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Dried Fruit Association (DFA) and FDA Hammer Award

Remarks by Bob Stone

Resort at Squaw Creek, Olympic Valley, CA

June 2, 1997

I’m here today to honor a group of people who are reinventing government, and I’d like to start out by explaining what reinventing government means.

Shortly after his inauguration in 1993, President Clinton asked Vice President Al Gore to conduct a "national performance review" of the federal government and make specific recommendations on how to make the government work better and cost less.

And, from the outset, they took a fundamentally different view from their predecessors of what running the government entailed. They looked at themselves as CEO and COO of the huge enterprise, USG, Inc. Here’s what they saw.

The company was in trouble. Sure, it had great name recognition. But, it had a lot of problems, as well. Customer confidence had, over the preceding 30 years, dropped from 75% to 17%. Red ink was mounting. The workforce was getting ever-larger, but the level of service was not growing along with it.

Al Gore saw that his company needed some major changes, and needed them now. And, to get advice on how to bring that change, he turned to CEOs who had faced the very types of challenges now confronting him. He talked to people like Bob Galvin of Motorola; Paul O’Neill of Alcoa; and Vaughn Beals of Harley Davidson.

He asked them how long an effort like this usually takes. They told him to figure on eight to ten years.

I'm not sure he believed them at first. But now we have all learned how tough a job this really is. I know the Vice President is committed for those eight years. In fact, he's started to think it might take even more than that—maybe as much as 12 years, or even 16 years. He’s willing to stay on for as long as it takes.

All kidding aside, he took the job on the way that corporate CEOs told him it would have to be done -- by getting -- and staying -- personally involved.

He soon got a taste of regulation. He found out that the government had a 9-page regulation for ashtrays --actually, the government didn’t even call them ashtrays, they were ash receivers comma tobacco comma desk type. And they’ve got something called "destructive testing" with a hammer, a center punch, and a 1-3/4-in maple plank. When the VP found this out he got involved. He did the testing himself – with his own hammer -- on the David Letterman show.

But as we all know, he couldn’t do all the work himself. He needed a team to do the work. So he put together a team of federal employees. That was a big change from the past, where "outsiders," like the Grace Commission, conducted reviews of government performance.

He decided the people who had been the whipping boys of every administration in memory – federal employees -- were not the problem. They had to become the solution. Just like in America’s best companies, the employees would have to be the ones to actually make it work better and cost less.

So the Vice President went out and toured the work sites like top CEO's have done

He went to every department in the federal government -- an enormous investment of his own time -- to get this reinvention moving. He spent hour after hour listening to federal workers – to secretaries, to procurement clerks, to front line supervisors, to lawyers.

As he listened to them he heard the same sort of thing private sector CEOs have heard from their workers-- they really cared about making the company better, and about cutting costs, but there were too many bosses and too many rules,. The suggestions the federal workers made are the basis of everything that we have done so far in reinventing government.

And how have we done? Lets look at what four years of reinvention have accomplished. We have reduced the federal workforce from 2,200,000 to 1,900,000, reversing the steady growth of the previous decades. Today, the federal workforce is the smallest it’s been since John Kennedy was President.

And we’ve introduced common sense to government procurement. Just Saturday the Vice President met with 150 political appointees to explain what he and the President expect of them with respect to reinventing government. He told them about the Navy’s new way of providing for communications aboard ship.

Who knows how Navy people communicate aboard ships? By telephone. Until recently they bought special "ruggedized" telephones, manufactured to Navy specifications that would survive all sorts of damage to the ship. They cost $400, but if the ship sank and was refloated, the telephone would still work. Now the Navy buys commercial phones for $35. If the ship sinks and is refloated, they have to buy a new phone. But at $35 instead of $400, they can afford to sink and refloat the ship eleven times and still come out ahead. That’s progress.

So how does the company look now? Workforce slimmed down! Red ink stanched!

But, it can’t end there. Government is smaller, but it has to be smarter too. And, by bringing terms like "customer service" and "quality" to government, we’re making some headway. You might not have heard about this.

Unfortunately, the press doesn’t seem too interested in this. That’s why we called our last report "The Best Kept Secrets in Government."

I’ll let you in on one of those secrets.

As part of reinvention the Social Security Administration made a commitment to providing "world-class customer service," which included responding to 50 million phone calls every year. In the phone service business, L.L. Bean, Southwest Airlines, and Nordstrom’s lead the way, right? Wrong.

According to Dalbar Financial Services Company, Social Security was number one in response time and service, beating out L.L. Bean and all the rest.

So the government is getting really good at customer service. Great. But what about the way government imposes its heavy hand on the American economy, what about the way government interferes with business, what about regulation?

Which brings me to the reason for today’s celebration.

President Clinton has said, "The era of big government is over." Vice President Gore has said that we must make big things happen without big government.

California’s dried fruit and nut producers are a $1.5 billion industry. Assuring the quality of your products is a big "thing." And it is happening without "big government." Instead it is being accomplished through common sense collaboration and partnership. That is worth celebrating.

