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The Earthquake

Business calls it "empowerment," "leveraging employees," or "investing in human resources." It's the terribly simple idea that people can think.

"People are smart, people have tremendous capacity, and it is our job not to give them power but to let them use the power they already have," Suzanne Allford, then-Vice President of Wal-Mart, told Vice President Gore at the Reinvention Summit. "Employee involvement is the secret of our success."

Many of America's top companies have been rocked by this new idea. For most of this century, business focused on structural position -- market share, brand franchise, cost structure, and so forth. But in the past 10 years, companies with the "people can think" idea -- like Southwest Airlines, Thermo Electron, and Banc One -- have come out of nowhere to shake up stodgy industries and challenge established leaders.

The source of their competitive advantage? When companies push responsibility down toward front-line employees, decisions can be made faster and better because those employees are closer to the market.

And new ideas percolate in such environments. Companies that have empowered employees -- including Hewlett-Packard, GE, IBM, and Merck -- have been strong enough to weather storms that sank many of their competitors.

Industry has taken this lesson to heart. But for government? It's like an earthquake. In fact, in this chapter, you will read about an actual earthquake that isolated some federal employees from their bosses -- and they responded by becoming more productive. A kind of virtual earthquake is shaking up the comfortable status quo of government hierarchy. It is changing management's perspective on the value and virtue of their employees.

Employees are the Government's Most Valuable Asset

So it comes as no surprise that the CEOs zeroed in on this problem. They told Vice President Gore: Your employees are your best asset. Start using them.

Involve the Workers

Vaughn Beals proved this point. He took over Harley Davidson when the company was only a few months away from financial collapse. The reason for these dire straits was best captured in a widely distributed photo of new Harleys in a showroom, cardboard under each to catch leaking oil.

"We removed multiple layers of managemen". We cut [headquarters] staff," said Beals. "We moved to employee involvement. The essence of employee involvement is employee trust. We told each employee, you make it, you inspect it, you analyze the inspection data statistically, you decide if it's good, you adjust your machine. We trust you."

Every corporate executive at the Reinvention Summit told the Vice President that the energy, creativity, and innovative ideas that turned their companies into world-class competitors came directly from their own employees. Union representatives, too, played a crucial role in the transformations. From the perspective of business, the most obvious way to improve government was to invest in its prime asset: its employees.

Listen and Learn

Too often, large organizations are set up to get existing tasks done in a certain way, and people with vested interests may oppose any break in the normal pattern. Employees learn to do as they are told, even if they have better ideas.

Some employee ideas are discouraged quickly by managers who believe they already know the best methods. After all, managers are traditionally selected for being smart and aggressive. The natural inclination of such people is to want things done their way. For many of them, it isn't easy to say, "Let's try it your way."

Other employee ideas simply disappear into "suggestion programs" and are never heard of again. Processing times for employee suggestions sometimes last longer than the employees themselves.

Reengineering to Empower

Companies have spent years reengineering their entire work flows to make room for innovation and improvement. Now, government is playing catch-up -- but that means it can benefit from the advice of those who learned through trial and error.

Businesses that were able to make a "culture change" typically worked on several areas at the same time: rewarding performance, reducing overhead, scrapping unnecessary rules and regulations, intrapreneurship, and training. By applying these principles, government is finding that it too can unlock the potential of its employees. "

Government has made progress in all these areas. For example:

• Rewarding performance. The Vice President uses the Hammer Award -- a $6 hammer wrapped in ribbons and mounted on a plaque -- to support and reward innovative approaches to government. Just as top-level recognition has been an essential tool in creating the best private companies, the Hammer Award program has encouraged federal workers to come forward with innovations to improve efficiency. To date, NPR has given Hammer Awards to more than 900 teams comprising more than 10,000 workers.
• Reducing overhead. Agencies have restructured, cutting out layers of excess supervisory and administrative personnel. Between January 1993 and 1997, the federal civilian workforce was trimmed by 309,000. Some agencies -- notably the General Services Administration, the Office of Personnel Management, the Department of Interior, and U.S. Customs -- have followed the example of GE and Harley Davidson and reduced their headquarters by one-third or more.
• Scrapping unnecessary rules and regulations. A top priority has been to free government workers from over-regulation. Agencies have scrapped more than 640,000 pages of internal rules and regulations that advertised distrust of workers and sapped their enthusiasm and initiative.
• Intrapreneurship. Pockets of reformers who are experimenting with innovative approaches to government have been designated "reinvention laboratories." This entitles them to special help from the Vice President's office in cutting through red tape and testing out new ideas. Many of the experiments are spreading far beyond the organizations that developed them."
• Training. Frank Doyle of General Electric told the government, "Empowerment is a disorderly gesture unless people are given the tools and knowledge that self-direction demands." Government is just beginning to get the message that it needs to invest in its employees and train them well -- as the private sector does. Some agencies, such as Social Security, have teamed up with leading corporations to learn how to use training better.

