Wednesday, January 12, 2011

Fostering a Culture of Fiscal Irresponsibility

When I started with my current employer (a medium-sized Federal agency) back in the early 90s, we had a smaller professional staff than we do now, and many more “support” personnel whose jobs were no longer necessary now that everyone had a capable personal computer.* We had a higher project load than we do now, and that load increased substantially during the go-go years of the mid- to late-90s and early 2000s. Back then, every professional staffer in my part of the organization had at least one, and often two, major projects underway with one or two more in some sort of minimal-work stage, plus several longer-term projects.** Now, the volume of work has diminished substantially – partly because of the recession – while the number of professionals has increased – in part because of agency growth and in part because of substitution away from support personnel to professional staff. As a consequence, the workload per employee has diminished dramatically.

The workload would have diminished even further had it not been for a collective decision to undertake projects with ever-decreasing rates of return. Although government agencies have a very different purpose and approach than profit-maximizing entities, think of this as equivalent to an oil exploration company hiring new engineers at the same time oil prices are falling, and then justifying the added expense by drilling in increasingly unlikely spots. Sure, one or two of those exploratory wells in unusual formations may yield some oil, but most will be predictable busts.

Of course, in the corporate world, a firm that makes continual expensive mistakes will eventually come under pressure to change course. Earnings will fall, the stock price will fall, shareholders will complain, and the Board of Directors will eventually be forced to act or be replaced. Government has those pressures only indirectly: if voters get fed up with the psychic rate of return they’re getting from the bureaucracy, they can replace the men and women who control the overall agenda and purse (Congress) and the man or woman who appoints people to set the specific agenda (the President). The voters can’t directly replace a single person who works at this agency.***

The bureaucratic imperative, whether in the private or public sector, is to build one’s empire. Growth is essential to the process. The manager demands more staff, a bigger budget, more responsibility. I suspect this is part self-selection – those satisfied with the status quo tend not to go into management – and part self-preservation – if your colleagues are all playing this game, it’s professional suicide to stand on the sidelines.**** As an employee, I’m glad to know there is someone in my part of the organization fighting for budget dollars for my stuff, whether it’s new computer equipment, better office furniture, or more colleagues. I’m glad to know that my agency is skilled at wooing politicians and justifying its existence. But it's not necessarily a good thing from a more global perspective.

Having continuity across political eras is a good thing. From a staff perspective, it would be horrible to know that a Republican Congress meant a staff of 500 and a Democratic Congress meant a staff of 1000. Who would want such a job? The human cost of firing people is enormous. Fortunately, there seems to be a bipartisan more-or-less consensus about the value of the agency and its work.

But the system provides no mechanism for checking whether the size of the agency is a little too big or a little too small. (Or a lot too big or small, I suppose, but let’s focus on gradual change.) Yes, ultimately Congress gets to decide on a budget for the agency and can control the mission of the agency,^ but how much time can be spent worrying about the details of one agency? If Congress is out there printing and spending money as fast as the presses will operate, a request for another $20 million next year is likely to be met with a yawn and speedy approval. If Congress is practicing some form of austerity, the agency budget may not grow, and may even shrink, but again without much thought about the specific nature of what we do, how it fits into an overall government agenda, and what should be the appropriate amount of that work. Even an austere Congress is more likely to shrug and declare that all agencies will take an x% budget cut, rather than think through the right size of every individual agency.^^

I look around the office and see enormous amounts being spent – on more personnel, more office space, trips around the country for one reason or another – and look at the relatively low capacity utilization, especially relative to the mid-90s, and wonder why it is that we keep hiring people. This seems especially cruel if anyone thinks we’re likely to have a budget cut of any real magnitude: people just hired will be let go, having disrupted their lives to move here and possibly having turned down alternative offers.

Whose fault is this, anyway? I can’t blame my bosses, who are fighting for resources with other divisions. I can’t blame the other divisions for the same reason. I suppose I could blame the agency heads for not being responsible adults and asking Congress for less money – “Hey guys, good news for you this year: we’re seeing less business, so we don’t need quite as many people. We’ll be back asking for a budget increase when the time comes where we need the money.” – but it’s like blaming the lion in the zoo for eating the tourist who falls in. Lions do what they’ve evolved to do, and bureaucrats are no different. Ultimately, the buck stops with Congress. If they would scrutinize agency requests for more money with a critical eye, instead of spending their time naming Post Offices and dreaming up creative ways to spend more borrowed money, perhaps they’d be more effective at oversight. I have my doubts, though. The government is just too big, with too many agencies serving too many constituencies, for one organization to monitor effectively all its parts.

