to save a co-worker from a collapsed trench.7 And complex and costly regulations are causing employers to shy away from doing things they want to do, like employing the disabled or providing health and pension benefits--things the laws are supposed to be promoting.
What we end up with, as President Clinton has pointed out, is a government that is obsessed with procedures but often seems oblivious to results. What's more, all this regulation is immensely expensive--hundreds of billions of dollars, so expensive that no one really knows the figure. It's costly to taxpayers to pay for the system that creates and enforces all these rules; it's costly to employers, state and local governments, and ordinary citizens to comply with them; and it increases the costs of products and services.
And then there is the matter of human judgment. After all, regulations don't think. In the pursuit of equal treatment of everyone, we have created a system that demands that one size fit all, and in the pursuit of certainty we have created a system that attempts to cover every eventuality, spelling everything out in excruciating detail. We have given neither the regulators nor the regulated any leeway. In the words of Philip Howard, we have "exiled human judgment."8 But the world is neither all one size nor all that certain. Things change constantly, conditions vary, and human judgment is crucial to making things work. Or, as Howard puts it, "Decision making must be transferred from words on a page to people on the spot."9
And that's exactly what Americans want--reasonable rules, reasonably applied by people close to the action. The new OSHA is proof that the "how" of government regulation can be changed dramatically for the better. But it isn't the only example. Throughout government, regulators have begun work on programs to cooperate with the industries they regulate.
Americans deserve a government that works. They're starting to get one.
Get Rid of Bad Rules and Make Good Ones Easier to Understand
Some years ago, someone in the federal government decided doctors should be required to fill out and sign an "attestation form"--sort of a truth oath--attesting to the accuracy of the information they provided to the hospital when they discharged a Medicare patient. It didn't add anything to patient care--in fact, it detracted, since filling it out took time away from patients. And it didn't improve medical records; the doctors were already providing all the information required for discharging patients, generally quite accurately. What it did do was create more than 11 million forms, take up 200,000 hours of physician time, and add $22,500 in administrative costs for every hospital in the country.
And now, thanks to President Clinton's reinvention initiative, it's gone. It's one of literally thousands of senseless regulations that people, businesses, and state and local governments don't have to follow anymore now that the federal government is focusing on results rather than rules. Are silly regulations all gone? Hardly. Is all that costly paperwork a thing of the past? Not yet. But agencies are killing bad regulations faster than at any other time in recent history-- thousands of pages of them this year alone. And they're working hard to make good regulations better, easier to understand, and easier to observe.
But in the meantime, how do businesses find out which regulations apply to them? And how do they make sense of them? In the past they usually found out when it was too late: after being hit with some violation.
Now there's the U.S. Business Advisor--a one-stop Internet shop for information on regulations and compliance for businesses. A reinvention project of 15 major federal agencies, the Business Advisor is a World Wide Web site (http://www.business.gov), housed at the Department of Commerce, through which businesses can find out what regulations apply to their situation and how to get help complying with them. Lawrence Livermore National Laboratory and the University of Massachusetts developed a technology that is remarkably user-friendly. All you do is tell the system what your question is and it culls the answers you're looking for from thousands of pages of regulations--in seconds. And that's just the beginning; soon the Business Advisor will make it possible for businesses to get not just regulatory information but also information on trade, labor, finance, and selling to the government. Eventually, you may be able not only to retrieve information, but also find out about best practices, send comments, and file documents with the government electronically. But these are just the government's ideas. The final design will be based upon input and ideas from businesspeople. President Clinton has created a task force to get these ideas and report back with a design by the end of 1995.
Better access to the right information will make it easier for businesses and others to do the right thing, but only if the information they receive is written in plain language. And let's face it; most of the time it isn't. Between the vagueness of the original laws and the legalese used by rule-writers trying to cover every eventuality, reading regulations is like wading through a jungle without a machete. Now, however, the government itself is clearing the path, gradually making regulations user-friendly: Interior Department staff, for example, reasoned that if they wrote clearer regulations, people would waste less time trying to figure out what the government wanted, would be less likely to make mistakes, and would be more likely to comply. Now, all regulation-writers at Interior use plain language.
The Forest Service has gone one step better: to help make the government's lands and resources more accessible to Americans with disabilities, it has scrapped detailed and convoluted design and engineering regulations in favor of an award-winning guidebook, "Universal Access to Outdoor Recreation."
Not every effort to make things clear is that easy, however. Take the Securities and Exchange Commission. When it comes to covering every eventuality, perhaps no agency has worked harder than the SEC, created in the 1930s to protect investors from fraud in the financial world. SEC's strategy has been simple: the more people know about what they're buying, the better they'll be able to judge the risks involved. So disclosure is crucial. The result of this simple strategy, however, has been anything but simple. As the mutual fund industry has evolved and investment strategies have changed, mutual fund prospectuses have grown too, as SEC requires more and more information to be disclosed. The result? The more information you get, the less you know. The average prospectus runs to 25 dense pages of legalistic prose that almost nobody understands.
