Archive

Transforming Organizational Structure

Recommendations and Actions

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

Action

Reduce the costs associated with management control structures by one half over a five-year period.

The costs of management control structures should be cut roughly in half as a consequence of the implementation of decentralization, empowerment, reduced regulation, and other NPR recommendations over the next five years. Roughly 650,000 to 700,000 individuals work in management control positions at an estimated annual cost of $35 billion to $40 billion annually (see Appendix B for an illustrative breakout by major agency). A portion of the savings should be reinvested in quality management initiatives, improved technology, training of administrative staff reassigned to line positions, and methods to continuously reduce control structures. Significant savings, however, are not expected in the first few years due to early outs, buyouts, severance pay, training, relocation, and guaranteed outplacement services, which will be provided to the affected staff.(1)

As part of the initiative to streamline management control structures, the President should

--- reduce the executive branch workforce by at least 12 percent--or a total of 252,000;(2)

--- establish a challenging, governmentwide goal of increasing the span of control from 1-to-7 to 1-to-15 over the next five years;

--- encourage the use of employee empowerment, self-managed teams, simplified control structures, and better use of information and communications technology; and

--- direct agencies to reengineer work processes to shift emphases to service delivery.

Reengineering work processes will require legislative changes in some cases, but this strategy will also play a major role in streamlining management control structures.

The preferred method for both reducing the costs of the central control positions and increasing the span of control is through a broad offering of separation incentives-- not just to the estimated 650,000 to 700,000 employees in positions related to the control structures. In this way, employees in the targeted positions, who are not eligible for early outs or do not elect a buyout, can be transferred to line positions as they become vacant. With a broad offering of incentives coupled with a commitment to train and reassign staff, a reduction-in-force--the least desirable method of streamlining--might be minimized.

The President's Management Council (PMC) will oversee and coordinate the strategic plans for reductions in costs of central control structures and in increasing the management span of control. The PMC consists of chief operating officers--the senior leaders of cabinet- level departments as well as large agencies--who are in a position to know the best way to cut administrative costs while improving performance.

Traditionally, streamlining efforts directed by central management agencies have been across-the-board cuts. While these efforts led successfully to temporary cuts in staffing, they did not result in improved performance and left behind many of the same problems without changing the culture. The PMC is charged with a very different streamlining initiative that is driven by a reduction in costs--not just people--and is specifically directed toward better government at less cost. PMC will need operational assistance in this effort and should identify the type of assistance needed from the Office of Management and Budget (OMB), the Office of Personnel Management (OPM), and the Federal Quality Institute, as required.

NPR's estimates in the magnitude of existing management controls and their associated costs are hampered by a lack of a clear measure of their scope. Therefore, an early charge to the PMC from the President should be to define baseline costs and expected savings in a standardized way that is acceptable to and understandable by most people. For much the same reason, PMC--supported operationally by OMB and OPM--should define and track progress toward increasing the ratio of workers in relation to managers in the federal government.(3)

Endnotes

1. See NPR's Accompanying Report Reinventing Human Resource Management, HRM14: Provide Incentives to Encourage Voluntary Separations.

2. The reduction in 252,000 positions includes the 100,000 FTE cuts required by Executive Order 12839.

3. See NPR's Accompanying Report Streamlining Management Control, SMC01: Implement a Systems Design Approach to Management Control.

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