The Reinvention Zone Interview

The Right Stuff

Q: What does USAID do in Senegal?
A:USAID is supporting efforts to improve natural resource management, health care, and market liberalization with an emphasis on empowering women and working at the local level.

Q:How did you change things?
A:When I arrived in 1994, USAID/Senegal was a very traditional, hierarchical -- and frustrating -- organization. Based on what I had seen work in my 13 years as a corporate and government lawyer, I did two things. First, I encouraged the mission to reorganize into multifunctional teams and then delegated responsibility to those teams. Second, I introduced the idea of customer focus.

Q:What happened?
A:First, I had to gain peoples' confidence and trust. My management style is very hands-off. I like to set guidelines and leave the details to the people who are closest to the work. But I came into a organization that was extremely centralized. For example, every international phone call had to have the director's permission. Now I give each team a budget, and they decide for themselves how to allocate the money -- for travel, office administration, training, et cetera. Even more important, each team has the responsibility to make the program decisions to obtain the agreed-upon result.

Q:What has been the most difficult challenge?
A:The most difficult aspect of this philosophy has been to fully empower the local Senegalese employees of USAID. These people are absolutely crucial because they are the continuity. They stay, whereas the Americans leave after a few years. So now, for the first time, a Senegalese woman is managing our entire health care program.

Q:You mentioned empowerment. Can you explain why it works?
A: Empowerment works on two levels: the organizational and the individual. When I first arrived here, I could have imposed my own framework for reorganizing the mission. But instead, we got the whole mission together and they designed the reorganization themselves. They were freed to use their imaginations and to completely lead the process. The result is far better than anything I could have done on my own.Second, empowerment succeeds at the individual level. Here's an example: We are currently developing a new strategy. The strategy team decided to put two local employees in charge of conducting focus groups with the customers and partners -- a brand-new initiative. I myself would not necessarily have chosen these two individuals for the task, but I was wrong. They have done a wonderful job on this project and have improved as well in their regular job performance. These two people are up for awards.

It shows that if you give someone the responsibility, they will rise to it, and often exceed your expectations

Tales From the Reinvention Zone

Employee Powered

"Before we started, if you looked at our internal statistics on performance, we were doing a great job," says Joe Thompson, a Vietnam veteran who runs the Department of Veterans Affairs benefits office in New York. But when he asked the customers -- veterans -- he heard a different story.

"Veterans were unhappy with the whole way we were structured," he says. "We were set up like an assembly line, with 25 steps to process a disability claim. When a veteran phoned in for information, he would speak to someone outside this process -- who could never answer the question. It was enormously frustrating. Our staff -- many of whom are veterans themselves -- really wanted to help people. But the system was set up in a way that didn't give them the chance." Thompson knew the VA office had to change to serve its customers. So he used successful businesses as a model.

"In April 1993, VA designated us as a reinvention lab," he said. "That gave us the freedom to be experimental. We went to IBM and AT&T and saw that we needed to change everything -- our organizational structure, work flow, job descriptions, performance 'measurement, and compensation systems. It was a big job. But in four years, we've done all that. In business terminology we actually reengineered' our operation -- though frankly none of us had ever heard the word before."

The biggest change? Employees took charge.

"We used IBM's Organizational Systems Design Model," Thompson explains. "We created self-managing teams, eliminated half the supervisory positions, and shortened the claim process from 25 to 8 steps. We adopted the 'balanced scorecard' approach to measure performance, and we added in measures of customer satisfaction and employee development. Now we're trying to replace civil service pay scales with skill-based pay, so our employees can be rewarded for what they contribute."

"The process was hardly smooth," he adds. "Along the way, all scenarios that could go wrong did. We had to learn from our mistakes. But the result is worth it: Personnel costs are down 25 percent, and call-back volume has been reduced through better service. Customer surveys show that veterans think we are faster and more responsive. What I'm most proud of is that we all did it together, and every single employee played a significant role."