Now that's changed. SEC Chairman Arthur Levitt, Jr., decided to have mutual fund prospectuses "speak a new language: the English language."10 Working with the SEC, eight of the largest mutual fund companies crafted brief, plain English summary documents to help people know what they're buying. They are testing what they did to make sure it works. If it does, all mutual funds will use summary documents and investors will know what they are buying.
Make It Easier for Us to Do What Needs to Be Done
If you want someone to do something, it's generally wise to make it easy for them. At least that's the message Americans have been trying to send to the government. The truth is that most businesspeople, like most other people, are more than willing to work to find ways of achieving the public purposes laws are meant to achieve, if they can find a way to do it easily. What they hate is being required to fill out hundreds of forms--especially when they know nobody reads them. What they hate even more is being pounced on by their own government.
New regulations are created every year. Businesses, big and small, are expected to know all the regulations that pertain to them. As far as the law is concerned, ignorance is no excuse. But for years, instead of helping, the government not only made it difficult to understand the rules, it made it difficult for companies to comply with them (by making them complex, obscure, or simply impractical). Then it pounced, levying fines on any who didn't comply. Sort of a "Catch-22." Lawyers and consultants have made fortunes advising businesses about these rules; they're probably the principal beneficiaries of government regulation.
In February 1995, President Clinton told the agencies to end the Catch-22s. In March, he gave all regulatory agencies permission to waive up to 100 percent of punitive fines so a businessperson who acts in good faith can fix the problem, not fight with the enforcer. The focus is on the objective, not the fines.
Let's return to OSHA. For decades, the old OSHA's inspectors would sweep into your company and start writing up violations of regulations--big ones, little ones, important ones, petty ones--often for things the employers had never heard of (and sometimes for things that didn't seem to have too much bearing on actual worker safety). Then they'd sweep out again, leaving behind the bill. You'd think they were there to make money, not to preserve safety. Not surprisingly, businesses--especially small businesses--were furious.
Now, however, OSHA has increased its emphasis on providing employers confidential consulting services to help them improve working conditions for their employees. Instead of playing "gotcha," they'll help you evaluate your workplace (and encourage you to involve your workers in the process). They'll help you draw up a safety plan. They'll listen to your side of the story--being student as well as teacher--so they can understand your needs and conditions better. They'll provide training for your employees--on site. And when everything's said and done, you may be exempt from inspections for a year. No hassles. And the consulting services are free.
Even the inspections are changing. It used to be that any employer who didn't have an OSHA compliance poster on the wall immediately got slapped with a $400 fine; now inspectors carry posters with them when they visit and help employers put them up.
In fact, the whole issue of fines is changing. A month after President Clinton released From Red Tape to Results: Creating a Government that Works Better and Costs Less--the first "reinventing government" report--in 1993, the OSHA office in Parsippany, New Jersey, saw it as an opportunity to change how it handled fines for safety violations. The way the old process worked, if a safety problem was identified the employer had no incentive to fix it until months later, after the reports were completed and the litigation was over. The folks in Parsippany thought that was pointless, so they made a deal with employers: fix the problem now, and we'll reduce the fines by an amount equal to the cost of the safety repair. Since then, immediate abatements of violations have risen by nearly a third and the cost of OSHA follow-ups has dropped. On July 1, 1995, OSHA made this "Quick Fix" initiative its policy nationwide. The point is to make it easy to improve the workplace--and also to make government work better and cost less.
Other federal agencies are making it easier too. For example, both the Coast Guard and the National Oceanic and Atmospheric Administration have shifted to issuing warnings rather than fines for boaters, fishing vessels, and others cited for minor violations of regulations. In addition, the Coast Guard now has a "pollution ticket" program that offers significantly lower penalties for first- and second-time violations of pollution standards. The Federal Highway Administration now imposes penalties only as a last resort, and scales what penalties it does levy to the company's ability to pay. The Environmental Protection Agency will give small businesses a six-month grace period to correct pollution violations.
Assume We're Honest, Not Dishonest; Intelligent, Not Stupid
Sometimes, federal regulations and the way they're enforced give you the impression the government thinks everyone's crooked. Or that we're stupid--that unless the government spells out how to go about doing something we'll never figure out how to do it on our own.
We shouldn't feel bad. For years, government has treated its own employees the same way--assuming, for example, that the people responsible for the national defense cannot be trusted to buy paper clips without defrauding the United States, or detailing exactly how employees should handle every situation, as if they couldn't work it out themselves. If you think you have to fill out a lot of forms, you should see what the government makes its own employees go through for even the most insignificant purchase or action. This lack of trust in its own employees is one reason why doing almost anything in the government has always required a couple of dozen signatures: to be sure no one was cheating the taxpayer. Of course the process sometimes cost more than what was protected, but at least no one could be blamed if something went wrong.
But people--in government or out--are, for the most part, neither crooked nor stupid. Most people want to do the right thing, so long as the right thing makes sense. Perhaps the most important thing about the reinvention initiative, and its regulatory reform work in particular, is that it is based on a new assumption: that people are honest and that if you tell people what needs to be done, and let them get on with doing it, the chances are it will be done better--and more cheaply--than if you tell them how. Moreover, it values them as human beings.