The problem isn’t limited to government, of course. Universities are notorious for increasing the number of faculty, departments, degrees, administrators, and what not, and grabbing as much land as possible. No one ever steps back and says, “Gee, was developing a cross-discipline program in the economics of chemical engineering Chinese literature during the Han dynasty really a worthwhile venture for us?” Instead, the ambition of universities tends to be limited only by the available budget. Churches tend to have an odd sort of mission creep as well, and corporations, despite the discipline imposed by the financial market, are not immune.^^^ Companies often think that being successful in one area gives them license to expand into other arenas, often beyond their competence, and almost surely without the degree of success of the first project.

Mind you, I'm not suggesting layoffs. I know the human cost of eliminating positions. And the government, bless its heart, has the luxury of not being subject to the harsh discipline of the market, so agencies have the ability to recalibrate their work force in a kinder way than the private sector. That's a good thing for the human capital involved, even if it's not as efficient as it could be. The labor market is flexible, a truly remarkable thing, but it is not frictionless. It takes time and considerable emotional energy to rebound from losing a job and to find another one. The solution isn't to halve the size of my agency overnight.

However, people retire and people move to other positions. If we should really be, say, 20% smaller than we are, a plan to get us from here to there would be a good thing. Losing 4% a year for five years could likely be achieved fairly painlessly. Yet I have the uneasy feeling that no one is looking that far ahead, and that one day someone will wake up and decide that the 20% reduction needs to be done in one fell swoop. That would be very painful.

Meanwhile, I'm trying to make myself useful while waiting for business to pick up...



*For example, we had remnants of the old typing pool (now called “secretaries,” but, let’s face it, the amount of secretarial work hadn’t increased when the typing pool suddenly became outmoded) and an entire statistical division that essentially did basic data collation and calculations – essential once upon a time but an anachronism once Lotus 1-2-3, VisiCalc, and Excel arrived.

**I know the word “project” covers a multitude of tasks. I realize I’m being somewhat cryptic for the sake of privacy, which is a little silly given the nature of this post. But that’s the way it is. Looks, this isn’t Wikileaks; I’ve got legal confidentiality requirements in addition to personal privacy issues. Think of a project as requiring an average of 10 hours per week for an average of six months, though the variance on that is enormous.

***Nor should they.

****Heh – I worked in a sports metaphor!

^Sometimes the crazy folks micro-manage the damn place, down to demanding specific reports on specific topics. Don’t they have anything better to do under that big ol’ dome anchoring the National Mall? What a world! But I digress.

^^An oft-heard proposal these days is to fund the government at 2008 levels. A supporter of Big Government would lament the need to make significant cuts while a supporter of Small(er) Government would note that 2008 levels were significantly higher in real dollars than even a few years earlier and can’t be much of a hardship. Neither side would spend much time arguing about whether 2008 funding is appropriate everywhere.

^^^And, lest you all think I protest too much, my agency is far from the worst offender of even my limited knowledge. We may be overstaffed, but we’re overstaffed, by and large, with smart people who are interested in doing their jobs well. I try to remind myself of that on days when some of my colleagues severely try my patience.

7 comments:

Fogwoman Gray said...

Tried to reply with my work info, but probably too identifying too :)
In short, I completely relate.
Coming out of a relatively easily understood profit motive environment into one that is motivated by Tribal, Federal, State and family politics and bureaucracy is surreal.

Rhianon Jameson said...

Yeah, putting work info out on the web might not be the world's best idea.

I'm pretty sure that I also have to do with Tribal politics, but probably not the same kind. :)

It's a weird system, with very strange incentives, that's for sure!

Dio said...

Oddly enough, there was a time when, after spending literally decades working with the military, non-profit, government and educational worlds, I had an opportunity to work for a "major corporation." You know, an organization that was supposedly dedicated to the idea that the desire for profit would foster a ferenghi-like commitment to efficiency and common sense.

I was thinkinh, "wootness! I shall no longer be cast adrift on a sea of fecklessness! Blessed be Profit!"

And in fact it turned out to be the most half-assed, misbegotten and inefficient enterprise I ever had the displeasure to deal with. Planning was non-existent, quality control on the product line had been abandoned, and--with fear of litigation being the primordial driving force in decision making--the largest department at the corproate headquarters were the lawyers who shut down any attempts to accomplish anything.

I think my dear Rhia, that it sadly comes down to there being no truly effective organizations of any type--we all just have to struggle along and accomplish what we can in small groups and as individuals in SPITE of the entities within which we are employed.

I'm sure that you and many of your colleagues do manage to achieve good things despite the system that has enfolded you in its loving bureaucratic arms, not unlike a slightly retarded mother gorilla that accidentally smothers its child.

