An 'A for Austerity

In 2010, the U.S. government’s outlays decreased for the first time since 1960, ending the luxury of ever-increasing budgets enjoyed by presidents from John F. Kennedy to George W. Bush. The recession that began in 2007 has ushered in a new era of austerity that will require a substantial rethinking of priorities by congressional leaders and the administration. 

While political leaders struggle with top-line budgets, federal managers from first-level supervisors to career senior executives and political appointees must find ways to operate in a budget landscape most have never experienced. Managers
who have too much on their plates are finding the plates are getting smaller too. 

This austerity demands innovative steps to rejuvenate programs, motivate teams and achieve levels of performance that many think aren’t possible. While that may seem like a fantasy to some, ambitious leaders have proved time and time again that it can be done. 

The Defense Logistics Agency, the Pentagon’s combat support agency, is a great example. Ten years ago, DLA was in the midst of a transformation that would challenge virtually every aspect of its operations. Costs were 24.7 percent of its revenue, and DLA was using antiquated technology that had to be replaced. The business systems modernization project would require significant training, job reclassification, labor negotiations, organizational redesign and change management. Yet the human resources operation struggled to meet basic personnel management needs. Average time to fill jobs was 111 days, customer satisfaction among hiring managers was abysmal and costs were excessive. DLA had to face both the internal and external challenges and transform itself into an enterprise that could meet the needs of warfighters in a far more cost-effective manner.  

While the agency’s logisticians and information technology professionals led the effort to replace the business systems, as DLA’s chief human resources officer I was responsible for finding better ways to manage the workforce. Working with the agency’s most experienced field HR director, we designed a new construct for human resources. We promised to deliver the transformation in a year, dramatically improving performance and reducing costs by 25 percent. Skeptics were plentiful and vocal. Using the favorite tools of bureaucrats—fear, delays and studies—they argued DLA should fix its problems without drastic changes. They pushed to delay the implementation until there was less going on in the agency and, of course, to study the matter more. Naysayers said a major overhaul was too risky, given DLA’s complex business systems modernization program, as well as the post-Sept. 11 demands of Operation Enduring Freedom in Afghanistan and Operation Iraqi Freedom. In short, they were using the very issues that drove transformation as reasons why the agency
should not reinvent itself.

Delay, unnecessary studies and an aversion to risk-taking are all too common. Fixing large-scale problems requires significant action. Clearly, it was in everyone’s interest to keep moving and make the seismic shifts necessary to deliver the HR services DLA needed. The agency director agreed and gave the green light over the objections of several generals, admirals and senior executives.  

Eleven months later the HR transformation was done. Seven offices were consolidated into two. DLA eliminated dysfunctional organizational constructs, reengineered processes and provided employees with customer service training. The agency saved $4 million in the same year reforms were implemented and reduced ongoing costs by 28 percent. The average time to fill vacancies shrank from 111 days to 62. DLA eliminated 117 positions, with only three involuntary separations. Customer satisfaction rose to record levels, an average of 4.7 on a five-point scale. The HR operation was so successful the Defense Department designated it a high-performing organization and exempted it from public-private competition. That led other Defense agencies to seek out DLA as an HR service provider. The number of employees it serves more than doubled, to more than 50,000.  

This success was based on several key factors. The director gave his team top-level support. DLA took the risk of walking away from the service-delivery model around which its personnel system was built. The agency addressed the needs of employees who would be adversely affected and provided placement assistance. Most important, leaders did not let bureaucratic
inertia get in their way.

You may be asking, “What happened to DLA’s overall transformation effort?” The agency reduced costs from 24.7 percent to 15 percent by 2005 and to less than 14 percent today. Sales and services grew by 70 percent and the workforce shrank to its lowest level since 1963. DLA fielded a superior enterprise business system and retired several legacy systems. With 2011 annual sales of more than $46 billion, DLA would rank 52^nd on the Fortune 500 list of top businesses if it were a private company. By every measure, the transformation was a resounding success.

DLA is not the only agency with creative and determined leaders. Innovators are abundant in government, but so is the stifling effect of bureaucracy. The austerity that government is now facing offers the perfect opportunity to unshackle the entrepreneurial spirit and inspire fundamental changes that can make government more effective and less costly. It won’t be easy. It will require leadership, determination and, most of all, courage. 

Jeffrey Neal, former chief human capital officer for Homeland Security, is senior vice president at management consulting firm ICF International (icfi.com).