What Americans--individuals, businesspeople, officials from state and local government--told the federal government when they were asked how the burden of regulation could be lifted was remarkable. They did not say, "Get rid of regulations." Their answer was sophisticated and practical at the same time. It was: "Get rid of obsolete or silly regulations, and then work with us to improve those regulations that must remain. Trust us. Treat us like partners, not enemies."
For several years now, the Environmental Protection Agency has been doing precisely that, in a program that demonstrates the value of making your objective clear and trusting people to do it right. EPA identified 17 high-priority chemicals and told industry that it wanted their release into the environment reduced by 33 percent by 1992 and 50 percent by the end of this year. Then it stood aside, asking only for a simple letter from industries involved explaining how they would reach those goals. Even the choice of chemicals was sensible; they were chemicals heavily used by industry, that posed significant environmental concerns, and that had a reasonably high likelihood of being reduced through industry action.
Individual companies have responded with remarkable enthusiasm--and not just major corporations. AB&I Pipe Coating in Oakland, California, for example, spent three years developing a plan that will actually eliminate completely its release of chlorinated solvents by this year, along with some 90 percent of emissions of the other volatile organic compounds it uses in its business. Nationwide, the results have exceeded the most optimistic projections. Some 1,200 companies are participating. They reduced emissions more than 100 million pounds beyond the 1992 target, and the 1995 goal appears to have been achieved at least a year ago (the data are still being analyzed). And the spirit of the initiative has been infectious; EPA now has several other voluntary partnership programs underway and even more planned. The formula is simple: focus on results. Less "gotcha" enforcement, plus more trust, minus mountains of paperwork, equals a lot less pollution.
Harley is a potbellied pig. He also happens to be very good at sniffing out drugs. In fact, the police in Portland, Oregon, think he is even better than a dog in tracking down narcotics on the city's streets. And he sure is a great mascot for anti-drug programs aimed at school kids. The kids love Harley.
Harley has been such a success that the Portland police want to buy some more potbellies, and to train them to detect guns as well as drugs. The whole project would cost about $25,000. But so far they haven't found any federal anti-drug money available for training pigs. Dogs, yes. Pigs, no. Never mind that Harley gets the right results--that he finds the drugs and charms the kids.
When the White House found out that Harley was denied training funds because he was a pig, it acted swiftly--and designated Harley an honorary dog. It was a comical response to a ludicrous problem--the kind of problem Americans can expect to be fixed, and fixed for good, as the government strips away layers of regulations and mountains of useless paperwork.
The Code of Federal Regulations, the government's rulebook, is a lot like your uncle's garage: crammed to the rafters with all sorts of stuff that's been there for who knows how long. There's stuff of great value in there. There's stuff you don't need anymore. And there's stuff you can't imagine ever having needed. On February 21, 1995, President Clinton sent the federal regulatory agencies in to clean up Uncle Sam's garage. By June 1, they had come up with 16,000 pages of regulations to haul out to the curb.
Then they went back in to find more. So far, they've rummaged around in more than 86,000 pages of regulations. Besides the 16,000 they are trashing, they are cleaning up another 31,000 more pages--stuff that's still valuable but needed to be refurbished. And there's still more, further back in the shadows, that they haven't gotten to yet. It's a very big garage.
President Clinton's instructions to the clean-up crew were simple:
1. Cut obsolete regulations and fix the rest. Conduct a page-by-page review; eliminate what's outdated and reform what's still needed. Figure out how the goals can be achieved in more efficient, less intrusive ways, and while you're at it, look for ways to push authority down to where it will be used best, like in state and local governments.
2. Reward results, not red tape. Change how you measure performance so that you focus on results, not process and punishment. Say what you want to achieve clearly and re- engineer your organizations so that people and programs are evaluated on the basis of outcomes.
3. Get out of Washington. Talk to your front-line employees and your customers about how best to achieve your goals; form partnerships.
4. Negotiate, don't dictate. Tell people what you want to accomplish and engage them in working out how to get there. Seek consensus at the very start.
The agencies didn't do it alone. In the month and a half after President Clinton's order, they held hundreds of meetings with businesses, individuals, and state and local government officials all over the country to ask them what needed to be eliminated or fixed. As you might expect, people had plenty of ideas; they'd just been waiting for someone to ask.
Cutting Obsolete Regulations, Pointless Paperwork
It's almost impossible to remember the world before automatic teller machines came along. If you needed cash, you either had to get to the bank before it closed--in the middle of the afternoon--or go to the supermarket, buy something, and ask for cash back. Now you can get money from your account virtually anytime, anywhere. You can even get it overseas. It's incredibly convenient.
The government, however, didn't made it very convenient for banks to set up ATMs. Until this year, the Comptroller of the Currency, which oversees banking operations, required banks to go through a complicated, lengthy, and ultimately costly 35-step application process before they could open up an ATM. Why? Because it treated ATMs as if they were separate bank branches, not as extensions of existing ones. Maybe it made sense in the early days, but it certainly doesn't anymore. Now, the 35 steps are on their way out.
