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July 16, 2002
Testimony by Herbert
N. Jasper
Executive Committee
Standing Panel on Executive Organization
and Management
National Academy of Public Administration
on Principles to Guide the Structuring or Restructuring of
Large Organizations Before the House Subcommittee on
Workforce, Empowerment, and Government Programs
Mr. Chairman and Members of the Subcommittee,
I appreciate the opportunity to offer comments on principles
to guide the structuring or restructuring of federal agencies.
You requested testimony from the National
Academy of Public Administration ("Academy," or
"NAPA"), a Congressionally chartered organization
established to assist government at all levels, with special
emphasis on the federal government. The more-than-500 elected
fellows of the Academy rarely take a position on legislative
issues, but its panels often do upon request. This statement
was prepared in consultation with members of the Academy's
Executive Committee of the Standing Panel on Executive Organization
and Management ("Executive Committee"). The committee
believes that it is consistent with the views expressed in
previous panel projects, reports and testimonies. It is based
in large part upon previous publications of the panel or of
its members.
My biographical statement is attached. But
I'd like to review briefly some of the assignments and projects
that shape my views: experience in management and organization
in the Government Organization Branch of the former Bureau
of the Budget; service as a Senate Committee Chief Counsel
and an employee of two Congressional staff agencies; as a
public management consultant; and as an Academy Fellow. I
was Executive Secretary of the 1964 White House Task Force
on Government Reorganization (the "Price Committee");
the project director for the Academy's series of Presidential
Transition Memoranda in 2000-2001; a staff member in the design
of the Congressional budget process and the creation of the
Congressional Budget Office; the project director for the
Academy's study of the National Ocean Service; and a staff
member of the Academy's 1988 study of the Executive Presidency
and the 1994 study of the General Accounting Office (GAO).
I have also been a chair or member of Academy project panels
on such subjects as management of NASA's Goddard Space Flight
Center and Congressional oversight of regulatory agencies,
and have published articles on federal management.
GAO's October 2001 report on the current
structure of the Small Business Administration (SBA) identifies
a number of challenges that it poses. As requested, I shall
begin with general comments on guiding principles regarding
organization of federal agencies. Then, I shall review several
of the challenges facing SBA, especially the ones relating
to organization, in the light of the principles.
Principles of Federal Organization. The Academy published
a paper (Principles of Federal Organization, NAPA, January
1997) prepared by the Standing Panel that listed 10 principles
and 14 corollaries to those principles. Following is an adaptation
of those items that appear most pertinent to this hearing:
- An executive department should be charged
with major public purposes, which serve all the people of
the nation and should not be created to represent, or serve
as an advocate for, a special group of Americans. (Independent
agencies, such as SBA, often serve a narrower clientele.)
- Organization by major purpose is preferable
to organization according to clientele or process.
- Each department and independent agency
head should be held accountable for the quality of its management
and be assisted by a senior official to whom the Secretary
assigns responsibility for providing advice on all aspects
of internal management.
- Legislation establishing departments
or agencies or addressing aspects of general management
should avoid prescribing statutory detail and should empower
the agency head to make the internal arrangements best suited
to the effective execution of the laws.
- Legislation that lodges functions in
officers other than agency heads or restricts their authority
to make adjustments to improve program management will increase
costs, impair the achievement of legislative objectives,
and make it harder to hold the agency head accountable.
- The President and the Congress should
maintain an institutionalized capacity to keep informed
of the manner in which agency heads exercise authority over
internal organization and management.
- Effective program administration depends
on competent, motivated public service employees who respond
to the policy direction of the political leadership but
are selected, retained and advanced on the basis of merit.
- Employing third parties (including state
and local governments and for-profit and nonprofit contractors)
to manage and operate government facilities and deliver
public services does not eliminate the need for public management,
it merely changes its character.
Principles Relating to the Establishment
of Departments or Agencies. While the status of SBA as
an independent agency is not specifically a subject of this
hearing, the Chairman's invitation to testify states that
"The focus of the hearing is the application of sound
management principles … in the structuring or restructuring
of a large … governmental … entity…."
Accordingly, it may be appropriate briefly to review criteria
for establishing departments, as proposals to move SBA to
a Cabinet department have been made from time to time. In
1988, an Academy panel issued a report for the Senate Committee
on Governmental Affairs (Evaluation of Proposals to Establish
a Department of Veterans Affairs, NAPA, March 1988). It set
forth criteria by which one could evaluate proposed cabinet
status for any candidate agency. The panel listed and discussed
14 criteria as they would apply to the Veterans Administration
(VA), criteria that may be too specific to the VA case for
general application. Other guidelines for evaluating reorganization
proposals can be found in a book by Harold Seidman (Politics,
Position and Power, fifth edition, Oxford University Press,
pp.219-220, 1998).
