Joe Versus the Bureaucracy

Veronica Wales remembers the sense of despair she felt three years ago, shortly after she was hired as a human resources specialist at the New York regional office of the Department of Veterans Affairs. She had been asked to perform a "desk audit" on one of the file clerks-that is, to determine what he did, how he did it, and whether his job was classified correctly.

Her first problem was simply finding the employee. "I had to go to the claims examiners and ask for directions to the file area," says Wales. "It is a distance of six yards between them and where this guy was, but they didn't know who he was." She finally found him, she says, in "a very depressing work environment. There were rows and rows of old file cabinets. The file clerks were totally separated from the rest of the workplace."

After interviewing the employee, Wales asked him if there was anything he'd like to change about the way he did his work. "Usually people use this as a chance to tell me what they hate about their job," she says. "This individual responded by mimicking what his boss had apparently told him: 'As long as I go to lunch and return from lunch on time, there shouldn't be any problems.'

"He was like a robot," says Wales. "No thinking, no creativity." Wales had joined the New York office because she thought its director, Joe Thompson, was making a series of exciting changes in its organizational structure and work processes. But experiences like her interview with the file-clerk had begun to take their toll. She wound up in Thompson's office, close to tears.

"I asked him, 'How do you see this and remain positive?' When you're dealing with the workplace it's one thing, but when you're dealing with individuals who have had the life sucked out of them, it's another." Thompson, Wales says, assured her that things were getting better and that more changes were coming. "Keep your eye on the light at the end of the tunnel," he said. "Focus on that, and we will get there."

Three years later, say Thompson, Wales and others, the New York office is almost "there." Last June, the staff moved from what Thompson describes as "the worst physical plant in the VA" to newly renovated space in lower Manhattan. Employees have been provided with new furniture, new computers and a new phone system.

More importantly, the office has eliminated its rigid hierarchical management structure and created a set of self-directed work teams, in which members perform multiple functions. The file-clerk position Wales audited no longer exists; the functions of all the different clerical titles have been combined into a single position of "case technician." The changes have made Thompson and his staff some of the original heroes of the reinventing government movement. The New York office has been designated a "laboratory of reinvention" by the National Performance Review and was the first recipient of Vice President Gore's coveted Hammer Award.

Yet, despite all the plaudits the New York office has received, the transition to the new structure has not been entirely smooth. Thompson's operation continues to get poor ratings on many of the VA's performance measures and is regarded by many as one of the least efficient in the Veterans Benefits Administration.

Thompson says a reduction in the backlog of pending benefits claims by veterans in recent months shows that his overhaul of the office is working. But to date, the case in support of what they have done rests mostly on the favorable reviews of employees and clients. That, along with the support of key officials higher up in the VA, has been enough to sustain the project to date. Now, though, it will come under increased scrutiny as VA officials look to extend Thompson's reforms to other offices.

Simplifying the Work Flow

The New York office is one of 58 regional offices of the VA's Veterans Benefits Administration, which processes veterans' claims for disability, retirement and other benefits. The heart of each regional office is its Adjudication Division, home of the claims examiners who make determinations about each compensation and pension claim. The New York office, with 340 employees and an operating budget of $17 million, is one of the largest offices in the system.

In many respects, the VBA fits the stereotype of the industrial-era bureaucracy. Typical VBA offices are characterized by multiple levels of management, "functional silos" in which people are segregated according to their duties, narrowly defined tasks and an assembly-line approach to processing claims.

When Thompson and his staff set out to reinvent their corner of the VBA, their paramount objective was improved service to veterans. Soon after embarking on their effort, they convened two focus groups made up of veterans who had received service from the New York office. Patricia Amberg-Blyskal, Thompson's assistant director, says the main message from the groups was frustration: Too often, they said, the workers with whom they dealt couldn't help them, because those workers' jobs were too narrowly defined.

In the old New York office structure, all direct contact with veterans was handled by counselors in the Veterans Services Division, while the actual processing of cases was handled by claims examiners in its Adjudication Division. When a veteran called in with questions about a claim, a counselor in the Veterans Services Division would have to retrieve the claims folder from the Adjudication Division before answering. Even then, counselors were often unable to respond to many of the questions veterans posed, because they were relying only on information in the folders, not on conversations with examiners who had made decisions on the cases. To make matters worse, veterans would get a different counselor each time they called, requiring them to explain their circumstances repeatedly. "The VA was sending messages we didn't intend to send," says Thompson. "The sense the veterans had was that the process was designed for our efficiencies rather than to provide service to them."