That's just one, very small example of how much simpler life can be with a little common sense. Throughout 1995, the major federal regulatory agencies have been cutting obsolete regulations and eliminating pointless paperwork on a wholesale basis:
* The Environmental Protection Agency is eliminating 1,400 pages of obsolete regulations and is revising 9,400 more; that means cuts or changes to 85 percent of EPA's rules in the Code of Federal Regulations. In the process, it's also cut paperwork requirements by 25 percent--a savings for industry of some 20 million hours of labor a year.
* The Department of Education eliminated 30 percent of its regulations.
* The Department of Housing and Urban Development is cutting 2,800 pages--65 percent of all its regulations.
* The U.S. Department of Agriculture dropped 3 million pages of government forms that America's farmers filled out each year.
* The Small Business Administration will have eliminated 50 percent of its regulations by the end of the year and will have revised the rest.
What does this mean on the street? Here's just one example: 15 years ago, when Mamma Jo's and Zeno's Pizza opened in Wichita Falls, Texas, the owners used an SBA loan to get started. They were grateful for the help, but it didn't come easy; it took them four weeks, with the help of a bank officer, to fill out a stack of forms, gather all the necessary documentation, and wait for the government's answer. Last year, when they needed another loan to expand, they learned that they qualified for an SBA program, designed by Rodney Martin in SBA, San Antonio office, that provides a fast-track application procedure for loans up to $100,000. The whole process took three days, start to finish--and required only a simple one-page form. That's quite a change from the earlier 78-page application and 90-day review. Multiply that improvement by all the rest of SBA's small-loan applications, apply the same math to many of the procedures the other federal agencies engage in every day, and you begin to get an idea how much can be saved simply by cutting obsolete regulations and pointless paperwork.
Of course, regulatory reform means more than just cutting. It also means making sure the remaining rules are user-friendly. It means making it easier for businesses, or state and local governments, or individual citizens to do things the federal government needs them to do. It means throwing away the hoops people have had to jump through when they wanted service from their government. And above all, it means keeping the government's eye on the ball--the objectives the laws were designed to accomplish.
It's happening. Consider the Environmental Protection Agency, the nation's biggest regulator. Sixteen separate laws spell out the agency's monumental task--to clean up pollution and figure out what needs to be done to protect people and the environment in the future. EPA has been enormously successful: the air is cleaner and healthier; you can swim in rivers that once caught fire and in lakes that once were dead; you can drink water and be sure it's safe; you can find out whether there are hazards in your neighborhood that may harm you or your children. But the costs have also been enormous--to the taxpayer and to industry and small businesses.
The EPA listened to the rising chorus of customer complaints and responded. The agency is rapidly changing the way it regulates, moving from mandatory, punitive compliance approaches to voluntary, consensual approaches. In short, instead of telling businesses what to do to prevent pollution and how to do it, down to the very last detail, EPA now invites businesses to describe how they think they can meet the goal and then lets them get on with it. Already, the agency has created more than two dozen such voluntary programs in a wide range of industry sectors. Says EPA Administrator Carol Browner, "Our new philosophy at EPA is tough standards to protect our air, our water, and the health of our people, but common sense, flexibility, innovation, and creativity in how you meet those standards."11
That same philosophy--essentially, the philosophy of reinvention--has taken hold in many other agencies as well. There are hundreds of examples throughout the government.
For example, ever since the Depression, we've been pretty firm about wanting our money protected when we deposit it in the bank. But sometimes the government hasn't made it especially easy for banks to meet that sensible objective. It used to be that when examiners from the Office of the Comptroller of the Currency walked in to examine a small bank, they brought along 1,216 pages of arcane technical procedures. No longer. Now they bring along a user-friendly 30-page booklet.
The rules for creating pension plans are currently so cumbersome and costly to follow that many smaller businesses are unable to afford them for their employees, and some businesses are forced to cut pension programs they already have. This is quite the opposite of what policymakers intended. In June, President Clinton announced an initiative to eliminate and simplify many of the rules governing such programs, along with creating a new, simpler IRA-based plan option called the National Employee Savings Trust, or NEST.
In addition, employers also are required to provide their employees with reports on the financial condition of their pension and welfare benefit plans. So that people reluctant to ask their employers have somewhere else to go, the law also requires employers to provide copies to the Department of Labor. But by the time Labor gets the reports, they're typically seven months old and, therefore, useless. Now, the department proposes to eliminate the requirement, ending a quarter-million filings per year and saving employers 150,000 hours of pointless work and $2.5 million per year in additional costs. If employees want the information, they will be able to call Labor and the department will request it from the plan administrator on the spot. It's just common sense.
Very small companies--those with 10 or fewer employees--make up nearly 80 percent of all American businesses. When asked for their number-one complaint about regulations, small business owners said, "Tax compliance and payroll recordkeeping are too complicated." In response, IRS is building the Simplified Tax and Wage Reporting System. When complete, it will let employers file W-2 data to both federal and state governments, electronically and simultaneously, saving billions of dollars for business every year.