A Uniformly Good Idea

Phil Archuleta, an employee at the Marine Corps Recruit Depot in San Diego, noticed that the Depot was issuing a lot of extra-large size uniforms to new, overweight recruits. But Marine Corps boot camp has a way of making people lose weight. Within a few weeks, practically all the recruits dropped down enough to exchange the XL's for a smaller size. Regulations prohibited the Marines from reissuing the barely used XL uniforms -- because, of course, they had already been issued once. The Marines had to give away perfectly good uniforms -- some never worn at all -- to government surplus stores.

Archuleta suggested that the Marines could wash the uniforms and then reissue them to incoming overweight recruits. His common-sense idea saved the depot $89,000 in the first five months and $220,000 over a year.

Empowerment By The Gallon

The General Services Administration's Auburn paints and chemicals center has reorganized to empower its workforce. "We used to be the typical government office," says Jim Hamilton, the manager who led the reorganization. "Before, nobody could make a decision on their own. Everything was controlled by centralized rules and constraints."

"So we took a different approach. First, we gave our people the right tools. We trained all our desk managers to use a vendor-managed inventory system just like GE's. Then we gave them each a set of targets, with total freedom to decide how to achieve these targets. All kinds of inventory control decisions like ordering and markups that used to be dictated from my office are now at the disposal of local desk managers."

The results are great, he says. "Our employees are much more motivated, and we're saving on inventory costs. Instead of keeping $40 million worth of inventory on the shelves, we keep $8 million. Think of all that inventory like milk in your refrigerator -- it's got a shelf life, and after a certain point you have to recycle."

Shaking Up Government

"It was pitch black and the noise was incredible. It just roared through," recalls Janice Peck about that early morning in January 1994, when the Northridge Earthquake struck Los Angeles. "The freeway bridge over the I-5, just south of Valencia where I live, collapsed and cut us off 30 miles from the main VA benefits office in West L.A."

But Peck and her coworkers, some of whom lived another 45 miles to the north, were determined to stay on the job. "We started using the Angeles Crest Highway, the mountain road," says Monique Koslow. "It was taking three hours -- and then the snow came and cut off that option. The first night, it took four and a half hours to get home." She wondered how long she could keep up the exhausting commute.

She needn't have worried, according to her coworker and carpooler, Bill Parker: "Our director moved very quickly." Within 10 days, all three were settled in a telecommuting center that the General Services Administration created from scratch after the quake. "I give a lot of credit to FEMA, too," Parker continues. The Federal Emergency Management Agency "got us some computers so we could get up and running, and they paid for our whole first year of operation -- rent, supplies, clerical support, everything."

The three are disability rating specialists; they review veterans' claims and medical records and decide eligibility for benefits -- a job that can be done in nearly any quiet place. It is perfect work for a telecommuter.

The Valencia telecommuting center was supposed to be a temporary solution, just until the freeways were repaired. "But we started plotting right away about how to stay here," says Peck. "Actually, years ago, when I started as a rating specialist with VA in West L.A., a couple of us realized we could do the work better outside of the office. We proposed it to the management, and they said 'No, we won't be able to watch you.' Traditional managers can't help imagining the worst.

"So we offered them a bribe," she says. "We said we'd do 10 percent more work if we could work at home. They bought that and then asked headquarters in Washington, who said 'No, you can't let them work independently.' Our promise of extra work didn't interest Washington."

But the earthquake let them make good on their offer. Parker has the statistics to prove it. "We are 12 percent of the regional office disability rating specialists, and we produce 17 percent of all the ratings. But that's not the whole story. Some veteran claims take longer than others. A veteran's first claim takes longer to review because we have to evaluate service medical records as well as any current medical problems. We do 19 percent of all first claims. And the most time-consuming category of first-time claims are those with eight or more medical or emotional issues. We do 47 percent of those."

How does the team explain its superior productivity? "Not so many interruptions," says Peck. "Downtown, the phones are ringing and people are talking, asking you questions, and the supervisors are always changing your priorities -- telling you to drop whatever you're working on and work on something else. Here, we get a box of cases and we just do them. The sooner we get done, the sooner the veterans get their money." Stew Liff, the regional director, has taken the Valencia success seriously. By next year, he plans to begin relocating many workers who serve veterans from the regional office to four area VA medical centers.

The Valencia telecommuting team is leading the way. Peck says, "Our team is producing the work. Our quality is good. We plan our own vacation times, report our leave, and cover for each other when someone's sick. We're responsible adults and we're capable of doing all that without management."

All it took was an earthquake.