[Senate Hearing 106-392]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 106-392

 
                QUALITY MANAGEMENT AT THE FEDERAL LEVEL

=======================================================================


                                HEARING

                               before the

                  OVERSIGHT OF GOVERNMENT MANAGEMENT,
        RESTRUCTURING AND THE DISTRICT OF COLUMBIA SUBCOMMITTEE

                                 of the

                              COMMITTEE ON
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION



                               __________

                            OCTOBER 15, 1999

                               __________

      Printed for the use of the Committee on Governmental Affairs


                               

                    U.S.GOVERNMENT PRINTING OFFICE
61-700 cc                   WASHINGTON : 2000
                           
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For sale by the Superintendent of Documents, Congressional Sales Office
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                   COMMITTEE ON GOVERNMENTAL AFFAIRS

                   FRED THOMPSON, Tennessee, Chairman
WILLIAM V. ROTH, Jr., Delaware       JOSEPH I. LIEBERMAN, Connecticut
TED STEVENS, Alaska                  CARL LEVIN, Michigan
SUSAN M. COLLINS, Maine              DANIEL K. AKAKA, Hawaii
GEORGE V. VOINOVICH, Ohio            RICHARD J. DURBIN, Illinois
PETE V. DOMENICI, New Mexico         ROBERT G. TORRICELLI, New Jersey
THAD COCHRAN, Mississippi            MAX CLELAND, Georgia
ARLEN SPECTER, Pennsylvania          JOHN EDWARDS, North Carolina
JUDD GREGG, New Hampshire
             Hannah S. Sistare, Staff Director and Counsel
      Joyce A. Rechtschaffen, Minority Staff Director and Counsel
                  Darla D. Cassell, Administrive Clerk

                                 ------                                

SUBCOMMITTEE ON OVERSIGHT OF GOVERNMENT MANAGEMENT, RESTRUCTURING, AND 
                        THE DISTRICT OF COLUMBIA

                  GEORGE V. VOINOVICH, Ohio, Chairman
WILLIAM V. ROTH, Jr., Delaware       RICHARD J. DURBIN, Illinois
JUDD GREGG, New Hampshire            ROBERT G. TORRICELLI, New Jersey
                  Kristine I. Simmons, Staff Director
   Marianne Clifford Upton, Minority Staff Director and Chief Counsel
                     Julie L. Vincent, Chief Clerk



                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Voinovich............................................     1
    Senator Akaka................................................     7

                               WITNESSES
                        Friday, October 15, 1999

Charles O. Rossotti, Commissioner, Internal Revenue Service, 
  Department of the Treasury.....................................     4
Martha N. Johnson, General Services Administration...............     8
Colleen M. Kelley, National President, National Treasury 
  Employees Union................................................    23
Bobby L. Harnage, Sr., National President, American Federation of 
  Government Employees...........................................    25
J. Christopher Mihm, Associate Director, Federal Management and 
  Workforce Issues, General Government Division, U.S. General 
  Accounting Office; accompanied by James R. White, Director, Tax 
  Policy and Administration Issues, General Government Division, 
  U.S. General Accounting Office; and Bernard Ungar, Director, 
  Government Business Operations Issues, General Government 
  Division, U.S. General Accounting Office.......................    33

                     Alphabetical List of Witnesses

Harnage, Bobby L. Sr.:
    Testimony....................................................    25
    Prepared statement...........................................    77
Johnson, Martha N.:
    Testimony....................................................     8
    Prepared statement submitted by David J. Barram, 
      Administrator of General Services..........................    56
Kelley, Colleen M.:
    Testimony....................................................    23
    Prepared statement with an attachment........................    65
Mihm, J. Christopher:
    Testimony....................................................    33
    Prepared statement...........................................    94
Rossotti, Charles O.:
    Testimony....................................................     4
    Prepared statement with attachments..........................    43

                                APPENDIX

Dr. Jack West, Past President, American Society for Quality, 
  testimony of ASQC before the National Commission on 
  Restructuring the IRS, September 10, 1996......................   109



                QUALITY MANAGEMENT AT THE FEDERAL LEVEL

                              ----------                              


                        FRIDAY, OCTOBER 15, 1999

                                       U.S. Senate,
         Oversight of Government Management, Restructuring,
               and the District of Columbia Subcommittee,  
                  of the Committee on Governmental Affairs,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 9:06 a.m., in 
room SD-628, Dirksen Senate Office Building, Hon. George V. 
Voinovich, Chairman of the Subcommittee, presiding.
    Present: Senators Voinovich and Akaka.

             OPENING STATEMENT OF SENATOR VOINOVICH

    Senator Voinovich. Good morning. It is nice to have Senator 
Akaka with us this morning.
    Senator Akaka. It is good to be with you this morning.
    Senator Voinovich. Unfortunately, we have a vote at 9:15. I 
know all of you are very busy people and I have quite a lengthy 
statement that I may submit for the record, because I think we 
should move forward with the panels.
    First I will introduce the witnesses that we have here 
today. Then I will ask you to stand, administer the oath, and 
then we will proceed with the hearing.
    In a nutshell, what we are hoping to do with these hearings 
is to see if during the next 2 to 3 years we can change the 
culture of the A-team, the people that really make a difference 
in the Federal Government, the people who are the middle 
managers and the rank and file workers who survive 
administration after administration, but I think in too many 
instances have not had an opportunity to participate. I am 
interested in empowering our workforce. I am interested in 
providing the money that is necessary for upgrading people's 
training. I am looking for ways that we can provide new 
incentives for our Federal workers, and overall create the best 
environment that we can for our Federal workforce.
    When we instituted quality management in State Government, 
it took us 8 years, but it is the most important piece of work 
that I did as Governor of Ohio in terms of improving the 
overall quality of life for the citizens of Ohio, and also the 
quality of life for the 58,000 people who worked for the State 
of Ohio. I know at the Federal level, it is going to be a much 
bigger job, but I think if we stay with it, we can make a 
difference.
    The prepared opening statement of Senator Voinovich 
follows:

            PREPARED OPENING STATEMENT OF SENATOR VOINOVICH
    The hearing will come to order. Good morning, and thank you all for 
coming. Today the Subcommittee on Oversight of Government Management, 
Restructuring, and the District of Columbia holds its second hearing on 
Total Quality Management. For at least the next 2 years, hearings like 
this will be an important part of my efforts to change the culture of 
the Federal workforce.
    I am interested in improving the work environment and culture of 
Federal career civil service employees and middle-managers who, I 
believe, do most of the heavy lifting and receive little acclaim for 
their hard work. I call these dedicated men and women the ``A-Team.''
    I would like to start this hearing by again defining Total Quality 
Management and outlining what I believe it can do for the operations of 
the Federal Government. Quality management is a system that (1) focuses 
on internal and external customers; (2) establishes an environment 
which facilitates team building, employee contribution and 
responsibility, risk taking, and innovation; (3) analyzes work 
processes and systems; and (4) institutionalizes a goal of continuous 
improvement. For TQM to be successful, several important elements must 
be present, including management-union partnerships, effective employee 
training, modern personnel policies, and an established system to 
measure program outcomes. This last point is a core characteristic of 
the Results Act.
    At our last hearing on July 29, we highlighted what quality 
management has done on the State level. Representatives from the State 
of Ohio and their union partners described to the Subcommittee the 
great success that they have enjoyed with their own brand of Total 
Quality Management, called Quality Services Through Partnership. 
Today's hearing will address what is happening at the Federal level.
    The Federal Government is moving in the right direction. The 
Results Act requires that all Federal departments and agencies adopt 
strategic plans, and that they collect performance information to 
measure the effectiveness and efficiency of their programs.
    However, I am concerned that the formulation of strategic and 
performance goals may be a wasted, paper-pushing exercise if it fails 
to include the perspectives of line employees and middle-managers who 
really know the programs and know how to make government work better. 
The rank and file must be involved in establishing the goals of Federal 
agencies. That's why I believe we must have in place at the Federal 
level both a strategic framework, which is proved by the Results Act, 
and a quality management framework, which will enable the government to 
use the Results Act to its full potential. In other words, quality 
management is the means by which agencies can achieve their Results Act 
goals.
    Through my work as Chairman of this Subcommittee, I will do all I 
can to help create an environment where our dedicated public servants 
can maximize their talents. I believe that if the Federal Government 
were to adopt quality management, it would lead to greater employee 
satisfaction and empower the ``A-Team'' to really make a difference in 
the lives of the American people.
    Today, we will move away from the hypothetical and focus 
specifically on quality management initiatives already in place at the 
General Services Administration (GSA), and the Internal Revenue Service 
(IRS). GSA is one of the three central management agencies in the 
government that provides a wide array of goods and services to other 
Federal agencies, and the IRS is the Nation's tax collector. Both 
agencies have undergone or initiated significant reorganizations in 
response to congressional oversight and criticism of management and 
customer service practices. This is an opportunity for these two 
agencies to discuss what they have accomplished, what remains to be 
done, and whether their success with quality management can be 
replicated in other Federal agencies. I would note that because of my 
duties as Chairman of the Subcommittee on Transportation and 
Infrastructure, I am more familiar in general with GSA and its program 
than the IRS.
    I am encouraged from what I have learned about the efforts of GSA 
and the IRS. Both agencies seem to have taken customer service to 
heart: GSA with their motto of ``thrilling the customer,'' and the IRS 
with new strategic goals focusing on ``Service to Each Taxpayer,'' 
``Service to All Taxpayers,'' and ``Productivity Through a Quality Work 
Environment.''
    Information technology is also playing a prominent role in agency 
reforms. GSA has hundreds of thousands of items for purchase on the 
Internet, and has leveraged the purchasing power of the government to 
save money. Despite some early setbacks, the IRS is attempting what is 
surely one of the most ambitious and important computer modernization 
projects in the Federal Government. I realize how challenging the 
computer modernization must be, given the shortage of information 
technology specialists and the difficulty of recruiting them into 
government service. I am eager to learn if the personnel flexibilities 
allowed under the Reform Act have assisted the IRS in this area.
    We must all keep in mind that major reforms are often lengthy and 
require a great deal of patience. We should not expect quick results 
nor be disappointed when they don't materialize conveniently overnight. 
The purpose of today's hearing is to demonstrate that there are Federal 
agencies in the midst of dynamic change that have made a long-term 
commitment to quality management as a tool to realize the goals they 
have set for themselves under the Government Performance and Results 
Act. I believe that the success of these efforts builds the case for a 
governmentwide quality management initiative.
    An equally important objective of this hearing is to stress the 
importance of labor-management partnerships. I am encouraged that the 
White House is directing Federal agencies to increase union 
participation in workplace decisions. The active participation of 
employees at all levels is essential for reforms to take hold 
successfully in Federal agencies. I believe it will be demonstrated, 
especially in the case of the IRS, that employee involvement is one of 
the keys to success.
    I would now like to introduce today's witnesses. On our first panel 
are the Hon. Charles O. Rossotti, Commissioner of the Internal Revenue 
Service, and Martha Johnson, Chief of Staff, of the General Services 
Administration. I have asked them to discuss the major changes to 
organization and operations that their respective agencies have begun 
to implement.
    Also joining us for our second panel are Colleen M. Kelley, 
National President of the National Treasury Employees Union, and Bobby 
L. Harnage, National President of the American Federation of Government 
Employees. Ms. Kelley and Mr. Harnage were asked to discuss the 
participation and role of their union members in the reform efforts 
currently underway at IRS and GSA, respectively.
    On the third panel is J. Christopher Mihm, Associate Director of 
Federal Management and Workforce Issues, General Government Division, 
U.S. General Accounting Office. He is accompanied by James R. White, 
Director of Tax Policy and Administration Issues, General Government 
Division, and Bernard Ungar, Director of Government Business Operations 
Issues, General Government Division. Mr. Mihm will first present an 
overview of common features that have been identified in successful 
government management initiatives. Mr. White and Mr. Ungar will be 
available to discuss the extent to which reforms at IRS and GSA have 
incorporated there features and the degree of success that they have 
experienced. We have also asked all witnesses to address the 
feasibility of implementing the types of reforms underway at IRS and 
GSA at other Federal agencies. We thank you all for coming and look 
forward to your testimony.
    Before we adjourn, I would mention that at our next quality 
management hearing, the Subcommittee will examine Federal agencies' 
employee training programs and budgets. Continuing education has been 
an important feature of Ohio's quality management program, and I think 
it makes sense for us to examine what the Federal Government is doing 
in this area. Thank you.