Even as the government is reducing the regulatory burdens on its customers, it's finally also cutting much of its own red tape--the stuff that ties the government itself into knots and runs up the cost of governing. For example, it has entirely eliminated the 10,000-page Federal Personnel Manual--the government's rule book for hiring and firing. Gone, too, is the notoriously complicated Form 171 that anyone seeking to work for the government had to fill out. If American industry will accept your resume, why shouldn't your government?
President Clinton, speaking at the White House Conference on Small Business on June 12, 1995:
I hate to tell you this, folks, but we're about to lose the regulation that tells us how to test grits. I want you to ask yourself if you can do without this:
Grits, corn grits, hominy grits is the food prepared by so grinding and sifting clean, white corn, with removal of corn bran and germ, that on a moisture-free basis, its crude fiber content is not more than 1.2 percent and its fat content is not more than 2.25 percent and when tested by the method prescribed in Paragraph (b)(2) of this section, not less than 95 percent passes through a #10 sieve, but not more than 20 percent through a #25 sieve . . .
Now here's the really interesting part; they tell how:
Attach bottom pan to a #25 sieve. Fit the #10 sieve into the #25 sieve. Pour 100 grams of sample into the #10 sieve, attach cover, and hold assembly in a slightly inclined position, shake the sieves by striking the sides against one hand with an upward stroke, at the rate of about 150 times per minute. Turn the sieve about one-sixth of a revolution, each time in the same direction, after each 25 strokes. . . . The percent of sample passing through a #10 sieve shall be determined by subtracting from 100 percent the percent remaining in the #10 sieve. The percent of material in the pan shall be considered as the percent passing through the #25 sieve.*
I don't know if we can do without that. There is some real sacrifice here; I am personally going to miss the 2,700-word specifications for french fries.
*21 CFR Sec. 137.230.
The government's also getting rid of thousands of pages of lengthy and often ludicrous procurement regulations and product specifications--dozens of pages on how to make French fries or tell whether fish is fresh, dozens more just to describe a camp lantern, and on and on. With the possible exception of late-night talk show hosts who use them from time to time for comic relief, it's unlikely many people will miss procurement regulations either.
Progress Report: Rewarding Results, Not Red Tape
The old OSHA wasn't the only agency in the federal government that was measuring its performance the wrong way. Most agencies did. In fact, when the National Performance Review examined how agencies measure their workers' performance, it found that fully 30 percent of the measures tracked punitive acts, like levying fines. Another 50 percent measured were administrative functions, like filling out forms correctly. Only 20 percent of worker performance was measured in terms of how well individual employees actually worked with others--and almost none of that was about working with customers.12
The study concluded agencies were measuring the wrong things. They were measuring inputs, not outcomes. In some cases, that was because agency or program missions were fuzzy to begin with. More often, however, the problem was that agencies had gotten so caught up in measuring inputs, they forgot what they were in business to accomplish in the first place.
Take the U.S. Coast Guard. The Coast Guard is responsible for, among other things, promoting safety on the high seas. For years it focused on inspecting the condition of vessels and levying fines whenever it found things weren't shipshape. The more fines, the better it was doing. The problem is, however, that faulty ships don't usually cause accidents--people do.
Today, the Coast Guard has shifted its attention from finding rust spots to reducing injuries and fatalities. It's also re-examined its assumptions. The Coast Guard had determined that its highest priority should be commercial fishing, an industry long known for its high injury rate. But when it actually looked at the entire industry, it found that the injury and fatality rate in the area of commercial towing--tugs and barges--was equally high and needed attention. By focusing on its mission and consulting with the industry itself, the agency achieved dramatic results: fatality rates declined from 91 per 100,000 industry employees in 1990 to only 36 per 100,000 last year--nearly a two-thirds reduction. When you're measuring what matters, nothing matters more than lives.
As President Clinton has noted, "If the government rewards writing citations and levying fines more than safety, then there's a good chance that what you get is more citations, more fines, and no more safety."13 And if what you measure is red tape, you get more red tape. The combination of the reinvention initiative's emphasis on results and the passage of the Government Performance and Results Act of 1993 is turning scores of federal agencies away from procedure and toward performance--serving people better and, at the same time, reducing the cost of government.
This new law ordered agencies to spell out their performance goals clearly and succinctly, make specific commitments for meeting them, and establish formal outcome measurement systems to demonstrate their progress. The law also called for the immediate creation of at least ten "pilot projects." To everyone's astonishment, 27 agencies volunteered, including the Defense Logistics Agency, the Coast Guard, the U.S. Mint, SBA, the National Highway Traffic Safety Administration, USDA's Farmers Home Administration, major programs in the Department of Energy, and the Department of Housing and Urban Development. These agencies, and many others, created more than 70 pilot projects, which are now in the vanguard of reinvention.
One of the first pilots was the Internal Revenue Service, an agency that made a comprehensive commitment to performance improvement. The vast majority of Americans are willing to pay our fair share of taxes, so long as the process of meeting our obligation is as painless as possible. To make it so, the agency has established a strategic plan with measurable, customer-driven outcomes that, as of this year, are directly linked to the performance evaluations of executives and managers throughout the organization. The concept is simple: if employees are measured by how well they serve their customers, their customers will be well-served.