The solution that Thompson devised was to merge the Veterans Services and Adjudication divisions and to combine the jobs of counselor and examiner into a single position, called "case manager." Each case manager now handles all claims, from start to finish, for a particular set of clients. The system provides veterans with a single point of contact and allows them to talk with the employee actually making decisions on their claims. The new structure vastly simplifies the flow of work. (See chart, page 54.) Instead of a process with as many as 30 steps and multiple hand-offs between workers and divisions, there are now only four steps with a single hand-off between workers. Among the advantages of the new system are clear accountability for work and fewer chances for mistakes to be made as cases are passed between workers.

The reorganization of the workforce into teams, Thompson says, complements these changes by giving employees greater control over their work environment. Sixteen teams, each with 12 members, have been created. The teams are intended to be self-directed, although each is assigned a "coach"-usually a former supervisor.

Beyond improving service to veterans, the redesign was intended to make employees' jobs more fulfilling. Thompson himself started his career as a claims examiner in the office he now directs, a job he says was "mind-numbing and dispiriting." The consolidation of divisions and of the claims-examiner and counselor positions allows each employee to perform a much greater range of functions.

For the claims examiners, who had not previously had direct contact with clients, the work is very different. "It's more work, but more gratifying," says Herman Wright, who has worked in the regional office for 13 years. "I have more control. I like the personal contact and the fact that if I tell the veteran I'm going to do something, I can do it." "It puts pressure on you to perform," adds Steven Hughes, a four-year veteran of the office. "Before it was just a folder; now it's a name and a face. You feel a compulsion to get it done."

Veterans groups are pleased as well. "It's tremendous," says Mark Winn of the Disabled American Veterans. "I have received no service complaints in two-and-a-half years."

Surmounting Snags

Thompson and his staff, though, have had problems implementing the changes. The biggest obstacle they confronted was resistance to the changes by one of the more entrenched groups within the agency, known as rating specialists.

Rating specialists are responsible for determining whether a veteran's disability is service-related and, if so, what level of compensation he or she should receive. The job requires extensive training, and the specialists had come to be regarded as an elite group within the agency. Their work area was separated from the rest of the staff, and they were the best paid of the front-line workers.

Many rating specialists resisted the move to teams, where their status would be the same as that of the other team members and where they would be accountable to other employees. Some transferred to other offices; others retired or simply left the agency. There were 20 rating specialists when the first teams were set up; shortly thereafter only 9 remained. Because all disability cases must be reviewed by a specialist, a huge backlog of cases built up. To address the problem, two new groups of rating specialists have been trained in the last year and half, and a third set will be trained this fall. As the new raters come on line, backlogs are going down. At the beginning of fiscal 1995, the New York office had a backlog of 17,000 cases. As of June 30, that number had been reduced to 12,000. The goal is to get it down to 11,300 by the beginning of October.

Still, some employees say the way the backlog problem was handled shows management's lack of willingness to let teams manage themselves. The backlog-elimination initiative originated with VA Secretary Jesse Brown, who promised Congress he would bring the department's backlog of compensation and pension cases down from 577,000 to 250,000 by fiscal 1998. Each region was to make cutting its backlog a top priority. In the New York office, the teams were in turn told to make it their priority. That, say some team members, compromises the independence they were promised. "We are not being allowed to move in a self-directed way," says Hughes, a case manager. "The managers' attitude is 'I'm going to take the ball until we weather the storm.' We had no input in setting the targets. There is a feeling that the team concept is being given lip service." Archetype or Outcast?

Thompson's reforms have created controversy not only within the New York office but throughout the Veterans Benefits Administration. Last fall, VBA head John Vogel sent out a memo encouraging the regional offices to adopt one of four alternative structures, each of which was based on the concept of teams and a consolidation of the services and adjudication functions, such as had been implemented in New York.