    Senator Voinovich. The witnesses on our first panel are 
Charles O. Rossotti, who is the Commissioner of the Internal 
Revenue Service, and Martha Johnson, who is the Chief of Staff 
of the General Services Administration. I have asked them to 
discuss the major changes to organization and operations in 
their respective agencies.
    Joining us on our second panel are Colleen M. Kelley, 
National President of the National Treasury Employees Union, 
and Bobby L. Harnage, National President of the American 
Federation of Government Employees. Ms. Kelley and Mr. Harnage 
were asked to discuss participation and role of their union 
members in the reform efforts currently underway at the IRS and 
at GSA, respectively.
    On the third panel is J. Christopher Mihm, Associate 
Director of Federal Management and Workforce Issues, General 
Government Division, U.S. General Accounting Office, and he is 
accompanied by James R. White, Director of Tax Policy and 
Administration Issues, General Government Division, and Bernard 
Ungar, Director of Government Business Operation Issues, 
General Government Division. Mr. Mihm will first present an 
overview of common features that have been identified in 
successful government management initiatives, and Mr. White and 
Mr. Ungar will be available to discuss the extent to which the 
reforms at IRS and GSA have incorporated these features and the 
degree of success they have experienced.
    We have also asked all witnesses to address the feasibility 
of implementing the types of reforms underway at IRS and GSA at 
other Federal agencies.
    We thank you for coming and if you will stand, I will 
administer the oath. Do you swear that the testimony you are 
about to give before the Subcommittee is the truth, the whole 
truth, and nothing but the truth?
    Mr. Rossotti. I do.
    Ms. Johnson. I do.
    Ms. Kelley. I do.
    Mr. Harnage. I do.
    Mr. Mihm. I do.
    Mr. White. I do.
    Mr. Ungar. I do.
    Senator Voinovich. Thank you. Let the record show that 
everyone answered in the affirmative.
    I would like to remind the witnesses that your entire 
statement will be entered into the record and if you can keep 
your testimony to 5 minutes or thereabouts, I would be 
grateful.
    Mr. Rossotti, we would like to start with you. I want to 
say that I really enjoyed meeting you yesterday. You have a big 
challenge there at IRS, and you have been there for just a 
short time and there have been some terrific changes. I want to 
remind everyone that nothing is perfect, but the reason why GSA 
and IRS are here today is because of the fact that they are 
innovative, they are making change, and they have had success. 
So I want you to know, this is not a hearing to beat up on 
anybody. We have enough of those hearings around here.
    Mr. Rossotti.

  TESTIMONY OF CHARLES O. ROSSOTTI,\1\ COMMISSIONER, INTERNAL 
          REVENUE SERVICE, DEPARTMENT OF THE TREASURY

    Mr. Rossotti. Thank you very much, Mr. Chairman and Senator 
Akaka. We appreciate the opportunity to be here. We have with 
us today three people that are actively participating in 
different ways in our effort. David Allen and Glen Jacobsen are 
both front-line revenue agents that are participating in our 
teams that are working on the changes, and Mr. Boswell has 
recently joined us to head our agency shared services 
organization.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Rossotti with attachments appears 
in the Appendix on page 43.
---------------------------------------------------------------------------
    When we look back a little over a year ago to the passage 
of the Restructuring Reform Act, we can see it really set a 
fundamentally new direction for the agency. The way I would 
summarize this new direction was that we were being asked to 
measure our success in terms of its effect on people as well as 
on the taxes that we collect, both being important in the 
future. To accomplish this goal, we are undertaking some very 
pervasive changes that are going to affect all 100,000 of our 
employees and managers, as well as our 125 million individual 
taxpayers and 6 million businesses that we serve.
    I think even before the passage of the act, there was a 
general consensus developing on the nature of the change that 
was required by the IRS, and the RRA pretty well locked it in 
and gave it clear direction. But even after the passage of the 
act, there were still many decisions and issues that needed to 
be decided. Of course, we also know that even with the passage 
of a law, in the end, our inside and outside stakeholders all 
have to support and engage in these decisions for the program 
to be successful.
    If you look at this whole process, we refer to it as 
modernization because we hope that it is bringing us forward to 
where we want to go in the future. While I think we have had 
some success so far, most of the work, as we noted yesterday, 
still remains ahead.
    But just to outline what we have been doing, the first 
aspect is to deal with what I call the softer issues, and they 
are summarized in the top half of the chart over there. They 
involved rewriting our mission statement, reformulating our 
goals and objectives and our guiding principles, which are on 
the top there, and I think if you just look at the mission 
statement, it really was developed with a lot of participation 
of our workforce, and in just 27 words, it says, ``Provide 
America's taxpayers top quality service by helping them 
understand and meet their tax responsibilities and by applying 
the tax law with integrity and fairness to all.''
    Then we have translated that into three specific goals that 
every employee and manager can, we think, make a contribution 
to. The first one is to provide top-quality service to each 
taxpayer we deal with in any transaction that we have with 
them. The second one being to provide service collectively to 
all taxpayers by ensuring that compliance with the laws is done 
so that the few taxpayers who may not want to pay their taxes 
are not allowed to put a burden on the others. And the third 
one, very importantly, is to provide a top-quality work 
environment for our employees so we can enable them to provide 
service to our customers. That is basically what this whole 
thing is about.
    Now, in order to make those goals a reality, one of the 
other things that we have been doing is making it clear that 
the way we measure performance in the agency and the way we set 
people's job objectives, that all three of these goals have to 
be achieved at the same time. In other words, we cannot any 
longer say that we are successful if we collect the taxes but 
we do not provide the right kind of service to taxpayers. Nor 
is the reverse true. We cannot provide wonderful service but 
not collect the taxes. We have to do all of those and we have 
to provide our employees what they need to do that job.
    I think that is also the principle that is mandated by 
GPRA, the Government Performance and Results Act, which says 
you should measure performance in a framework that is tied to 
what your mission is. So that is what we are trying to do with 
the first part of this.
    Now, as important as it is to lay those goals out and to 
communicate and to measure performance, we also know that we 
would not succeed unless we tackled some of the tougher 
structural issues that really get in the way of delivering. So 
that is why we are on the bottom there tackling a lot of 
changes in five major areas that are listed on the bottom of 
that chart. They basically boil down to revamping the way that 
we do business.
    We have a lot of good examples to work from, both in the 
IRS and in the private sector, so what we are trying to do is 
to take advantage of best practices that we have learned about 
in good organizations everywhere, and we think that if we can 
take advantage of these best practices, we will succeed in 
meeting our strategic goals. Some of these, though, do require 
major changes and investments in organization, training, and 
technology.
    We have tried to set priorities. We have 161 short-term 
initiatives that we are doing to try to deliver on these goals 
in the short term. In the long term, then, we are working on 
some of these major changes, such as reorganizing the agency 
and to customer-focused operating divisions supported by, 
behind the scenes, the four major divisions who will work with 
the outside taxpayers, and then we will have two shared 
services organizations that deliver such things as information 
systems and facilities services and other personnel services 
that are required in order for us to operate effectively.
    I do want to mention one important point that I think this 
Subcommittee, and the broader Governmental Affairs Committee, 
helped a great deal on, which was during the restructuring, 
giving us the authority to provide certain flexibility with 
respect to personnel. One of the areas was to enable us to 
bring in some executive cadre from the outside that had 
experience with some of these best practices that we were 
trying to implement. We have been using that authority. We have 
so far recruited seven executives. Mr. Boswell is here with me 
today, who has come in after 31 years in the oil industry. He 
is one of the most recent of our hires in this category.
    The other one, and I will finish up quickly, but I just 
want to mention one other major area, which is technology. We 
are embarking on one of the biggest technology modernization 
programs that I have ever encountered, and I have spent 28 
years in the business, and that is because, unfortunately, the 
old technology that the IRS currently depends on is probably 
the biggest barrier that our employees have to being able to 
deliver quality service. So we are faced with almost a complete 
renewal and reengineering of our technology base, which we, 
with the help of Congress who very constructively has given us 
the resources, and now we are embarking with the help of the 
private sector to do that.
    The last point I will mention is a little bit about the 
process that we are using. Some of those factors are summarized 
on that chart, which I will not run through, the one on the 
left. But the key point here and the reason I brought Mr. Allen 
and Mr. Jacobsen with me today as just two of the 
representatives that are working with us, is that we are not 
doing this in a way that has a few people locked in a back room 
at the top making decisions and then telling everyone else what 
to do. We have over 500 front-line people working from all 
parts of the IRS with us in a set of design teams and they are 
very carefully going through an analysis of what we need to do 
and have already come up with very effective recommendations on 
how we need to move forward, and we are going to continue to 
use that process as we implement this change. It does not 
eliminate the anxiety and the risk, but I think it does help us 
to make sure we get the best information to make decisions and 
also to get the best buy-in.
    So that is a short summary of a big program that we have at 
the IRS. Mr. Chairman, we appreciate the comments you made at 
the beginning and would be happy to answer any questions that 
you or Senator Akaka have.
    Senator Voinovich. Thank you.
    Senator Akaka, I apologize to you. I did not give you an 
opportunity to make an opening statement, and if you would like 
to do that now, I would appreciate it.