I believe that the following selection
of Seidman's and the Academy panel's criteria would apply
to considerations of department status for a group of programs:
- Are there now in one agency, or can we
combine in it, programs that are closely related in terms
of achieving broad national goals?
- Would combining related programs improve
service delivery and help to achieve the results intended
by the President and Congress; would it save money, either
for the taxpayers or for those affected by the programs,
and would it prevent the domination of the agency by one
constituency group or by one professional discipline?
- Would Cabinet status improve the leadership,
visibility, and public support for the programs?
- Does the agency warrant independent
status, whether in the Cabinet or not, as compared to other
agencies; does the public interest require that it remain
in the government or should it be devolved or privatized?
- What is the nature of the agency's constituency
and how much will it be able to influence policies and program
administration?
Principles Relating to the Organization
and Management of Departments or Agencies. Alan L. Dean
recently prepared a revised version of a paper on the organization
and management of Cabinet departments (Organization and Management
of Executive Departments, NAPA, March 2001). Most of that
paper applies equally to independent agencies. Following are
a number of observations in that paper that are relevant to
SBA:
- Legislation dealing with agency management
should avoid excessive detail in assigning functions and
prescribing internal departmental structure.
- To improve accountability and program
oversight, secretaries must be the real -not nominal - managers
of their departments.
- The quality of departmental administration
depends heavily on the field organization's design.
- Experience favors decentralized departmental
management, often through the program administrators
who delegate much of their operational authority to
field officials. When field officials can take final
action, services can usually be provided more quickly
and with a better understanding of local conditions.
- Successful decentralization depends
upon clear policies and standards to guide field officials
and upon reporting, audit and evaluation systems to
ensure that delegated authority has been properly used.
- No department can function well unless
it relies heavily on an experienced cadre of career civil
servants. Principal field officials usually should be from,
and remain in, the career civil service.
- A deputy secretary who is an effective
manager and a well-organized secretariat will often reduce
or eliminate the need for a chief of staff as an important
figure in management matters.
Additional Guidelines That Relate to
Restructuring of SBA. SBA has experienced significant
growth in number, size and complexity of its program responsibilities.
Concurrently, the size of its work force has declined. It
is probably time for a program review addressing the possibility
of eliminating or combining programs.
As noted by Thomas H. Stanton in a recent
paper (Moving Toward More Capable Government: A Guide to Organizational
Design, Pricewaterhouse Coopers Endowment for the Business
of Government, June 2002), "Reorganization is not a substitute
for inadequate resources in areas such as budget, staffing,
or systems." Further, as I pointed out in an Academy
paper (Making Reorganization of the Executive Branch Work,
NAPA, January 1997),
- Reorganization is always costly and disruptive
and should be undertaken only when the perceived benefits
clearly outweigh the costs.
- Reorganization is a way to emphasize
certain values or goals, but this means downgrading other
values or goals.
- Reorganization, per se, seldom saves
money.
Stanton also noted in the paper mentioned
above that, as in architecture, "…in organizational
design, form should follow purpose." It is not clear
that SBA had previously changed its structure in response
to the changes in programs and methods for carrying them out.
But its transformation plan (still a working document) proposes
to make some such changes now.
With the theoretical principles and guidelines
that I have outlined in mind, I shall now turn to a number
of organizational challenges for SBA. Most are set forth in
GAO's report and possible corrective actions are described
in SBA's transformation plan. I begin by applauding SBA's
efforts to date. Of course, the plan is a work in progress
and identifies a number of additional topics yet to be addressed.
So what follows is intended to fill in some gaps that I perceive
and to encourage early attention to the remainder of the agency's
transformation agenda.
Field Organization. SBA's
plan is designed to make the organization more responsive
to its principal customers - small businesses, rather than
to its lending partners. But the first phase of the plan does
not go very far in rationalizing a complicated field structure
with 10 regions, 70 district and 16 branch offices, more than
1,100 centers, plus six area offices. As GAO pointed out,
the last reorganization that created an Office of Field Operations
did not reconcile that action with a clear re-definition of
the role of the Regional Directors and their relation to the
Office of Field Operations.
Substantial delegation of operating responsibility
and authority to the field is desirable. However, for the
various program offices at headquarters to deal directly with
this large number of field offices carrying out delegated
authorities is guaranteed to cause confusion and conflicts.
Perhaps, creation of the Office of Field Operations was a
mistake. I believe that the Regional Directors ought to be
in the chain of command from Washington to the district offices.
That should go far toward clearing up two challenges mentioned
by GAO, viz., overlapping organizational relationships and
ineffective lines of communication. Additionally, the number
of district offices appears excessive and some of the area
offices no longer have a significant workload.
