Report Card on Downsizing

t's been four years since the Clinton administration promised to reduce the size of the federal workforce. It should come as no surprise that the federal workforce has downsized to its lowest level in more than 30 years. If federal downsizing was only about numbers, the data would show that it's been successful.

However, as envisioned by the administration, downsizing was supposed to occur in conjunction with reinvention. The administration calculated that streamlining government processes could render about 250,000 budget, procurement, accounting and other administrative positions unnecessary. Downsizing was not just intended to get enough people to leave, but to get the right people to leave. Measured against this standard, downsizing has had mixed results.

"In terms of numbers, agencies are meeting their downsizing targets," says Timothy Bowling, director of operations at the General Accounting Office division that has been monitoring downsizing activities. "However, there's little evidence that the reductions were carried out with an effective plan to reshape the workforce to better fit a reinvented government. What we got were across-the-board reductions rather than carefully planned cuts aimed at positions no longer essential to agencies' core missions."

Rationale for Reductions

Reducing the size of the federal workforce was one of President Clinton's earliest initiatives. Within three weeks of his inauguration, the President, by executive order, called on agencies to cut 100,000 federal jobs over three years. At least 10 percent of those reductions were to come from the GS-14 level and above.

Vice President Al Gore's National Performance Review expanded the administration's downsizing goals. In its September 1993 report, the NPR called on agencies to make management reforms to clear the way for elimination of 252,000 positions over five years. Included in this number were the 100,000 positions the President had cut by executive order. Workforce reductions were to be aimed at "management control" positions that the administration claimed added little value to serving taxpayers. Managers and supervisors, headquarters staff and employees in personnel, budget, acquisition and accounting/auditing occupations all fell under the NPR's definition of management control positions.

The NPR recommended that agencies cut the ratio of supervisors to employees from 1-to-7 to 1-to-15, and halve the number of other management control jobs, all by the end of fiscal 1999.

To minimize the need for reductions in force, the NPR called for legislation that would allow non-Defense Department agencies to pay buyouts of as much as $25,000 to eligible employees if they voluntarily left federal service. Defense agencies had been offering buyouts since January 1993 to ease reductions following the end of the Cold War. In 1994, Congress enacted the Federal Workforce Restructuring Act, which gave agencies buyout authority, placed annual ceilings on personnel levels for fiscal 1994 through 1999, and raised the federal downsizing target to 272,900 positions.

The Numbers Game

Downsizing is ahead of the schedule mandated by the Workforce Restructuring Act. At the end of fiscal 1996, federal employment stood at about 1.94 million, nearly 63,000 employees below the target. Since 1993, the workforce has been reduced by 11 percent, but the cuts were not evenly distributed. Agencies making the largest percentage cuts in their staffs include:

• Office of Personnel Management (38 percent)
• General Services Administration (23 percent)
• Defense Department (16 percent)
• NASA (15 percent)
• Agriculture Department (13 percent)

Moreover, although the NPR's reinvention efforts were supposed to drive workforce reductions, the decrease in federal employment was largely a peace dividend from the ending of the Cold War. Between fiscal 1993 and 1996, Defense civilian jobs accounted for about 64 percent of workforce reductions. Further, while DoD's civilian workforce dropped by 16 percent during that time, the non-Defense workforce shrunk by just 7 percent. This trend is expected to continue. In fiscal 1997, DoD is expected to absorb all of the anticipated 30,300 workforce cuts, as well as an additional 2,600 reductions to offset an increase in the non-Defense workforce of 2,300 positions.

In addition, management control positions have not been reduced as intended by the NPR. Although many of these positions have been eliminated, their representation in the workforce has shown little, if any change, and some positions have actually increased proportionally. In August 1996, GAO reported that between September 1992 and March 1995, personnel, budget, accounting/auditing and headquarters positions increased slightly as a proportion of the DoD workforce. The number of DoD supervisors decreased, but by less than 1 percent. At non-Defense agencies, the proportion of personnel, headquarters staff and supervisors decreased by less than 1 percent, while other management control positions showed no change or increased slightly.

Buyouts Helped

Buyouts were responsible for a large portion of workforce reductions. According to OPM, about 113,000 employees received separation incentives. At the same time, buyouts, along with voluntary early retirement authority and other mechanisms, helped minimize the need for RIFs. The NPR reports that of the more than 239,000 people who have left federal service so far, fewer than 9 percent were involuntarily separated, easing adverse affects on morale, agency operations and workforce diversity.

While there were reports that some buyout recipients violated the buyout terms and returned to federal employment, such incidents were rare. Recipients had to meet certain conditions to be rehired by the federal government. Initially, DoD buyout recipients could not be re-employed by any DoD installation within a year of their separation dates. However, no restrictions were placed on their ability to return to a non-DoD agency. The Workforce Restructuring Act changed that, requiring buyout recipients to fully repay their incentives if they were rehired by a federal agency within five years of leaving their jobs, unless they received waivers. Of the nearly 88,000 people taking buyouts between January 1993 and June 1995 reviewed by GAO, only 11 appeared to have been rehired in violation of either DoD buyout authority or the Workforce Restructuring Act.

Downsizing From Here

Downsizing continues to be a work in progress. Although the non-DoD buyout authority expired in March 1995, Congress renewed it for most agencies under various pieces of legislation in 1996. The DoD buyout program will continue through fiscal 1999.

Given the workforce reductions yet to come, what lessons can be applied from the first phase of downsizing and buyouts? According to Bowling, planning is essential. It helps ensure that mission-critical employees are retained, while those positions no longer consistent with an agency's future goals are eliminated. Private firms have found that downsizing without adequate planning leaves fewer people doing more work and diminishes customer service.

For federal agencies, planning means deciding which functions are mission-essential and identifying the skills necessary to accomplish them. Planning also means developing downsizing strategies to eliminate positions peripheral to core functions. Agencies also must address how they will accomplish the work with fewer employees. Will the work be outsourced, privatized, automated, reengineered or eliminated altogether? Will workers be retrained or redeployed? Across-the-board cuts and the lack of workforce restructuring suggest that most agencies have not been downsizing with meaningful workforce or strategic planning.

In the end, the size and capabilities of the workforce must equal the magnitude and complexity of the work. At a time when the federal workforce has been scaled back to its lowest level in decades, it is not at all clear that agencies are taking adequate steps to ensure their work can still be accomplished efficiently and effectively.