The Agriculture Department, the SBA, Social Security, and HUD, among other agencies, also have begun evaluating employee performance on the basis of explicit, customer-driven outcomes. The Department of Education's new performance appraisal system even has a mechanism for incorporating customer feedback into employee evaluations--a process that has the blessings of the agency's labor-management council.
Progress Report: Getting Out of Washington, Creating Partnerships
Joy Lucas came home to Oregon from Germany last year with two small children, a divorce from her soldier husband, and ambition.14 But with no work experience and no job skills, her options would have been limited--had it not been for the "Oregon Option," a performance-based partnership contract between federal and state agencies that does something states have been craving for years. It consolidates narrow, inflexible federal funding programs and waives the rules that govern them so they can be merged with state funds and turned into real services for real people in real need.
Joy Lucas has never heard of the Oregon Option. Nor has she heard of Oregon Benchmarks, that state's landmark effort to set goals for government services and hold agencies accountable for achieving them--perhaps the main reason the federal government agreed to the Oregon Option. She doesn't need to know about either one; that's the point. They're invisible to her and should stay that way. Instead of having to navigate the unmapped territory of federal and state categorical programs herself, filling out form after form in agency after agency, she can simply get what she needs--in this case, the training to become a 911 emergency dispatcher and the interim support she needs for herself and her children until she lands the job.
The Oregon Option is just one example of the benefits of "getting out of Washington"--that is, of sitting down with customers and developing partnership agreements for reaching common goals quickly and less expensively. In the last year or two, other examples have developed throughout the federal government. Many involve partnerships between Washington and the states designed to consolidate funding streams, eliminate overlapping authorities, create incentives for achieving concrete results, and reduce the innovation-sapping micromanagement that has so often characterized federal grant programs in the past.
In his 1996 budget, President Clinton has proposed that 271 separate programs be consolidated into 27. In the welfare program, 34 states have been granted waivers from federal micromanagement because their programs address the job of reducing welfare dependency more effectively, more flexibly, and in some cases more innovatively than uniform federal rules would have allowed. In addition, ten states have been granted Medicaid waivers. And, under the education flexibility partnerships, Oregon and several other states are receiving waivers from federal statutory and regulatory rules in education.
In a similar vein, the Community Empowerment Board, comprising 15 federal agencies, has helped the agencies provide waivers of federal job training, community development, and various "safety net" rules for 95 Enterprise Communities and nine Empowerment Zones--created last year to enable communities to custom-craft programs that meet their particular needs. The difference between such waivers and simple block grants is that the waivers require the development of comprehensive community plans and results-based measurement systems; they also ensure accountability for taxpayers' money.
The EPA has undertaken several new partnerships with state and local governments. For instance, many communities have hesitated to redevelop inner-city sites and put them to safe, productive use again, for fear they will be held liable under Superfund legislation for past industrial contamination. The new "brownfields" initiative lifts the threat of liability; that program has awarded five pilot projects, and 50 more are planned. EPA has also limited the liability of the operators of municipal solid waste landfills and removed 25,000 sites that had been tracked by Superfund but that either had no contamination or were being fully addressed by state clean-up programs. Developers wouldn't touch those sites as long as they were still on the tracking list.
Government is creating performance partnerships not only with state and local governments, but also with industry.
Pretend for a moment you're a factory owner in Texas. Plenty of your workers are Mexican citizens. They are here legally--they've got papers. Then one afternoon Immigration and Naturalization Service agents surround the building, burst in the door, inform you that the papers for half your workforce are fraudulent, then arrest them and haul them away. And you're left stranded. No workers, no work. No work, no income. You're in deep trouble.
That happens all the time in the Southwest--or at least it did, until Neil Jacobs, INS assistant district director in Dallas, decided he was getting nowhere. The workers just showed up someplace else a few days later, with more fake papers. Meanwhile, he was hurting the people the area needed most: its employers. Working in partnership with employers, local enforcement officials, and employment services, Jacobs created "Operation Jobs." Now INS meets quietly with employers and connects them with documented workers (at the same wage levels) before they remove the undocumented workers. Not only does this change eliminate the disruption of the old approach, it ensures there are no empty slots for the undocumented workers to re-occupy later. And it creates a solid market for legal workers--more than 2,500 of them in north Texas alone, and thousands more now that Jacobs' project has expanded to neighboring states.
On a larger scale, EPA's doing the same kind of thing: developing working partnerships with industry and others to achieve environmental goals. Here are just four of the several dozen EPA initiatives already underway:
* "Green Lights," through which more than 1,500 companies have put in energy-saving lighting throughout their installations (American Express in New York is saving more than a quarter-million dollars annually in energy costs and has received nearly a half- million dollars in rebates from Commonwealth Edison);
* "Waste Wise," which has encouraged more than 400 major industries to generate less solid waste (NYNEX, the northeast telecommunications giant, is saving $6 million a year);
* "Climate Wise," a joint EPA-Department of Energy effort, which helps industry decrease energy use, prevent pollution, and reduce greenhouse gases--while increasing profits (DuPont, for example, aims at reducing greenhouse gases by 40 percent by 2000, for a savings of $31 million annually); and
* The "Pesticide Environmental Stewardship Program," in which EPA, the Department of Agriculture, and the Food and Drug Administration join nearly two dozen industry and commodity production organizations to develop methods for reducing pesticide use and risk.