               OPENING STATEMENT OF SENATOR AKAKA

    Senator Akaka. Thank you very much, Mr. Chairman. I want to 
compliment you and commend you for holding this hearing on this 
subject and for your desire to work with employees of unions 
and Federal agencies in this regard.
    These are exciting times, as I mentioned to some of you 
that I said hello to, that it is going to be a busy morning. As 
Ranking Member of the Subcommittee on Federal Services, I am 
pleased that there are fresh views on how to improve Federal 
management and performance. In working toward improving 
management and performance, however, it is important that line 
employees, middle management, and the unions be actively 
involved.
    So I want to join the Chairman in welcoming you to this 
hearing, all of you who are of the three panels as well as the 
GAO and union presidents who are here this morning.
    I want to compliment the IRS for doing what you are doing 
now, following your goals, and know that this involvement has 
helped the IRS in achieving marked improvement. I would also 
like to know that as GSA moves in new directions, I hope that 
it will work with its employees, middle management, and their 
unions. This involvement and consultation should also extend to 
GSA's JWOD partners.
    Mr. Chairman, I thank you very much for this moment to 
express myself, and again, I want to compliment and commend you 
for this hearing.
    [The prepared opening statement of Senator Akaka follows:]

              PREPARED OPENING STATEMENT OF SENATOR AKAKA
    Thank you, Mr. Chairman for allowing me to sit with the 
Subcommittee this morning. I commend your keen interest in quality 
management and your desire to work with Federal agencies in 
implementing these practices. We are all aware of our Subcommittee's 
proud history in enacting legislation to increase performance and 
accountability within the Federal Government. Most recently, we have 
focused on managing for results--the driving force behind the 
Government Performance and Results Act, which requires Federal agencies 
to develop strategic plans, performance measures, annual performance 
plans, and performance reporting.
    As Federal agencies work toward improving management and 
performance, it is important that employees be actively involved in 
these initiatives. Moreover, it should be obvious that without employee 
involvement, improvement efforts instituted solely by management will 
not have a lasting effect and stand little chance of becoming a part of 
an agency's culture. As the Ranking Member of the Subcommittee on 
Federal Services, I do not want this fact overlooked as agencies 
implement ``best practice'' initiatives.
    I look forward to hearing from IRS Commissioner Rossotti, whose 
agency has one of the highest levels of interaction with the public. 
The IRS was long considered the lightening rod for all that was wrong 
with the Federal Government. However, under the Commissioner's 
leadership, there has been sustained improvement and accountability to 
the public, coupled with a strong drive to involve line employees and 
middle managers in achieving those goals.
    I am pleased that the General Services Administration is also with 
us today. Although this hearing is to explore how quality management 
practices can be integrated into the Federal Government, the GSA, 
through its announcement that it was closing eight Federal Supply 
Service warehouses, found itself at the focal point of dissent. 
Although the decision to close the warehouses was just reversed, I hope 
that as GSA moves in new directions, it coordinate and consult with its 
employees, middle management, and their unions on this issue. This 
involvement and consultation must also extend to GSA's Javits-Wagner-
O'Day (JWOD) partners, who immediately felt the unexpected consequences 
of the proposed warehouse closings. I am pleased that GSA is now 
forging a better relationship with its JWOD partners and their 
affiliates.
    I know that Bobby Harnage, president of the American Federation of 
Government Employees, AFL-CIO, whose union filed the initial grievance 
against the GSA closings, will most likely address this matter in his 
testimony. I also look forward to hearing from Colleen Kelly, president 
of National Treasury Employees Union, whose union has worked so well 
with the IRS to implement the wide-ranging changes that resulted in the 
agency's turnaround.
    I would like to touch briefly on the successes achieved by the 
Administration's National Partnership for Reinventing Government, 
formerly the National Performance Review. This initiative, begun in 
1993, established customer service standards and identified programs 
that could be reinvented, terminated, or privatized. Most recently, NPR 
is working on performance partnerships with Federal and State and local 
governments, and I applaud this ongoing effort to make the Federal 
Government more responsive to those it serves and to those it employs.
    These are exciting times for the Federal Government, and I am 
pleased that there are fresh views on how to improve management and 
performance within the Federal Government. However, there is much work 
to be done, as we will be told by representatives from the Government 
Accounting Office, who are also here with us today.
    I again compliment the Senator from Ohio on his interest and 
willingness to hold hearings on this subject and for his desire to work 
with employees, their unions, and Federal agencies in this regard. 
Thank you Mr. Chairman; I look forward to this morning's hearing.

    Senator Voinovich. Thank you. As I mentioned in my remarks, 
we are going to spend a lot of time on this and, hopefully, get 
something done.
    Our next witness is Ms. Johnson. We are anxious to hear 
from you.