The first thing that struck me about this partnership was the similarity in the abbreviations for the two organizations involved -- the "DFA" and the "FDA." The second thing that struck me was that the similarity was more than superficial.

The Pure Food and Drug Act of 1906 was the progenitor of the FDA. The DFA began in 1908 as a type of corporate "pure food act."

The people in this business realized early what much of American business has only begun to focus on in the last ten to fifteen years -- and government in the last four years. QUALITY was the reason that dried fruit and nut producers formed the DFA. Originally the DFA inspected shipments of these products on the dockside to make sure that QUALITY was being maintained, eventually the DFA began to inspect the production facilities.

All of this happened without any big-buck management consultants. The DFA was the California dried fruit and nut producers reinventing themselves -- in 1908. They were clear on three key concepts that are part of reinventing government today. The first concept was "customer service" --- if they were to stay in business they had to provide the customer with a quality product.

The second reinvention concept was "common sense." It was simply common sense that QUALITY could only be maintained industry-wide by standardizing what constituted a safe, consumable product and the most cost-effective way to do that was to create the DFA.

The third reinvention concept was the very idea of "partnership". The producers would continue to compete in all other aspects of the dried fruit and nut business, but in this singular aspect of QUALITY they would be "partners," the partnership being realized through the DFA.

Then the FDA got up and running. For years it operated as a national overseer, a regulator of things consumable and medical. And of course many businesses in the early 20th century needed a strong overseer to bring their production processes up to standard.

But it was never possible for the FDA -- or any regulatory agency, for that matter -- to be everywhere at all times. The way it generally worked was to find a particular violation in a particular place and then to "make an example" of that company to put the fear of God into the rest.

If that sounds like a pretty arbitrary process, it was. Both sides got pretty fed up playing cops and robbers in a game with ever-changing rules. Sometimes the rules were made up by Congress, sometimes by the FDA. And to some of you it may have even seemed sometimes like the rules were made up by the individual inspector.

But the team we honor today has changed the rules for good.

First, you -- the FDA and DFA -- focused on your shared goal, safe and wholesome dried fruit and nut products.

Second, everyone involved tried to find the best way to achieve that goal --- and I mean everyone. The growers, the inspectors, the plant staff, the association staff, the shippers -- everyone rolled up their sleeves to find a better way.

Third, all options were open. The FDA was flexible in carrying out their mandate. The DFA was flexible in adapting their procedures to meet FDA requirements.

Undergirding all of this regulatory reinvention was a new idea -- TRUST. The FDA staff trusted that the DFA members didn’t want their kids, their relatives, or their fellow Americans eating contaminated food.

The rest wasn’t easy. Harmonizing sanitation and inspection procedures, standardizing sampling and laboratory analysis -- all the "fine print" had to be worked out. But it was worked out, and now the DFA ensures that the member producers comply with FDA standards -- and in the process saves the industry money. In the last year the DFA has conducted 176 inspections and analyzed 4700 samples for hazards.

This allows the FDA to focus on the approximately five percent of companies who are not DFA members. Inspecting all the plants was an impossible job for the FDA to do in the first place. Focusing on the non-DFA companies has already resulted in the detection and destruction in the last year of over 16 tons of defective dried fruit -- fruit that might have otherwise made it into the marketplace.

Wouldn’t it be nice if what Ron Johnson and his FDA staff has achieved with the DFA members represented a universally applied new policy in government. Not quite. In fact, trust and partnership is still a controversial approach to regulation.

There is still mistrust on the part of government . You heard Ron say that some at FDA thought he was getting in bed with the Devil. There is mistrust in business as well — not to mention interest groups and the Congress. So reinventors need courage to pursue and create change surrounded by people and institutions that are averse to change. Sometimes they don’t know whether to expect a Hammer Award from the Vice President or a different kind of hammer from the top brass in their own agency.

Ron Johnson and his staff at FDA persisted with their reinvention in the face of just this kind of uncertainty. I think they deserve three cheers for their courage in reinventing this relationship with the DFA.

And they and their partners in the DFA deserve the award they’re getting from the Vice President. He decided at the beginning of reinventing government to reward the kind of teamwork that we are saluting today. If you saw Gore on the Letterman show, you’ll know why it’s called the hammer award. It’s not named after the mythical $600 Pentagon hammer. This hammer is meant to demolish the useless regulation and wasteful policies of the past. And if you see anybody clinging to the bad old ways, you can use the hammer on them. Just kidding—of course we don’t condone violence in reinventing government.

Hammer Teams like yours are restoring the faith of the American people in their government. You here today are leading the way in the most radical -- most important of reinvention efforts -- REGULATORY REINVENTION. You are creating a new way of governing.

Under this new way of governing, government and business, interest groups and labor, can together, provide cleaner air, safer streets, healthier workplaces, better medicines, as well as healthier food.

And those are results that all Americans want.

So, on behalf of the Vice President, congratulations and thank you for your tremendous efforts and outstanding results.