Another intriguing EPA partnership experiment is "Project XL," by which the agency, working with states, enables individual companies to develop their own ways to improve the environment. Partners will be allowed to replace current requirements with alternative, company-developed controls so long as they perform better than current laws and regulations, permit citizens to examine assumptions and track progress, ensure worker safety and environmental justice, are supported by the community, and are enforceable.
Government-industry partnerships like these continue to grow. For example, the Customs Service has involved business in its own efforts to reinvent itself.
Customs was established in 1789, by the second act of the new Congress, to collect revenue for the new nation--a nation that, even then, had a substantial debt. Customs paid for the Revolutionary War. It paid for the Louisiana Purchase. In fact, it was the major source of revenue for the U.S. Treasury until the early 1900s, when income taxes were created. Customs officials met every incoming ship, supervised unloading, inspected cargo, established duties, and established a written record of every transaction. More than two centuries later, they still did.
In the meantime, both the traffic and the shipping-related problems (drugs, contraband, firearms, diseases) skyrocketed. And so did the paperwork. Forms got longer and longer, inspections more and more complex, and delays reached intolerable levels. Combine this with a measurement system that cared more about how many shipments were detained than about how many were cleared, and you have a recipe for chaos, frustration, anger. Finally, Customs itself got fed up. The result was the Customs Modernization and Informed Compliance Act, signed just months after President Clinton announced the reinvention initiative.
Some Cost Savings to the Private Sector
From Regulatory Reinventions
Private businesses, taxpayers, and consumers will save nearly $28 billion as a result of hundreds of changes to regulatory and administrative activities that will reduce burden or allow alternative approaches to achieving national goals. For example, agencies will:
* Eliminate the Physician Attestation Form. Savings: 200,000 burden hours on doctors and $22,500 per hospital from no longer filing 11 million of these forms.
* Implement effluent trading on a national scale as a cost-effective approach for reducing water pollution. Savings: at least $1.2 billion, and possibly as much as $15 billion a year.
* Reduce existing monitoring, recordkeeping, and reporting burdens by at least 25 percent. Savings: 20 million burden hours for employers.
* Revise PCB disposal regulations to allow less expensive disposal methods. Savings: $4 billion a year.
* Streamline the Resource Conservation and Recovery Act's corrective action procedures. Savings: $4 billion a year.
* Streamline the alien labor certification process by decentralizing authority to state employment agencies and automating form processing. Savings: $223.8 million over five years.
* Simplify pension computation procedures by relying on employer calculations and simplifying methods of dealing with complex plan provisions. Savings: $6.3 million over five years.
* Streamline affirmative action plans for federal contractors. Savings: 4.8 million hours of contractor time annually.
* Relieve duplicate filing burden on employers. Three federal agenciesIRS, Labor, and Social Securityhave agreed to work together to eliminate duplicate tax data filing requirements on businesses and taxpayers. Savings: $1 billion a year in time spent by employers.
* Expand federal-state tax partnerships to eliminate duplicative tax requirements and allow a single filing. Savings: $1.5 billion in reduced burden on taxpayers.
Customs met with shippers all over the country and designed a new automated system for handling shipments--a system so simple that most cargo is now cleared before it is even unloaded. Information is collected monthly instead of transaction-by-transaction, and companies have just one Customs account, rather than one for every port through which their shipments pass. (One Miami company used to file some 700,000 forms every year; now it files one per month.15) In the meantime, Customs is in the process of clearing out most of its current regulations and designing new ones, with the help of shippers themselves. Despite the need to completely overhaul their own procedures, businesses are delighted. Time is money; their objective is to move cargo. Now that's Customs' objective too. The bonus is that voluntary compliance with Customs duties and apprehension of violators are increasing as well.
Progress Report: Negotiating, Not Dictating
When government representatives "get out of Washington," meet with customers and front-line employees, and start addressing problems on the ground--not in the rarefied air of the Capital--understanding grows. With understanding comes trust, and a willingness to arrive at agreements jointly, without the intervention of enforcers and lawyers. It's common sense. It's also a world away from the "Decide-Announce-Defend" approach the government has used for years. As Philip Howard explains, "Sensible results come out of discussion and negotiation, not from seizing technicalities and parsing legal language to achieve a victory."16
Some agencies have been moving toward regulatory negotiation for a few years. EPA has conducted 16 negotiated rule-setting programs in the last ten years. USDA and the Department of Transportation have also used "reg-negs," as they're called. Agencies like OSHA and the Nuclear Regulatory Commission are using online computer systems to give as wide a range of customers as possible an easy way to comment on proposed rules. This year, as part of President Clinton's 100-day governmentwide regulatory reform initiative, agencies identified more than 40 high-visibility issues that were ripe for negotiated rulemaking.