      TESTIMONY OF MARTHA N. JOHNSON,\1\ GENERAL SERVICES 
                         ADMINISTRATION

    Ms. Johnson. Thank you. We are very glad you are holding 
this hearing on the issues of quality management. Dave Barram 
submitted a statement in writing and I ask that it be submitted 
for the record.
---------------------------------------------------------------------------
    \1\ The prepared statement of David J. Barram submitted by Ms. 
Johnson appears in the Appendix on page 56.
---------------------------------------------------------------------------
    I cut my teeth professionally in manufacturing at Cummins 
Engine Company just as it began to embrace TQM, total quality 
management. I agree with Barram when he says that one of the 
great lessons of that time is that quality is actually free. 
Any costs you pay are more than offset by increased 
productivity and customer satisfaction. You cannot have quality 
without good management, and you cannot have good management 
without high quality. There is no point in trying.
    We are proud of the GSA management story. We are at a 
different place than just a few years ago. The President and 
Vice President charged us to work better and cost less, and we 
have done just that.
    There were many levers and gears shifting and turning to 
make this happen. We are much smaller. We are clearer about our 
mission. We are structured in significant ways so that the 
market can measure and discipline us. We use technology.
    Good management is not a one-shot, one-pill, one-remedy 
answer. Instead, it is a systems answer in which the leadership 
juggles change on a number of fronts.
    Early in our tenure at GSA, we worked on our vision for the 
future. We did not go offsite for a week-long conference to 
wordsmith a statement. Instead, we tested ideas. We tried ideas 
in speeches and conversation. When we heard these ideas back, 
we knew we had something. If this sounds a little informal or 
iterative, perhaps it is, but it connects us to an idea shared 
by Stanford Professors Collins and Porras in their book, 
``Built to Last.'' In it, they talk about something called 
BHAGs, big hairy audacious goals. Our visions are like that.
    For example, we challenge ourselves to thrill the customer, 
not satisfy, not meet the needs, thrill. This is a BHAG, 
according to the professors, and everyone at GSA seems to sense 
what that means. We did not need position papers to engage and 
convince all of GSA. It happened first by phrase, then more 
discussion, then a sense of direction. That is vision at its 
best.
    One of our top priorities and my specific job has been 
challenging our leadership team. They must be champions of our 
vision. We are delighted that GSA executives have changed jobs, 
the cheapest training possible, model flexibility themselves, 
broadened themselves through experience, tough projects, 
creative learning, and technology. Seeing the senior leadership 
changing jobs raises the bar for the entire organization.
    I have already mentioned technology twice. It cannot be 
mentioned too often. In 1996, we made it possible for every GSA 
employee to have access to the Internet. While not a big deal 
now, it was then. It means we have, today, a full 3 years of 
living and working in the future under our belt, and that makes 
a difference. We have an online university system, a chat line, 
a daily electronic newspaper, and a vast array of research 
capabilities. All these things bind a community together and 
build people's skills, and skills are what it is all about.
    In a knowledge society, every person has to be skilled. One 
way we approach this challenge is by turning an old idea on its 
head. The old idea is job security. Our new idea is 
employability. Our economy is robust and fluid. People need the 
security of knowing that they are desirable and competitive. 
Our job is to meet their curiosity and drive for skills with 
mechanisms to build their skill set. The Internet has helped 
hugely.
    Mr. Barram and I agreed that if we were forced to choose 
one goal for GSA, it would be that all GSA employees are 
regularly approached with job offers because they are such 
highly competitive workers, but they choose to stay and work at 
GSA. Good management must have a good people-centric attitude 
configured so that it builds the viability of the whole 
enterprise.
    The Federal Government operates within regulations and 
policies about ethical and efficient procurement, about smart 
use of large government assets, and about sensible purchases 
from the large-volume agreements we negotiate for telephone 
service, airline tickets, etc. These frame GSA's work and 
remain our steady business guideposts, but our attitude is new. 
We wake up each day determined to serve our customers. With 
commitment, technology, and skill, we can thrill the customer 
and thrive ourself.
    Mr. Chairman, the GSA of 1999 is built on a solid platform 
that will let us move smartly into the next century. We have 
achieved a lot, but we have a lot still to accomplish. Barram 
and I are more confident today than ever that we have been able 
to help with the management and leadership culture of this 
important organization and it is capable of continued high 
performance. Thank you.
    Senator Akaka [presiding]. I thank both of you for your 
testimony this morning. I am so glad to hear that you are extra 
sensitive to the people who work in your agencies. It is 
obvious that when people do not leave their job, even though 
they have other offers, that tells you something about what the 
job and the environment offers them.
    Mr. Rossotti, again, I want to compliment you for what you 
are doing. It is a great turnaround and it answers many of the 
complaints that we, in Congress, have received in years past.
    A front page headline in last Sunday's New York Times 
indicates, ``IRS is allowing more delinquents to avoid tax 
bills.'' Can you explain this situation and offer us some 
insights as to what you are doing about this?
    Mr. Rossotti. Yes. Well, I think it is important to 
recognize, if you look at the chart, we have three goals, not 
just one goal, and that basically means what Congress is saying 
to us, as we understand it, is we need to continue to collect 
the taxes, as has been the case, but we also need to observe 
taxpayer rights and treat taxpayers properly. So that is a more 
complex thing to do than just to do one or the other.
    With respect to the issue that is raised in the New York 
Times article, it really deals with a particular part of the 
tax administration process, which is collection of certain 
types of tax debts, particularly the older, more hard-core, we 
call them, kinds of tax debts. As I think was well known at the 
time that the Restructuring Reform Act was passed, the act did 
add additional taxpayer rights and additional procedures that 
need to be followed before the IRS can take enforcement action, 
such as seizing someone's home or seizing their bank account or 
their property. So there was a delay factor imposed, when the 
act passed because there is an elongated process in order to 
take those kinds of actions.
    The second thing that happened was that, of course, 
additional resources were required just to implement these 
procedures, because they are somewhat time consuming.
    And the third point, of course, and I have to be honest 
about this, is that the whole process of learning how to do 
this in this new environment, our front-line employees learning 
how to do this, and of the management providing the necessary 
support and training, has been a very challenging, very 
difficult one, and I have said that many times. We have not yet 
arrived at the point even now, after over a year, where I think 
we have fully been able to work out all the ways, the practical 
ways, to do this. So that has caused some confusion, some 
anxiety. There were some provisions in this bill that certainly 
caused anxiety among our front-line workforce.
    Therefore, the net result of this is there was a decline in 
the number of enforcement-type cases that we were able to do in 
collections. Now, that is something that we are working very 
hard to turn around and to stabilize.
    I do want to point out, because it is important to put this 
in perspective, that this represents a very tiny percentage of 
the total revenue that is actually collected in terms of our 
total tax collections, because our total tax collections, and 
even our tax collections from our own enforcement collection 
activities have leveled off. But this particular part of the 
problem is very important in the long run because, of course, 
as I said, our goal is to make the law apply equally and fairly 
to every taxpayer. So we cannot allow, even though it is a 
small percentage, we cannot allow a certain set of taxpayers 
who may be unwilling to pay to be allowed to burden the 
remaining taxpayers.
    Senator there is one last point that I do want to make, and 
I actually made this on TV the other night when I was asked 
about this, is that I really hope that no taxpayer reads any of 
this and makes a mistake in thinking that any of the things 
that they have read about or learned about or anything that has 
happened in the IRS means that they do not still have to pay 
the tax debts that are due, because even though it may take us 
a little longer to get to some of these debts, they are still 
debts, they are still on the books, and taxpayers are going to 
be required to pay them. So I do not want anyone to be confused 
about that point.
    Senator Akaka. I do realize, and all of us do, the tough 
job you have. I like the word you used, challenges. There is so 
much under that word that you have to meet to keep your 
employees up with whatever changes that Congress makes. It is 
tough enough already.
    Mr. Rossotti. Yes, sir.
    Senator Akaka. But I am glad you are using all the 
resources you can, including technology, to try to meet the 
needs of the taxpayers. I like your three goals, each taxpayer 
and all taxpayers, and also with the quality working 
environment. I think those are great goals.
    GAO praises their top-level leadership commitment to 
change, which you demonstrate as you lead IRS in implementing 
comprehensive reforms. However, GAO expresses concern that the 
IRS, ``missed its opportunity'' to demonstrate how important 
management reform initiatives are on the way to tackle 
longstanding management weaknesses. What is your reaction to 
that finding?
    Mr. Rossotti. I have to say, I am not sure I know which 
report that refers to. I am sorry.
    Senator Akaka. It was an expression of GAO that the IRS, 
and as I said, I was just quoting the three words, ``missed its 
opportunity'' to demonstrate how important management reform 
initiatives are that are underway to tackle longstanding 
management weaknesses.
    Mr. Rossotti. The only reason I am hesitating is there are 
a lot of GAO reports. I am not sure where that one--when it was 
or where it comes from. So I have a little bit of difficulty 
responding, but I will say that what we are attempting to do 
throughout the whole way that we are running the agency is to 
demonstrate in sort of clear, unmistakable terms that we are 
committed to change. We are attempting to take advantage of the 
window of opportunity, as I call it, that we have in front of 
us that was created by the directives of the act and the other 
things that went before it.
    But, I guess I would be the first to acknowledge that there 
are many pitfalls along the way, and in some areas, we have not 
been able to provide, for example, the training that our 
employees needed in some of these collection areas as fast as 
we would like to. So we try to address that by being very 
straightforward and honest about acknowledging where we have 
those problems and then acting to improve them in the future.
    I would be glad to get a copy of that afterwards and 
respond more specifically to that particular case if you would 
like, Senator.
    Senator Akaka. Thank you, Mr. Rossotti.
    I was just informed that I have 2 minutes before they close 
the vote on the floor, so I am going to call a recess, but 
before I do that, I just want to mention that in July, GSA 
announced that eight warehouses were closing, and since that 
time, the decision has been reversed. Part of the problem was 
that more than 1,000 blind and disabled vendors would have lost 
their jobs in the closing. I am grateful that GSA decided to 
reverse closing those warehouses, although I think we 
anticipate that there might be some of that in the future. I 
want to thank you for that. Do you have a comment?
    Ms. Johnson. We, just a few days ago, entered into a very 
exciting and innovative process with our union in which we 
agreed that we would, and you will have to bear with me here, 
our phrase is turn back the clock, so that we are going to 
reenter pre-decisional discussions with our union about the 
stock program. The administrator and the commissioner of the 
Federal Supply Service, along with our unions, will engage in a 
process of discussion and pre-decisional partnership and at the 
end of the month, the administrator and the commissioner will 
make a decision about the future of the stock program. But we 
are at this point in a turn-back-the-clock mode and our current 
stock program is an ongoing concern and we continue to be 
moving products through all our warehouses.
    Senator Akaka. Thank you very much, Ms. Johnson.
    At this time, I would like to call a recess until the 
Chairman returns. Thank you.
    [Recess.]
    Senator Voinovich [presiding]. I apologize to the witnesses 
for having to rush out, but you learn that that is part of the 
game here in the Senate.
    What I am interested in learning from both panelists is, 
how much were your people involved in formatting the mission 
statement, goals, guiding principles, and so on? I would be 
interested in hearing, if they were involved, the method you 
used in order to involve them.
    Mr. Rossotti. What we did with the mission statement, which 
was a key item and we got that done--it was called for, 
actually, in the act, interestingly, that we should reformulate 
our mission statement. That was in July 1998. During that 
period, we had already been working on it. We had a number of 
different inputs and solicitations from both external--we have 
a lot of external stakeholders, practitioner groups and other 
people, as well as internally, to come up with various 
formulations. Then we had a small group that actually 
formulated several alternatives, several possibilities, because 
you cannot wordsmith a mission statement totally in committee. 
So we actually formulated a number of different possibilities.
    Then we had--very quickly, we did this. We had one person 
in the national office that was in charge of soliciting input 
on these different alternatives. We did a lot of it through E-
mail and we put it on the Internet and Intranet, and internally 
alone, we got over 1,000 different comments from employees, 
mostly employees internally, and then a lot of different 
comments externally.
    Senator Voinovich. This was in response to a mission 
statement that had been drafted by a group?
    Mr. Rossotti. Yes. It was actually not just one. We had 
several different formulations. We had several different 
possibilities with different words that we had--we had taken 
inputs that had been recommended. There had been previous work 
done by--the Vice President had a task force before I even got 
there, the National Performance Review had done some work, and 
external groups had done some things, so we took all of that 
and we used that to formulate a short list of possibilities.
    Then what we did is we published these possibilities on the 
Internet for externally and on our Intranet internally and 
circulated them throughout the organization and asked for 
comments. We had one or two people that basically took all 
these comments and tried to put them in kind of a rational way 
so we could look at them, and we had over 1,000 comments from 
our employees internally, as I recall--this was over a year 
ago--and quite a few externally.
    We tended to group them into what they said so that we 
could get them into a rational sort of smaller, manageable 
proportions, and eventually, we came out with this formulation 
and I think it has been well accepted. It deals with the twin 
aspects of our mission, which are then translated into the 
goals.
    The IRS, as with many organizations, has to satisfy more 
than one stakeholder. We have to deal effectively with each 
taxpayer. If we have a transaction with a taxpayer, we have to 
provide good service. If that taxpayer owes money, we have to 
inform them of their rights and make sure they observe all 
their rights. But in the end, collectively, we have to protect 
all the taxpayers by making sure that the law is applied fairly 
and that we collect the debts that are due. Otherwise, people 
would be burdening the honest taxpayer by not paying their 
debts.
    So those are the twin kind of key goals that we have as far 
as taxpayers, and then internally, we have the need to provide 
the right kind of a working environment for our employees.
    Senator Voinovich. I think what a lot of people forget 
about is that we talk about taking care of our external 
customers, and it is just as important to take care of our 
internal customers, the people that deliver the services, in 
terms of their involvement, their training----
    Mr. Rossotti. Exactly.
    Senator Voinovich [continuing]. And how much incentive we 
are providing them.
    Mr. Rossotti. Exactly.
    Senator Voinovich. How about the goals and the rest of it?
    Mr. Rossotti. Well, the goals translate directly from the 
mission. I mean, the three goals are the two aspects of our 
mission, individually providing good service to every taxpayer 
we deal with and----
    Senator Voinovich. Was the union involved in any of this in 
terms of being at the table?
    Mr. Rossotti. The union, and I will let Colleen speak for 
herself, she has been our partner, and Bob Tobias before that, 
in every one of these committees. All of these things that we 
run, we have what we call an executive steering committee, 
which is a top-level group that oversees the change process. I 
am, in most cases, a member of that and head of it, although 
some executives are heads of some of the----
    Senator Voinovich. So the executive steering committee is 
the vehicle that you use to get input from a variety of people, 
including your unions?
    Mr. Rossotti. Yes, and Colleen, and before her, Bob Tobias, 
have been members of these executive steering committees at the 
top level for every one of these change initiatives we have 
done. But that is only at the top level. Then we have the 
teams, and that is why Mr. Jacobsen and Mr. Allen are here. 
They happen to be two members of the teams.
    At the present time, I would say we have over 500 or 600 
people working on various teams, and they include bargaining--
usually, about half of them are bargaining unit people, people 
that are members of the union that actually participate, 
usually for a full time period, maybe 3 to 6 months on one of 
these teams. I am sure, if you would like to, you can speak to 
them on the panel and ask them how it works.
    Senator Voinovich. I am really interested in the 
organizational structure.
    Mr. Rossotti. Right.
    Senator Voinovich. Is it a structure that has been fruitful 
from everyone's point of view? If it has been a good structure, 
then perhaps it is a structure that could be replicated, and 
that is what we are looking for, things that are working in 
your respective shops that could be absorbed or taken under 
consideration by other departments.
    Mr. Rossotti. I do think that this way of doing things is 
something that I adapted from my previous life, where I was 
involved with different clients on change, and what it boils 
down to is that change, if it is anything more than a small 
change in a small area, involves people at different levels 
vertically in the organization and also cross-functionally, 
across this way. So you have to somehow find a way to engage 
all of this at the same time.
    Now, what we have is basically three ideas. One is the 
executive steering committee, which is the top-level 
leadership, which we meet regularly on a very substantive 
basis. We have a small program management office, which is a 
full-time group of people to manage the project and make sure 
that it is kept on track, the trains run on time. Then we have 
a fluid set of teams, integrated teams, that represent people 
from different levels of the organization and different areas 
of technical expertise that work together for a limited period 
of time to come up with proposals and recommendations. That is 
basically the process we use, and it is all kind of laid out 
there. There are other aspects to it. I also believe----
    Senator Voinovich. The people who are on the teams are 
picked by you and by the union?
    Mr. Rossotti. That is right.
    Senator Voinovich. Once their job is done, do they leave 
the team? Have you undertaken any quality management training 
for all of your employees to the extent that you would create 
teams that would be working continuously on improvement?
    Mr. Rossotti. Yes. I was only referring on this part of the 
discussion to some of these major change processes. The IRS 
also has a whole quality process at the local level in each of 
the districts and local offices. In most of them, they have 
quality teams and a quality coordinator that does more local 
kinds of constant quality improvement kinds of activities.
    What we have not done yet, and I will be honest about this, 
what we have not done yet well is we have not yet linked these, 
I will call them more strategic changes, with, I will call them 
the more tactical kinds of changes that need to go on at the 
local level. That is kind of a next step that we have to do, 
moving forward.
    Senator Voinovich. Would you like to comment on training? 
We discussed the fact that that is very important to your 
workforce.
    Mr. Rossotti. Right.
    Senator Voinovich. Is the money in your budget? When you 
put your budget together, do you specify that portion of it 
that would be used for training?
    Mr. Rossotti. Yes, we do, and I think that, as I assessed 
it when I took into office, was a really major problem at the 
IRS in that I would call it a training deficit had accumulated. 
It is interesting, if you go back, and I was not involved with 
it, but I have read some things, at one time, the IRS was well 
known. People would come into the IRS because of the good 
training that they could get. Unfortunately, because of budget 
cuts and other reasons, that kind of fell off for a period of 
time. When we had some early discussions with employee groups 
right after I took office about what was the biggest barrier 
that was preventing you from being able to deliver good quality 
service, training was the No. 1 item.
    So we really went to work and tried to come up with some 
improved commitment of resources as well as some improved ways 
of delivering training. It was not only resources that was 
involved, it was also the quality of the training and the 
meaningfulness of the training.
    We have been successful in getting additional budget money 
allocated, and in this budget year, the Congress has actually 
fully funded our request, so we are very glad for that. And 
yes, we are going to put that aside. We actually have different 
categories of training. We have technical training on things 
like tax law. We have management training and quality training. 
We also have, though, some special things because of our 
modernization. The balanced measures, which is our whole way of 
implementing these set of goals, is a huge effort, because we 
are literally retraining our whole management cadre as well as 
our union partners and many front-line people in this whole 
balanced measure concept. That is underway.
    Senator Voinovich. But I would be interested in knowing, 
when you put your budget together, in terms of percentages and 
overall personnel allocation and you get X number of dollars 
for that and then you specifically calculated what it was that 
you needed for training, I would be really interested to see--
--
    Mr. Rossotti. In terms of actual dollars?
    Senator Voinovich [continuing]. What percentage of your 
budget is actually being used for training?
    Mr. Rossotti. Yes. I would have to get that number for you. 
I do not recall the number offhand. What we did, though, was 
what we allocated was what we thought we needed for training 
for these different categories, technical training, and the 
balanced measures training. We added it all up and said, this 
is what we need to put in, and we really have gotten in this 
current--we did not have it before, but in this current budget 
year, we have gotten pretty close to what we asked for.
    It is important to know that the way the Federal budget 
works, at least in our agency, for training, the dollars only 
go for what are the out-of-pocket costs for training, like the 
travel costs to bring people in and the facilities. The time of 
the people, which is a big part of the cost of training, is not 
really charged to training. It is charged to whatever their 
normal account is. It is just the way the Federal accounting 
works, at least in our agency.
    So, actually, the number that you see, whatever it is, and 
I will get it for you, is really not the full cost of what the 
total training commitment is, because the real cost is the time 
of the people being trained and that is not included.
    The information referred to follows:

 QUESTION AND ANSWER TO INFORMATION REFERRED TO ABOVE SUBMITTED BY MR. 
                                ROSSOTTI
    Question: What percentage of your budget actually is being used for 
training?

    Answer: The training budget line items for Fiscal Years 1998 
through 2000 are as follows:


----------------------------------------------------------------------------------------------------------------
                                                   Training                    Total Budget            Percent
----------------------------------------------------------------------------------------------------------------
1997 Actuals...........................                   $57,700,000                $7,095,000,000         0.81
1998 Actuals...........................                   $78,000,000                $7,558,000,000         1.03
1999 Actuals...........................                   $89,000,000                 8,155,000,000         1.09
2000 Planned...........................                  $106,000,000                $8,350,000,000         1.27
----------------------------------------------------------------------------------------------------------------


    Senator Voinovich. Right. But you can train in-house, you 
can bring people in, you can send people out, there are a 
variety of opportunities for people at work, is that right?
    Mr. Rossotti. Yes, that is right.
    Senator Voinovich. Last but not least, what if somebody 
does a bang-up job? Let us say someone comes to a supervisor 
and says, I have a good idea and we can save $1 million a year 
or $2 million or whatever. What do you do to reward that 
individual?
    Mr. Rossotti. Well, there--and again, I am not an expert on 
all these personnel regulations and so forth, but there are 
some limited bonus possibilities that people can get bonuses 
for based on their performance, and we have various kinds of--
they are called awards, and we have various kinds of agreements 
with NTEU for bargaining unit people on how those awards are 
distributed. Those are regularly administered in that way.
    There are also things called special act awards, where you 
can give someone a specific bonus for, it is literally called a 
special act. It might be appropriate in the circumstance you 
suggested. I can get for you--I do not know what the limits are 
of those dollars, but they are----
    Senator Voinovich. But is there a formalized incentive 
program in place that the people who work at the Internal 
Revenue Service understand is available to them?
    The information referred to follows:

 QUESTION AND ANSWER TO INFORMATION REFERRED TO ABOVE SUBMITTED BY MR. 
                                ROSSOTTI
    Question: Is there a formalized incentive program in place that the 
people who work at the IRS understand is available to them?

    Answer: Yes there is.
    The IRS awards program for its General Schedule employees is 
administered in accordance with government-wide regulations issued by 
the U.S. Office of Personnel Management (OPM). These regulations give 
Federal Agencies wide latitude to develop awards programs suitable to 
their needs. Cash awards require two levels of management approval and 
all employees are eligible for recognition.
    Suggested Awards are granted when IRS adopts employees' written 
suggestions to improve the efficiency, effectiveness, or economy of 
operations. Suggestions are evaluated by program experts on a cost/
benefit basis and recommended for adoption or non-adoption to the 
appropriate program manager. If a suggestion is adopted, the employee 
(or group) receives a share (typically 10 percent) of the first-year 
net tangible or intangible benefits, which IRS gains from the 
suggestion. In recent years, IRS has granted approximately 200 
suggestion awards totaling $80,000 annually. Individual suggestion 
awards average about $400.
    Special Act, Special Service, and Managers Awards are lump-sum cash 
awards granted to recognize specific accomplishments by individual 
employees or groups whose accomplishments are in the public interest 
and have exceeded normal job requirements. In Fiscal Year (FY) 1999, 
IRS granted approximately $8 million in special act or service awards. 
Individual award amounts are determined by management based on 
Servicewide award guidance and the value and scope of the contribution.
    Performance Awards are lump-sum cash awards that are based on 
individual employees' ratings of record-performance ratings assigned at 
the end of the appraisal period. Employees must receive a rating of 
record of Fully Successful or higher to be eligible.
    For bargaining unit employees, the amount of these awards is 
determined through local negotiations between the IRS and the National 
Treasury Employees Union. Generally, management and the union develop 
systems that distribute available performance awards funds to employees 
based on factors such as their overall ratings, ratings on job 
elements, grade, and time spent in specific position. There are 
approximately 100 local performance awards agreements in the Internal 
Revenue Service.
    Performance awards for some non-bargaining unit employees are 
administered in the same fashion as for bargaining unit employees in a 
particular locality. However, management is also free to develop 
different performance awards systems for non-bargaining unit employees 
in accordance with applicable regulations.
    In FY 1999, IRS granted approximately $47 million in performance 
awards to its employees.
    Quality Step Increases are additional, permanent within-grade 
salary increases of about 3 percent of basic pay which may be granted 
to reward exceptional sustained performance. To be eligible, an 
employee must have received an Outstanding rating of record and meet 
other government-wide and IRS requirements.
    In FY 1997, IRS granted Quality Step Increases to approximately 2.4 
percent of its eligible employees.
    Time-Off Awards may also be granted to employees. These are not 
additional awards but an alternate form of the cash awards described 
above. At management's discretion, a monetary award may be granted to 
an employee as cash only, as time-off only, or as a combination of cash 
and time-off. This program, which was negotiated with the National 
Treasury Employees Union, is designed to increase employee productivity 
and creativity and the enhance the quality of work life. In FY 1999, 
IRS granted time-off awards valued at approximately $2 million to its 
employees.
    Incentive Pay. Data Transcribers working in our tax processing 
Service Centers are eligible for additional pay based on the speed and 
accuracy of their work.
    Honorary Awards may be granted in conjunction with, or separate 
from, the awards described above. They are granted to employees or 
groups to recognize exceptional service or contribution. These awards 
often take the form of certificates, plaques or medals and may be 
granted during special employee recognition ceremonies. The 
Commissioner's Award is the highest honorary award granted by IRS.