Some regional directors argue that the New York model is far from a proven success. Their skepticism is based partly on New York's poor showing on several performance measures, such as the average processing time for cases. In a recent report, VBA said cases should take an average of 106 days to process but that the actual average processing time nationwide was 168 days. In New York, the average was 242 days.

Thompson's model "is one the agency as a whole is extremely reluctant to adopt," says Jim Maye, director of the VBA's Roanoke, Va., office. "How can you tell everybody to do what New York is doing when production and quality of service there are at the bottom of the heap?" According to Maye, VBA statistics show that the productivity of the New York office is a fraction of that of his own.

Steadman Sloane, head of the VBA's Columbia, S.C., office, doubts employees can master the full range of skills required for Thompson's model to work. "The complexity of our work makes it difficult for one person to be knowledgeable in everything," he says. Larry Woodard, former director of the Jackson, Miss., office and now head of the Vocational Rehabilitation and Counseling Service in Washington, says, "Joe has not been able to show dramatic improvement. Productivity and efficiency are not good. Other offices are doing better on these measures."

Even those who, like Maye, profess to believe in the concepts Thompson is implementing say it is a mistake to test those concepts in New York. "It is a notoriously inefficient operation," says Maye. "They picked the wrong place to do it."

Thompson attributes his office's poor showing on performance measures to the turmoil caused by the changes, the recent move and the backlog created by the departure of the ratings specialists. "We'll look like hell for another year," he says. "It's just a matter of time for us. We have laid a base. My analogy is with a house that has fundamental problems, and you're remodeling it from top to bottom and living in it at the same time. You have plaster dust in the air, and the water gets shut off periodically, but you end up with a fundamentally stronger house than if you just keep patching the old one."

Leadership and Change

Most of Thompson's colleagues in the VBA, even those who disagree with his model, express a high regard for his abilities. Gary Hickman, director of the VBA's Compensation and Pension Service, describes him as "a magnificent leader." Maye says Thompson "has a charisma about him and can get people to follow him. His enthusiasm is infectious."

VBA chief Vogel, for whom Thompson once worked in the agency's Philadelphia office, calls him a "risk taker." Thompson "was always pushing the envelope," says Vogel. "He would drive you crazy. Every morning he would come in with some brainstorm he had on the way to work. I would have to chase him out of the office."

Thompson says he's not a risk taker by nature but concedes he does enjoy the "clashing and testing of wills." He will doubtless be in for more such clashes during the next phase of his effort: implementing changes similar to those he has wrought in New York across the agency. With the cooperation of agency leaders, he has put in place a strategy to make this happen.

Thompson thinks the path to widespread adoption of his model is to change the VBA's performance measures. As a pilot site under the Government Performance and Results Act (which requires agencies to measure the success or failure of their programs), Thompson's office spent a year developing a new set of measures emphasizing customer service and employee empowerment. To the traditional measures of accuracy, speed and productivity, they added measures of customer satisfaction and employee development. A VBA committee (of which Thompson is a member) recently recommended that such new measures be adopted across the entire agency. One of Thompson's new performance measures has paid immediate dividends for the agency. Thompson and his staff decided productivity measures should include overhead costs. Traditionally, productivity had been based only on personnel costs. Overhead costs like rent and phones were not even included in the regional office budget. Instead, they were paid centrally, with a minimum of scrutiny, by the national office.

In order to develop unit-cost measures that included overhead expenses, Thompson's staff obtained information on rental costs from VBA's central office. In reviewing those costs, they discovered that the General Services Administration had been overcharging the VBA to the tune of $1.7 million over two years, an amount that was subsequently refunded to the agency.

Once the new performance measures are in place across the VBA, Thompson says, regional offices will have more incentive to examine such costs closely and keep them to a minimum.

Thompson is also trying to change his office's pay system to make it congruent with the new organizational structure. He has instituted a system of skill-based pay by making creative use of what little flexibility the government-wide General Schedule pay system provides. The New York office is applying to the Office of Personnel Management to become a demonstration project, which would allow it to experiment with new means of compensation based on group performance.

Thompson regards changes in performance measures and the compensation system as more significant than the structural changes, such as the use of self-directed teams, that have received so much attention.

"Teams and structures are not eternal truths," he says. "What we're doing organizationally should not become the new orthodoxy. But if you change what you measure and how you reward people, you change the organization at its heart."