EPA has gone even farther: its "Common Sense Initiative"--a dramatic departure from its old "command and control" way of operating--has brought together teams of industry representatives, labor, environmental groups, community organizations, and government officials at every level to find ways to change complicated, inconsistent, and costly regulations. Even more unusual, it focuses on six specific industries: auto manufacturing, computers and electronics, iron and steel, metal finishing, petroleum refining, and printing. Under the new initiative, "We're taking all the regulations that relate to the individual industry and putting them on the table," EPA Administrator Carol Browner says. "We're going to seek the best way for that industry to meet environmental standards to ensure clean water and clean air."17
Ask industry how it should be regulated? Who else knows the problems, and the potential solutions, better? So long as the government establishes standards that protect the public, why not let the industries and other affected stakeholders help figure out how best to get there? Government, industry, and the public share a common goal--a cleaner environment at less cost to taxpayers and businesses. The stakeholder groups are looking for common sense approaches to regulation, pollution prevention, reporting, compliance, permitting, and technology. The principles of this new partnership are to seek consensus on how to reach the goal, focus on prevention, develop industry-specific solutions rather than trying, as Browner says, to make "one size fit all," and maintain tough standards.
In a way, it's borrowing an idea from the past. As General George S. Patton said, "Never tell people how to do things. Tell them what to do, and they will surprise you with their ingenuity."18
As Newsweek magazine pointed out this year, in the old federal government the theory was that if you just stipulated every possible regulatory circumstance, a robotic army of inspectors could go out and enforce the rules.19 The trouble is, circumstances differ, conditions change, life goes on. And the government went on too, but with the same inflexible, red tape-tangled procedures it had always used--in some cases, since the beginning of the Republic.
There's an old saying: "If we keep on doing what we're doing, we're gonna keep on getting what we've got." Americans don't want "what we've got" anymore. We want a government that delivers results, that keeps up with change and actually helps people, businesses, and state and local governments adapt to those changes. We want, in fact, an enterprising government, one that moves as quickly as the rest of our society, one that works with us, listens to us, and acts on the things we need in a more efficient, more effective, and less costly manner than it has in the past.
And that's what we're beginning to get. Agencies that treat their customers as partners. That cut rules long out-of-date and make those we still need sensible. That seek to find ways to achieve public goals without damaging the structure of private enterprise that supports us. That remember that the purpose is progress toward those goals, not punishment for those who violate--often unwittingly--rules that are obscure or pointless. And that reward their own employees for doing the right thing, not simply for doing things right according to the rulebook.
As The New York Times said, it is a "quiet revolution."20 But revolutions take time, and no one is suggesting the government's got the problems all licked. There is progress, but there is a great deal that remains to be done--and indeed, it is never finished. New laws get passed. New regulations get written. The government's task is to ensure that those rules are clear about what needs to be accomplished, but flexible about how.
What government reinvention does is reinstate the promise of common sense in self-government. President Clinton has already described the result: "a government that is limited but effective... that does better what it should do and simply stops doing things it shouldn't be doing in the first place, that protects consumers, workers, and the environment without burdening business, choking innovation, or wasting the money of the American taxpayer."21
1. Franklin D. Roosevelt, speech at Oglethorpe University, Atlanta, Georgia, May 22, 1932.
2. Dan Margolies and Bonar Menninger, "OSHA's Obsessions Trivialize Hazards," Kansas City Business Journal, reprint report, December 1994, p. 13.
3. Joseph A. Dear, Application #484 for the Ford Foundation's Innovations In American Government 1995 Awards Program.
4. Bill Clinton, remarks at Regulatory Reform event, Old Executive Office Building, Washington, D.C., February 21, 1995.
5. Bill Clinton, remarks at Reinventing Government event on regulatory burden reduction, U.S. Department of the Treasury, Washington, D.C., June 9, 1995.
6. Philip K. Howard, The Death of Common Sense: How the Law is Suffocating America (New York: Random House, 1995), p. 7.
7. Margolies and Menninger, p. 2.
8. Howard, p. 175.
9. Howard, p. 186.
10. Arthur Levitt, Jr., speech to the Society of American Business Editors and Writers, May 1, 1995.
11. Carol Browner, Administrator, U.S. Environmental Protection Agency, press briefing on regulatory reform, May 16, 1995.
12. Unpublished National Performance Review survey, 1995.
13. Bill Clinton, remarks on reinventing worker safety at OSHA event, Stromberg Metal Works, Inc., Washington, D.C., May 16, 1995.
14. John Goshko, "To Cut Red Tape, Oregon Experiments with Federal Aid," Washington Post, August 6, 1995.
15. Joe Klein, "The Birth of Common Sense," Newsweek, March 27, 1995, p. 31.
16. Howard, p. 179.
17. Margolies and Menninger, p. 7.
18. George S. Patton, War As I Knew It (1947).
19. Klein, p. 31.
20. Robert Pear, "A Welfare Revolution Hits Home, But Quietly," The New York Times, August 13, 1995, p. 4-1.
21. Bill Clinton, remarks at Reinventing Government event, Custom Print, Arlington, Virginia, March 16, 1995.