The Gorilla in the Government Redesign Room

The Gorilla in the Government Redesign Room — Annual Meeting Highlights

The politics and practice of redesigning government was the featured topic at MTA’s 85th Annual Meeting of Members held at the St. Paul River Centre on October 5th. Approximately 100 MTA members and guests heard thought-provoking perspectives on efforts to transform government service delivery and the challenges public sector workforce issues present in improving government productivity.

Following the MTA business session (see the “From the Director” column for more information), a distinguished group of individuals who have been working in the trenches on redesign took part in a panel discussion to provide their take on where Minnesota is and what the future might hold. Representative Carol McFarlane, Co-chair of the Minnesota House Redesign Caucus; Representative Keith Downey; Dane Smith, President of Growth and Justice; and Jim Mulder, former Association of Minnesota Counties and 2010 Independence Party candidate for lieutenant governor discussed several issues relevant in moving government redesign from concept to reality.

The panel discussed the full continuum of government redesign potential that exists, ranging from the adoption of continuous improvement processes to fundamental reform involving potentially radical changes to the methods, structures, and incentives surrounding government service delivery. Panel members agreed on two basic themes. First, government needs to invest more in performance monitoring and outcome based budgeting practices. Second, budget realities demand that we embark on these redesign efforts expeditiously.

The challenge, panelists noted, is that a fundamental transformation of government structures and programs face stronger political and ideological headwinds than the process improvement initiatives at the other end of the reform continuum. Panelists agreed that engaging government workers at all levels is critical to the success of any redesign plan. Yet the current government employment model – an area itself infused with politics and strong ideological opinions – is often itself a major implementation barrier.

Competition, Innovation, and Talent

Such remarks proved an excellent segue to the featured luncheon speaker, Marty Manley. As a former labor union organizer and executive, Silicon Valley CEO, and Assistant Secretary of Labor in the Clinton Administration charged with workforce innovation, Manley has worn the hats of labor, management, and government in his unusual and distinguished career. His perspective on government productivity improvement and its relationship to public workforce issues – “the gorilla in the room”– was entertaining, informative, and often unconventional.

Productivity improvement in government is an imperative, not an option, Manley began, because government is being buffeted by influential factors over which it has no control. In addition to our well-documented demographic challenges, economic activity is increasingly disconnected from political boundaries due to cross border growth in trade, capital, and information flows. Together these factors present government with a “tough business environment” demanding investments in greater effectiveness and efficiency. He described productivity improvement as a system challenge comprised of three elements: competition, innovation, and talent. Government faces special system-related challenges in each of these three areas.

With respect to competition, Manley argued that constructing competition in government involves much more than just creating competitive bidding structures for government service delivery. It also requires constructs within government that create a fertile field for competition to thrive. Harkening back to the earlier redesign panel, he emphasized the importance of creating service delivery metrics and “keeping score” on government outcomes. In addition, private interests within government, which benefit from the status quo, must not be allowed to use their political influence to undermine competition and potential innovation. Arguing that public service demands abstinence from partisanship, Manley recommended pursuing state level equivalents of the federal Hatch Act, which significantly restricts employees from participating in partisan political activity and extending it to vendors, managers and other special interests receiving government funds.

Manley discussed several interesting public sector examples of the second leg – innovation – many of which revolved around government embracing information technology in new and exciting ways. But again, he noted, government’s primary challenge is not to generate ideas – those are often in abundant supply. Rather, it is to create the systems and conditions within government necessary for innovation to thrive and take root. His list of catalyzing forces for government innovation included “sunshine partnerships” with private industry in which best practices can be transferred to public sector operations; mandatory sunset commissions to force periodic reevaluation of programs and service delivery; and public reports on cost structures of programs – what money is actually spent on – to flag issues and areas demanding attention.

The talent element revolves around a critical and controversial issue: the freedom to replace employees. According to Manley, if any organization is serious about rationalizing redundant operations, improving services, streamlining processes, reorganizing, or just improving performance, it likely needs to replace between 2-4% of employees each year. “Like weeding a garden,” he noted, “neglect the task and all is lost.” Retention of poor performers not only precludes the hiring of better performers, but their negative influence on working conditions and operations drives out top talent. Regular pruning also enables governments to take new initiatives and accommodate needed skills sets resulting from changing technological and demographic realities. Government needs to adapt regularly and often, and governments simply cannot do it if managers cannot replace people.

Manley continued by saying terminating employees should be easy but not cheap. He argued tenure and seniority based government employment protections should be removed in exchange for mandatory and relatively generous severance averaging 6 months of pay. Based on his experiences, a cost of severance line item in government budgets representing 1%-2% of payroll is both expensive and absolutely worth it. It forces managers to think very carefully about how to organize operations, who to bring in and who to counsel out, and makes governments reserve financially for severance so they can restructure and respond as needs change.

Needed: More Labor Strikes?

Each of these three productivity elements is profoundly affected by public sector unions and the constructs created by collective bargaining. Manley offered two provocative thoughts about the impact of public sector unions on the government productivity imperative.

First, he argued that is too easy to make unions the scapegoat for issues that are created as much, if not more, by management. Every labor-management agreement has two signatures, and blaming unions exclusively for contract provisions that hinder innovation, productivity improvement, or cost-efficient service delivery lets public sector managers and elected officials off the hook far too easily. Since management often places the highest priority on preserving labor stability and avoiding a strike, public sector officials will sign off too readily on contract terms that are really management malpractice. He argued that collective bargaining must be fully recognized for what it is – “a full contact sport” – and that a scarcity of strikes is a big indication that management is not being sufficiently aggressive. Failure to hold elected officials and managers accountable for their negotiated outcomes ensures taxpayers will get what they deserve.

Second, there is a critical need for union innovation. Unions, he said, have largely chosen politics and collective bargaining over service innovation and professionalism. Due to massive economic pressures and the math of budget deficits, what has worked so well in the past is not a recipe for future success.

Manley described some opportunities unions have to redefine their purpose and source of power in ways that support government productivity and innovation:

• Helping public employers discern the highly qualified from the merely competent through training and skill certification
• Participating in employment decisions through peer group performance evaluations to help reward the best performers and replace the worst
• Developing online and other services to facilitate professional mobility and growth, career path planning and advancement, and self organization (jobs boards, social capital development, issue based social media, etc.)
• Serving as an information source in helping to identify arbitrary, capricious, and poor managers

Transforming from the classic industrial union model into a professional association model will help secure both public support and higher earnings. But he also argues in many ways this transformation is not an option – the landscape is fundamentally changing. Public employee unions, he believes, will either adapt or risk going the way of many of their private sector brethren.

Can public employee unions innovate? Not easily, according to Manley, because the primary barrier is ideological. Unions are spiritually and historically attached to a legacy of labor solidarity that makes increasingly little sense in an information age. It is very difficult for any organization to rethink their purpose and redefine their mission. Power in public sector unions should stem not from collective action, but from the talent, commitment, and professionalism of individual members – which we would parenthetically note Minnesota has in abundant supply.