What will most likely happen is that Uncle Sugar--now realizing that his way of doing business has brought us all to the tipping point of a crisis, he will undoubtedly overreact, and cut things way back to where nothing works, and then the pendulum will swing again. During that swing, there will be a brief window when shit that we need actually gets done at a reasonable cost.

It just won't last very long.

Rhianon Jameson said...

I re-learned the hard lesson that one shouldn't compose anything lengthy - even a reply - directly in a browser window or Bad Things Could Happen.

Rhianon Jameson said...

Hi, Dio, and thanks for livening up my somewhat dreary whine.

If I gave the impression that the private sector was free from overbearing, incompetent managers, prima donna staff, lack of direction, and lazy, incompetent staff, I apologize. I temped in a variety of private sector businesses, and often the reason a firm brought in temps was to deal with its incompetence in managing its business day to day. I've also had war stories from a number of close friends and relatives describing the horrors of their private sector work places. At times it's a wonder that any products make it to market. If the grass really is greener in parts of the private sector, there are also a large number of cow patties to avoid.

Whatever inefficiencies are in the private market, however, we can venture a guess that successful firms were once upon a time startups that built the proverbial better mousetrap - no matter how screwed up, say, Wal-Mart is, the firm got where it is today because at some point in the past it out-performed its rivals - and that once-successful firms that hit hard times did so not only because of their own incompetence, but because there was someone out there ready to take that business. And sure, none of this happens instantaneously, but eventually it dawns on someone up the food chain that the Gizmo Division hasn't been very profitable for a while and is now drowning in red ink, or that the formerly top-selling Gadget 3.2 isn't seling much, and maybe it's time for the 3.3 update. Firms get rid of products or divisions all the time, or reorganize to do things differently - not necessarily better, I grant you, but the successful firms go on to do better and the unsuccessful ones are bought out or die out entirely. Bad decisions, too many lawyers, intertia, and everything else not withstanding, there are still competitive pressures to identify egregious problems.

In contrast, those pressures just aren't there in the public sector. Goals aren't well defined. In the military, having an objective to "Take that hill" is pretty clear, and the military is great at doing that. "Get Germany to surrender" isn't as clear, but hey, if you let your top guys get creative and give them a big budget, they eventually make it happen. "Make Afghanistan into a place with fewer terrorists" is such a vague goal and so unrelated to what the military does best that it's no wonder there are problems.

Closer to home, take a look at the Fed. What is the job of the Fed, anyway? Is it to (1) maintain a steady money supply to keep inflation low, (2) use monetary policy to simultaneously target inflation and unemployment so that neither gets "too big," or (3) steady the financial sector by acting as a lender of last resort in order to maintain liquidity in the system? Different people have had different ideas about its mission. Now the Fed is also supposed to have a consumer protection mission...exactly how does that fit in with the above? Worse, if you pick (2), what constitutes an inflation rate or an unemployment rate that's "too big"? Damned if I know. Even if we agreed on its mission, how do you know if it's doing well? Or if it needs more or fewer bodies? No one is minding the store, in the sense of asking regularly "What is it we should be doing?" Agencies will ask the question "How can we do what we're doing better?" but managers often have limited tools to implement any ideas. And, as I said above, the incentives are always to add to your influence, so no agency is ever too big in the eyes of those running the place.

I agree with you, though, that the finances of the government have been pushed to the brink, and now an overreaction in the other direction seems likely. One can only reflect that this, too, shall pass.

Vivito Volare said...

Every organisation has its stated goals and values. One would need to be exceedingly naive or delusional to believe these are true. You learn what the modus operandi of the organisation is by looking at what they actually do.

As the President of our division puts it, we continue to thrive because we are open, imaginative and committed to excellence.

No.

We border on feudalism, with Baronies and fiefdoms aimed at securing continued employment and not being required to be beholden to others. We are Autocrats pretending to share a common goal.

I think this is a good thing. It allows the canny to know which vice or fear runs a department or task and go for the throat rather than all the silly "Oh I don't know, this isn't documented, not my call, lemme check on that..." nonsense.

---

As to the role of Government you mention, it really depends on the sort of government, does it not? Generally, I think most any governing body is reducible to the self interest of its most well ensconced members.

I do not know the author, but the quote goes "The key role of a Congressman is to garner money from the Rich and votes from the Poor by promising each to protect it from the other."

Efficient? Economical? Probably not.

Rhianon Jameson said...

Indeed, sir, one cannot determine how an organization truly runs without first understanding the incentives of all players, from the leaders to the serfs, er, employees.

And with government agencies, one also has to be aware of regulatory capture - most notably seen in the cozy relationship between the oil industry and its regulators prior to the Deep Horizon explosion.