Number of Appointees. SBA, with up to 60 appointees,
has a far higher proportion of such positions than any other
agency that I can think of. Successive national administrations
and Congresses have steadily enlarged the number of appointive
positions in many agencies, partly in response to the popular
sport of "bureaucrat bashing," and partly because
of a mistaken belief that these positions will help the current
administration "get control." In reality, political
appointees, most of whom owe their appointments to the political
parties, interest groups, or Members of Congress, are more
likely to resist direction from the White House and their
agency heads than are the career civil servants. Further,
such appointees often serve only a short time, and all have
to be replaced with a change in national leadership. To begin
with, I'd urge that SBA seriously consider making the Regional
Directors career positions. A substantial number of the other
appointive positions should also be eliminated or converted
to career status.
Congressional Influence Over Relationships
and Locations. Congress should avoid unnecessary prescriptions
about internal management matters and hold the Administrator
accountable for results. I was not surprised to see that the
transformation plan failed to address these issues that were
mentioned in the GAO report. But the Congress, in creating
or chartering such organizations as GAO and the Academy, seeks
additional input on many matters that the agencies might not
feel comfortable addressing.
The four most significant matters appear
to be: 1) the number and location of field offices; 2) the
requirement that there be an Associate Administrator for Small
Business Development Centers (SBDCs) with specified reporting
channels; 3) the constraints on limited combination of funding
for servicing disaster loans and other direct loans of the
agency; and 4) the establishment of a large number of offices
at headquarters.
Field Offices. Congress
has not mandated the number and location of the various
field offices that I think are too numerous. However, some
seem to have been established in response to Congressional
pressures and their termination will probably require acquiescence
by Congress.
SBDCs. Constraining the
Administrator's ability to integrate the SBDC program with
closely related functions of the agency is a good example
of why such statutory prescriptions are undesirable. If
the Administrator is to be held accountable for results,
he must be able to organize the delegations of authority
and the chain of command from time to time as circumstances
and program priorities dictate.
Loan Servicing. With respect
to disaster loans, the issue is not whether funding should
be separate. It is that servicing of direct loans for disaster
assistance once they have been made is often managed by
the same personnel who are concerned with certain servicing
functions for the few remaining direct loans under other
SBA programs. And the current funding constraints complicate
the financing of loan servicing centers.
Statutory Positions. At
least nine positions, beyond the Presidential appointees,
are required by statute. Here, I'm not referring to the
programs they are responsible for. Those ought to be authorized
by law. But specifying the administrative arrangements locks
the positions in and prevents adjustments as programs evolve.
Overlapping Positions at Headquarters.
The Chief Operating Officer (COO) concept has recently been
imported to the federal government from the private sector.
In most Cabinet agencies, the COO is the Deputy Secretary,
but it is a separate position in SBA. The Chief of Staff position
has been copied in many agencies from the military and the
White House. These positions and those of COOs are not statutory.
SBA also has a Deputy Associate Administrator
for Management and Administration, currently Dr. Blanchard
who is also COO. With the exception of the Inspector General
and contracting functions, he has responsibility for the full
spectrum of management activities. So it appears that SBA
has four positions (two now filled by the same person) that
are concerned with agency management and operations.
Typically, the Chief of Staff in a federal
agency performs the significant function of "gate keeper,"
sometimes performed by an Executive Secretariat or an Executive
Associate Administrator. The range of internal management
and administration functions assigned to Chiefs of Staff varies.
I suggest that SBA should now reevaluate whether it could
lodge the COO responsibility in the Deputy Administrator.
Even if not, it should consider eliminating either the Chief
of Staff or COO position, or combining them. But, especially
in light of the large number of appointee positions, it is
vital that the remaining position, however titled, be filled
by a career official in order to provide the needed continuity
Competitive Sourcing. More
competition for the performance of federal activities is part
of the President's Management Agenda. The transformation plan
signals the agency's intent further to expand its already-significant
outsourcing. But, in contrast to the planned strengthening
of oversight of loan programs, I did not see in the plan any
recognition of the need to have sufficient numbers of highly
trained staff to manage additional competitive sourcing and,
most importantly, to oversee the contractors' performance
and to evaluate when outsourcing is no longer justified on
a case-by-case basis. (Incidentally, I do not use the words
"privatize" or "contracting out" as synonyms
for "outsourcing" because I think they weaken the
perception that what is contracted remains the responsibility
of the agency to assure that taxpayers are getting what they
pay for.)
Conclusion. I close by reiterating
my strong support for what the transformation plan outlines.
However, I urge that careful attention be paid to the rest
of the identified agenda, as well as to the matters I have
discussed that are not yet addressed. In particular, I urge
that Congress work with the agency to minimize statutory prescriptions
or other constraints regarding administrative arrangements
that should be left to the Administrator.
I'd be pleased to respond to any questions.
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