    Mr. Rossotti. Yes, there is. It is called the award program 
and it is worked out with the union, and that is the formalized 
process that is largely keyed to their performance ratings on 
the job. I was just responding to your question. There are some 
additional things that you can do for somebody who does a 
special act, where you can give them those rewards.
    Senator Voinovich. If you have done that in any case, I 
would like you to describe----
    Mr. Rossotti. I will get that for you, yes.
    Senator Voinovich. Under what circumstances.
    Mr. Rossotti. Sure. I will get that for you.
    Senator Voinovich. Thank you. Ms. Johnson, in the General 
Services Administration, how much employee involvement do you 
have?
    Ms. Johnson. In terms of formulating some of the----
    Senator Voinovich. In formulating your mission statement, 
your goals, and objectives.
    Ms. Johnson. It is terrific to hear another example. We are 
a much smaller agency, so I think we are able to have a little 
bit more fluidity in our culture and our process, but we are 
still a sizeable organization. Putting everyone on the 
Internet----
    Senator Voinovich. How many people are in the GSA?
    Ms. Johnson. Fourteen thousand, approximately.
    Senator Voinovich. So the IRS has about 104,000, Mr. 
Rossotti?
    Mr. Rossotti. Our number is about 100,000.
    Senator Voinovich. Yes, and you are----
    Ms. Johnson. We see ourselves as smaller and, therefore, 
able to try out some innovations that----
    Senator Voinovich. For the people in the audience here, 
just to get an idea of what 14,000 means, I was mayor of the 
City of Cleveland and we started out with about 9,800 
employees, so that gives you a comparison. It is a big agency.
    Ms. Johnson. We started 3\1/2\ years ago at 20,000 and we 
have reduced substantially through major buy-outs, which was a 
wonderful tool for us, a fabulous tool for us, because it did 
not mean we had to do anything but say to people, if you choose 
to leave, we would be delighted to help you, and if you choose 
to stay, we would be delighted to have you. In the course of a 
couple years, well over 30 percent of our organization moved 
on.
    I have to say, we were a little concerned that we were 
stripping muscle out of the organization, but I do not think 
that has happened. I think that it is a disservice to the 
people who remained and who had been in the wings or underneath 
or down in the organization and they have stepped up. We had 
maybe one or two small pockets of specialties that we needed to 
supplement, but the buy-out was a tremendous----
    Senator Voinovich. You had 20,000 people----
    Ms. Johnson. This is very approximate, 20,000, right.
    Senator Voinovich [continuing]. Approximately, and you have 
gone to about 14,000.
    Ms. Johnson. Fourteen-thousand, yes.
    Senator Voinovich. And the major way of reducing was 
attrition----
    Ms. Johnson. Entirely through buy-outs.
    Senator Voinovich [continuing]. And one of the reasons for 
the buy-out was to save money. But in addition to that, perhaps 
you put yourself in a position where you could get some new 
people in with skills that maybe you did not have, or----
    Ms. Johnson. Well, I am sorry to say, the way the buy-out 
legislation was created, we lost the FTE. I believe that is in 
the legislation. It might be in the regulations. But we offered 
buy-outs and part of the circumstances of them were people 
could take them and leave, but we could not person-for-person 
replace them. So this was a leap of faith that at a smaller 
size, we could still find the skills we needed to run our 
business.
    Senator Voinovich. So it was a buy-out with no replacement?
    Ms. Johnson. No replacement, right. That is the way it was 
done.
    Three years ago, when we put in the Internet, made that 
available to everyone, I have to say, that opened a lot of 
channels for us to involve employees in discussing things like 
our visions, our direction, our performance, and our customers. 
We have developed in a much more iterative way, as I was 
saying, the four visions that we function under. One of them is 
to thrill our customers. That was a statement that Dave Barram 
used early on in his administration and people seemed to pick 
up on it. After they laughed, they said, I think I know what 
you are talking about.
    When we put up our chat line on the Internet, the first 
question we asked every employee was, comment on the best story 
you have of when you, yourself, were a thrilled customer, and 
we had tremendous stories coming up over the chat line about--
--
    Senator Voinovich. Let me ask you, Mr. Rossotti talked 
about the fact that he involved people through technology.
    Ms. Johnson. Right.
    Senator Voinovich. And what you are saying to me is the 
people really get into this, use the Internet and the chat 
rooms?
    Ms. Johnson. Oh, yes. They use it to tell stories----
    Senator Voinovich. With 10 or 15 percent of your people?
    Ms. Johnson. Actually, because we do not trace who makes 
comments on the chat line, we cannot actually count, and we 
have tried very hard to overcome their anxieties that they are 
being watched when they type.
    Senator Voinovich. OK. So it is----
    Ms. Johnson. We have, though, when we put up a question for 
a week, we will get 800 comments, and I am sure some of them 
are repetition, and we try to get on and talk, too. We do not 
keep that up continuously, but when it is up, we get a lot of 
attention. So that is one way in which we have a more informal 
but technologically-based conversation about the things going 
on at GSA, and I think that is very important.
    Senator Voinovich. Do you have an executive committee like 
IRS has with the unions?
    Ms. Johnson. We have a senior management team that includes 
our regional administrators and our central commissioners. We 
are both a geographic and a service organization, kind of a 
matrix, and that is a senior team. We have had some measurement 
meetings this last year with that group plus some that 
certainly the unions have been involved in. And yes, that 
leadership team, because it is spread around the country, is 
not one that meets as a total group more than maybe quarterly, 
and that has not happened as much recently, but there is a 
story behind that.
    Senator Voinovich. Do your regional teams have executive 
committees where they have union representation?
    Ms. Johnson. They do not call them executive committees. I 
know that there are a couple of senior executives in each 
region and when and as they are working on matters, I 
understand they meet regularly with their union partners. Of 
course, it varies from region to region and some regions are 
much bigger, so it is a different kind of engagement. Sometimes 
it is very informal, a lot of back and forth, my impression.
    Senator Voinovich. But you would not characterize it as 
being a formal process?
    Ms. Johnson. In some regions, I characterize it as being 
quite formal. In other regions, my understanding is when there 
are only a couple hundred people, there is a fair amount of 
back and forth in the course of business and invitations to 
meetings, which I am sure formalizes some of it.
    Senator Voinovich. Training, how do you approach that?
    Ms. Johnson. Our training--can I talk about total quality 
management?
    Senator Voinovich. Yes.
    Ms. Johnson. When we came into the organization, there was 
a tremendous push on for total quality management in GSA and it 
had actually lived out its cycle. It had devolved to having 
action committees around, but I think that they were really a 
little passive. So we----
    Senator Voinovich. Can I interrupt you?
    Ms. Johnson. Of course.
    Senator Voinovich. I want to define total quality 
management. I talk to people and they say they have quality 
management, and it is not what I understand quality management 
to be. And that is one of the problems around here. So I want 
you to understand how I define it.
    Total quality management focuses on the internal and 
external customers, establishes an environment which 
facilitates team building, employee contribution, and 
responsibility, risk taking, and innovation, analyzes work 
processes and systems, and institutionalizes a goal of 
continuous improvement. If it is going to be successful, the 
elements that I think must be present are management and union 
partnerships, effective employee training, modern personnel 
policies, and an established system to measure program 
outcomes, which is a characteristic, of course, of the Results 
Act.
    I keep hearing people say, we have the Results Act and we 
are doing our performance plans, and I ask, do you have any 
involvement of your employees in putting that together? This is 
an important question. Then the issue after that is, how are 
you going to achieve the results that your performance plan 
calls for, and that is where quality management aspect comes 
in.
    So I am interested: How are you implementing quality 
management?
    Ms. Johnson. I appreciate that. When I was in 
manufacturing, TQM had a very term-of-art form to it, and in 
GSA, we, I think, can appreciate your definition and embrace 
it.
    Senator Voinovich. I want to point out one other thing. We 
did not call our program in Ohio quality management. My unions 
did not like it. When we got this process started, they were 
unhappy because they were not involved, and thank God, I had a 
good relationship with the union president and he said, 
``George, this is not working out.'' I said, ``Well, let us 
stop it.''
    We went up to Xerox and spent a day up there with their 
folks to try to get back on track. On the way up, it was total 
quality management. On the way back, we changed it to quality 
services through partnership and eliminated the management, but 
fundamentally, it is quality management. But they felt more 
comfortable with those words rather than TQM. I am sorry. Go 
ahead.
    Ms. Johnson. I always enjoy hearing all these stories. They 
are very helpful to share.
    Our four visions do not include the word ``quality'', 
either. They are change, excellence, honest conversation, and 
thrilling the customer. So they are customer focused and they 
are about changing and they are about having honest 
conversations internally so that we can understand performance 
measurement, talk to each other about that, share real numbers, 
and so on.
    There are many vectors here. Training is--I also do not 
have the numbers in front of me of the actual resources we 
dedicate to training, but we also have pushed hard to widen the 
idea of what training is.
    Senator Voinovich. Here is what I am interested in. Every 
year, you have to put a budget together.
    Ms. Johnson. Right, and how much of that is devoted to 
training.
    Senator Voinovich. And you submit that to the Office of 
Management and Budget. I would be interested in learning the 
discipline you use in determining the money that you are going 
to spend on training. Or do you just have a personnel item and 
then try to squeeze the training out of that?
    Ms. Johnson. There is a direct line in the personnel 
resources account. However, we also look to our CIO or IT 
organization because that is where we bought and brought in our 
online university, for example. That is not in the personnel 
budget. It would be a couple of different places that we could 
pull those numbers from.
    That has been a significant project, because we felt that 
we needed to expand what people looked at training as a 
delivered course that I must attend to, or a sense that my job 
and my customers and my results require me to get better at 
something, so I need to get out and push on that.
    So we are trying to pull people towards training rather 
than push training at them, and we do that, I think, obviously, 
by focusing on the customer, but also by focusing on 
measurements, and we have a good story about measurements to 
tell. I will summarize it quickly by saying it started with 
getting the data better and then getting the data out to 
everyone on the Internet and then having a very rigorous 
process of reviews that we go through regularly in which we do 
not yell, we talk about measurements, and people begin to see 
what is happening with respect to their particular arena.
    In our Public Building Service, we have been particularly 
aggressive in tying this to a compensation process, where 
certain monies have been set aside so that the regions who 
perform best on the measurements then get some money in 
response to that.
    Senator Voinovich. I am familiar with that fact, and it 
gets into the incentives. You have bonuses. You have set, what, 
eight standards that you measure your regional people on, and 
then if----
    Ms. Johnson. And that is in the Public Building Service, 
yes.
    Senator Voinovich. And regions compete with each other in 
terms of those eight goals?
    Ms. Johnson. Right. Yes.
    Senator Voinovich. And then if somebody does better, there 
are bonuses that are available to the people that are the most 
successful.
    Ms. Johnson. And it is a new program and so far, it has 
gotten a lot of people's attention, especially when the first 
checks went out. Suddenly, that got everybody livened up.
    We also have changed our performance award process away 
from a year-end calculation for everyone and have moved towards 
just a mechanism called fast track, in which we allow managers, 
based on their budgets, to make decisions about how they want 
money to be--how much money they want reserved for awards, and 
then people give fast tracks, which means if someone does 
something or performs something, you can apply for that award 
overnight and hand them a check the next day.
    The first year of doing this, there was a lot of learning 
about this process because it was pushing the responsibility 
for saying thank you and rewarding out. The second year, what 
was interesting about the data is that a lot more of the money 
began to flow across organizations. People were saying thank 
you to customers and to clients internally and just 
acknowledging help from central staffs and so on. So I think 
that has helped us force people to honestly recognize when a 
good job is done and to say thank you. It has been a very nice 
mechanism for us.
    Senator Voinovich. I would be interested in how you did 
that--does the regular law allow you to do that, the bonuses, 
within----
    Ms. Johnson. Very much so.
    Senator Voinovich. You have the discretion?
    Ms. Johnson. Yes.
    Senator Voinovich. Mr. Rossotti, do you have the ability to 
give people bonuses?
    Mr. Rossotti. Yes, we do.
    Senator Voinovich. You do?
    Mr. Rossotti. There are various programs that will give 
people bonuses. They generally call them awards, but that is 
what they amount to.
    Senator Voinovich. I think the idea of rewarding people is 
a good one. In Ohio, we usually did it two or three times a 
year. We would recognize people and they would get financial 
incentives. We would give them a catalog where they could get a 
TV set, or they would decide whether they wanted the money or 
they wanted----
    Ms. Johnson. Off the GSA schedules. [Laughter.]
    I will say, though, that we have not relied only on 
monetary awards and recognition. We have tried a number of 
different things, and the nicest one is our Deputy 
Administrator, Thurm Davis, has something called the Giraffe 
Award, and he gives these beautiful little wooden giraffes out 
to people for sticking their necks out.
    Senator Voinovich. That is great.
    Ms. Johnson. It is a risk recognition. So it is not that 
you have changed something dramatically, but you have tried 
something.
    Senator Voinovich. I want to thank you very much for coming 
here this morning. We enjoyed your testimony and I look forward 
to working with you.
    Ms. Johnson. Thank you.
    Senator Voinovich. I would like to welcome Colleen Kelley, 
the new President of the National Treasury Employees Union, and 
Bobby Harnage, who is the National President of the American 
Federation of Government Employees. Thank you for being here 
and thank you for your patience. I know you are both busy 
people. Bobby, I saw you looking at your watch and you probably 
have something to do, but thanks for being here.
    Mr. Harnage. We are doing good.
    Senator Voinovich. Ms. Kelley.

TESTIMONY OF COLLEEN M. KELLEY,\1\ NATIONAL PRESIDENT, NATIONAL 
                    TREASURY EMPLOYEES UNION

    Ms. Kelley. Thank you, Mr. Chairman. As the President of 
the National Treasury Employees Union, representing over 
155,000 Federal employees across the Federal Government, I am 
very pleased to be here today.
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    \1\ The prepared statement of Ms. Kelley with an attachment appears 
in the Appendix on page 65.
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    I believe we are in agreement, Mr. Chairman, that the most 
important resource the Federal Government has is its employees. 
It has been shown time and time again that when Federal 
agencies involve employees, front-line employees, in the 
decision making process, that everyone wins, the agency, the 
employees, and most of all, the agencies' customers, the 
taxpayers. Pre-decisional involvement for employees is the key. 
It should come as no surprise that when employees are involved 
in work process decisions before they are made, productivity 
increases and cost savings result.
    Perhaps nowhere is this more important today than at the 
Internal Revenue Service. The IRS interacts with more citizens 
than any other government agency or private sector business. 
Twice as many people pay taxes as vote. NTEU takes great pride 
in the fact that we have had a cooperative relationship with 
the IRS dating back more than a decade. Over those years, we 
have built on ideas that have worked and we have tossed out 
those that have not worked. We have learned from each other and 
we continue to build on that relationship as new situations and 
challenges arise.
    Our partnership efforts are constantly being tested. They 
are being reworked and they are being revised in the face of 
funding restrictions and changes in the tax laws. There is 
often a temptation to blame IRS employees for the complexity of 
the tax laws. This fact makes it even more important that the 
IRS and NTEU work together to make sure that employees have the 
tools that they need to perform their jobs. IRS employees are 
competent, hard working, and motivated individuals who want to 
deliver a high-quality product to the American taxpayer.
    Commissioner Rossotti knows this, and his efforts to 
empower employees have reaped rewards for the agency, as well. 
Following enactment of the IRS Restructuring and Reform Act, 
Commissioner Rossotti set in motion a process to restore the 
public's confidence in the IRS. The Commissioner recognized 
that any meaningful reform had to include the active 
participation of the front-line employees, and his employees, 
he has repeatedly acknowledged, are the cornerstone of what 
will make the IRS successful in the future.
    NTEU has long argued for meaningful input for employees, 
not only at the IRS but in every Federal agency. At the IRS, 
communication between management and the employees who make the 
IRS work has been crucial to efforts to restore the public's 
confidence in the IRS.
    One particular focus of our partnership with the IRS has 
been improving customer service. This has included providing 
not just longer office hours, but hours that meet the 
taxpayers' needs, such as taking our services to more customer-
friendly environments like libraries and shopping malls, 
employing the latest technology to do this, and also providing 
the critical training that employees need to do the job that 
they want to do.
    Another excellent example of our partnership with the IRS 
was the establishment of nationwide problem solving days. These 
were set up to provide taxpayers with one-on-one assistance 
with tax questions and problems. Surveys following these 
problem solving days have shown that both taxpayers and 
employees believed that these efforts were successful beyond 
their expectations. Given a clear goal and adequate time and 
resources, IRS employees can deliver a level of service that in 
many cases actually exceeds that expected by taxpayers.
    The IRS modernization plan also called for the 
establishment of 11 different design teams to examine specific 
aspects of the work of the IRS. Hundreds of front-line IRS 
employees who are represented by NTEU are working on these 
teams today, including Glen Jacobsen and David Allen, who you 
met earlier, who Commissioner Rossotti introduced.
    However, more than 2,300 NTEU members responded to the 
initial possibility of involvement in the modernization of the 
IRS, even though their involvement on these teams meant many 
months away from home and from their families. I think 
Commissioner Rossotti would agree with me that employee input 
has been instrumental in the design improvements that have been 
made to date.
    I am also very pleased to report that just last month, the 
National Treasury Employees Union received three National 
Partnership Council awards for our work with the IRS, with the 
U.S. Customs Service, and with the Food and Nutrition Service. 
Awards were given to teams that have successfully embraced 
labor-management cooperation that has resulted in better and 
more economical service to the taxpaying public. We were 
pleased to share in these awards, which are excellent examples 
of what can be accomplished by providing a voice to front-line 
employees.
    NTEU and the IRS, acting as partners, have taken major 
strides toward modernizing the service. The challenge for our 
union and for our members is to continue to make sure that our 
voices are heard and that the knowledge and the expertise that 
we have gained on the front lines over the years is used to the 
agency's advantage.
    Like IRS employees with their dedication and their 
abilities, all Federal employees want to deliver first-rate 
programs and services. NTEU has long argued for meaningful 
input for employees in every Federal agency. Partnership is an 
avenue that permits us to work together towards our shared 
goal, and for that reason, we have embraced it. Thank you, Mr. 
Chairman.
    Senator Voinovich. Thank you very much. Mr. Harnage.

  TESTIMONY OF BOBBY L. HARNAGE, SR.,\1\ NATIONAL PRESIDENT, 
          AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES

    Mr. Harnage. Mr. Chairman, on behalf of the more than 
600,000 Federal and D.C. Government employees represented by 
AFGE, I thank you for inviting me to testify today. Our union 
is deeply committed to working with Federal managers, the 
administration, and Congress to ensure that the Federal 
Government carries out its responsibilities with quality as the 
top priority.
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    \1\ The prepared statement of Mr. Harnage appears in the Appendix 
on page 77.
---------------------------------------------------------------------------
    In 1993, AFGE and other Federal sector unions published a 
report called ``Total Quality Partnership,'' which we presented 
to the Clinton Administration. This led to discussions that 
resulted in Executive Order 12871, directing agencies to 
develop labor-management partnerships to reinvent government. 
In our report we wrote, ``No one feels stronger about the 
meaningful transformation of the Federal workforce than Federal 
employees. Our members have much at stake in the outcome of the 
reinventing government process. We simply cannot fathom a 
continuation of the outmoded ideas, processes, and attitudes 
which currently prevail in Federal service. The quality of our 
lives and those of the public that we choose to serve are in 
the balance.''
    We did not call our proposal total quality management, or 
TQM. In those days, TQM was much talked about and tried, but 
agencies tended to involve unions as an afterthought, if at 
all, and rarely engaged the energy and expertise of front-line 
workers.
    Mr. Chairman, I know that TQM is an important issue to you, 
but the phrase may not carry some meanings that you intend 
because of the way it was used in the Federal Government some 
years ago. For many Federal employees, it just does not convey 
the collaboration and the participation that we expect. That is 
why we called our proposal total quality partnership and 
envisioned something very much like the total services through 
partnership you developed with the State Employees Union when 
you were the Governor of Ohio.
    My testimony covers three examples of AFGE's efforts to 
make our commitment to quality into reality. Two are 
longstanding successful labor-management partnerships, which 
have improved operations for the benefit of taxpayers, Federal 
workers, and managers. The third partnership, between AFGE and 
the General Services Administration, is currently at a 
crossroads. In fact, there has been dramatic change in the 
AFGE-GSA situation in just the 3 weeks since I submitted my 
written testimony to this Subcommittee.
    In July, GSA announced its intention to close its four 
distribution centers as well as its four forward supply 
centers. This followed an abrupt end to what our union 
considered promising partnership discussions about how to 
respond to GSA's declining sales. In September, GSA was ordered 
to cancel the facility shutdowns and its associated reductions 
in force and begin bargaining with AFGE on the matter. Our 
prospects looked grim when GSA said it would continue with its 
plan to close the facilities, despite the arbitrator's order.
    But just this week, we reached an agreement that will keep 
the operation going while we attempt to revitalize the 
partnership and put it to work to find a better solution for 
the Federal Supply Service. It has been a bit of a roller 
coaster ride, but I remain optimistic that we will succeed in 
our efforts to build a successful partnership that serves the 
needs of the public, GSA, and its employees.
    I would like to turn now to two AFGE labor-management 
partnerships that have stood the test of time. Our local at the 
Crane Naval Surface Warfare Center in Crane, Indiana, has been 
in a partnership management since before the President's 
Executive Order. As the partners began to realize that their 
very future of their facility was under threat, they joined 
together to turn things around. They saw that under the Federal 
contracting out processes, they had little control and watched 
helplessly while vendors picked off lucrative pieces of their 
business, leaving the rest bleeding and weakening. They 
described this as being killed by 1,000 cuts.
    Crane operates with a $500 to $600 million annual business 
base and is the second largest naval installation in the 
continental United States. The union and management are putting 
into place an ambitious and courageous business and processes 
reengineering. They have identified millions of dollars in 
projected savings and are making decisions based on data about 
what kind of work they should be doing and how they should be 
doing it. In addition to saving millions of dollars, they 
possibly are also saving lives.
    The U.S. Mint is another agency whose labor-management 
partnership is a source of pride to us. AFGE and the U.S. Mint 
signed the first partnership agreement in the Department of 
Treasury in 1994. Prior to that, we had a long history of 
adversarial relationships and spent far more time trying to win 
cases against each other rather than trying to improve the way 
we did our jobs. The key to success at the Mint, as it is at 
Crane, is the willingness of the agencies to engage the union 
as a full partner in the most important, fundamental issues of 
the workplace.
    The Mint asked AFGE to join in developing the agency's 
strategic plan. Since the first joint strategic planning 
meeting in 1994, AFGE and the Mint have worked together to 
reach the goals they set and redefine them each year. They 
documented $1.4 million in cost savings, cost avoidance, and 
improved resource allocations in 1997. In 1998, the Mint-AFGE 
partnership was on track to reduce annual expenses by an 
additional $4.7 million. In addition, the profits from 
producing and selling circulating coins have increased from 
$428 million to $594 million. That is a $166 million 
improvement.
    The amount of money the Mint has sent back to the American 
people through the general fund has increased from $465 million 
to $562 million, and that is a $97 million increase. The Mint 
estimates that 25 percent of this increase was attributable to 
cost reduction measures that the partnership had put in place. 
Improving customer service was also a prime focus of the 
partnership, with dramatic results.
    Mr. Chairman, I admire the partnership that you developed 
with your employees' union when you were Governor of Ohio and I 
believe that our experience at the Mint and at Crane comes 
close to approximating Ohio's quality service through 
partnership. Our experiences have clearly shown that 
partnership works when the parties truly are committed to them 
and they are allowed to work on important matters.
    Please use our models of these agencies to wisely involve 
the unions as dual partners, such as Crane and such as the U.S. 
Mint. We sincerely hope that we are embarking on a joint effort 
that will add GSA to the list of model labor-management 
partnerships. With these type of successes, it should not be 
optional today. It should be required.
    That concludes my testimony, Mr. Chairman.
    Senator Voinovich. Thank you very much.
    Based upon the testimony from the GSA, it did not appear 
that the process of involving employees was formalized. Could 
you contrast the kind of organizational structure that you have 
at Crane versus what you have with GSA and why is one more 
successful than the other?
    Mr. Harnage. Well, it is sort of like real estate and being 
in the restaurant business. It is all in location, location, 
location. In this, it is all in attitude, attitude, and 
attitude.
    I think the IRS showed a prime example of the difference. 
The fourth item listed on that chart was the engagement of the 
employees and managers at all levels of the operation. I 
noticed that the GSA representative evaded your questions when 
you tried to find out the participation of the union at 
different levels of their program, and the answer was--they did 
not say yes, they are at all levels. The answer was, we do 
contact them. We do get in touch with them. So they are not 
sitting at the table, and that is a significant difference.
    At Crane, Indiana, we are at all levels. At the U.S. Mint, 
we are at all levels. Where we had employees there, they 
retired at the same grade and in the same job as when they went 
to work working for the U.S. Mint. They had absolutely no 
career development, no career advancement. Today, they have a 
career ladder, they have a career advancement, and we are still 
saving money and doing a much better job and are much 
productive because the employees were allowed to participate in 
deciding how the job ought to be done. I think you recognized 
early on when you were governor that the people who really know 
how to do the job are the ones that are doing it.
    Senator Voinovich. I would be interested in having your 
perspective on the organization at the Mint and Crane, and then 
compare it with the General Services Administration.
    Mr. Harnage. I will give you two very quick examples. When 
Crane started to initiate their proposal----
    Senator Voinovich. At Crane, you are working with the 
Defense Department and the Navy, is that it?
    Mr. Harnage. Right.
    Senator Voinovich. So it is military people that are your 
interface, then.
    Mr. Harnage. Right. Exactly. At Crane, Indiana, when they 
started to implement their program, they came to AFGE at the 
headquarters and we sat down and talked about the program and 
we bought into it. We said, it is risky, it is innovative, let 
us try, and it worked.
    At GSA, when they announced that they were going to close 
these facilities and have this reduction of force of somewhere 
between 1,500 and 2,000 Federal employees, I was advised at an 
interrupted lunch, one hour before the announcement to the 
public, of what they were going to do. That is the difference.
    Senator Voinovich. So the point is, specifically, that it 
would have been great if you had a formal process where they 
had sat down and said, we have got problems out here. Here is 
what they are. Can we sit down and figure out how we can work 
together to try to improve them, so there would be 
participation in that decision making rather than having you 
react to it after it was a done deal.
    Mr. Harnage. That is true, and I have to give them some 
credit. There was some participation at different subcommittee 
levels leading up to that. But the problem was, the trust was 
not there, and willingness to take the risk was not there. Even 
though they have a lot of testimony about risk, management 
risk, they were not willing to take any at the top level, 
because at one point, they finally said, this is not going 
where we want it to go. This is the end of it. Then they made 
the decision to close the facilities, which is not, 
incidentally, saving the money that they indicated it would 
save. In fact, it is going to wind up costing the taxpayers 
money, not actually saving them.
    Senator Voinovich. Ms. Kelley, it appears that you have a 
pretty good formalized process with the Internal Revenue 
Service.
    Ms. Kelley. We do, Mr. Chairman. At all levels of the 
organization, there is a formal structure in place that 
includes NTEU. I would say the IRS and NTEU work very hard at 
helping each other to make that system work because it is very 
easy, and with everything happening every day, for something to 
get missed, not intentionally, but just with the speed at which 
things happen. So we work very well, I think, and very hard to 
help each other to keep us in the process.
    Senator Voinovich. I would like the staff to look at what 
is going on at IRS and then look at Crane and the Mint and see 
how that is working out and how that was put together. It could 
serve as a model that we could apply to other agencies.
    The other thing I would be interested in is your objective 
appraisal of that kind of partnership in some of the other 
Federal agencies where you represent workers and at what stage 
you think they are, in terms of this formalized employee 
involvement procedure.
    One of the things that I talked to Mr. Rossotti about 
yesterday is that when Congress passes changes in the Internal 
Revenue Code, they probably think about how long it will take 
for the ``professionals'' to deal with the system, but I 
suspect that none of them think about how much help the people 
who have to run it internally need to have. Let us say this 
session there are going to be some extenders or some new 
changes in the code. How much time do you get to implement 
those? Are they usually effective the year later? How fast do 
you have to respond?
    Ms. Kelley. It depends on what the law requires. It is not 
unusual that things that are passed in October or November are 
put in place for taxpayers the next January 1, literally 6 or 8 
weeks after being passed, and that creates all of the obvious 
problems for the front-line employees who are specifically 
answering the toll-free telephone lines where taxpayers call 
and expect to have the answers to their questions.
    It is complicated by the fact that it is not--once the law 
is passed, that is not the end of defining what the real change 
is for the taxpayer. Behind that has to come a lot of technical 
work on regulations to implement the law, and oftentimes those 
are not even in place until after the effective date. So it is 
very difficult. It puts employees in a position where they do 
not have the tools that they need and cannot provide the 
information taxpayers want. So it is a very difficult 
situation.
    Senator Voinovich. That is one of the things that ought to 
be considered when these changes are made. If they are minor 
changes, it is one thing. But for major changes, consideration 
should be given to delaying them for a year so that your people 
can get ready for it, get the training and the things that are 
necessary so that you can actually get the job done for people.
    Ms. Kelley. I think that is a very fair request, and I will 
tell you that we do at every opportunity. We would appreciate 
your assistance in helping to make that happen, because often 
what happens is the tax changes are caught up in the heat of a 
lot of other things in a specific bill and, candidly, the last 
thing anybody who is voting is thinking about is, what happens 
next. We work hard in that education process and look forward 
to working with you to help us with that.
    Senator Voinovich. How about training? It appears that you 
have training money that is part of the budget, and Mr. 
Rossotti said they have made some real progress in this budget 
to get more money. How do you feel about that, and then I would 
be interested, Mr. Harnage, in your comment in terms of the 
money that is being provided for training for your folks.
    Ms. Kelley. The IRS has definitely made inroads in the past 
few years concerning training. Training is one of those areas 
that I do not know that there can ever be enough of. While the 
money is there from a funding standpoint for external develop 
of courses or travel or sending people to training, the problem 
becomes the FTEs, the staff years. Using customer service as 
the perfect example, these are the employees who are on the 800 
toll-free lines year-round and in order for them to be at 
training, they have to be off the phones. There are times when 
that cannot happen, and depending on the volume of calls and 
the needs of taxpayers, it is not possible for the IRS to 
release them to do the training that they require.
    Now, we have worked very closely the last 2 years with 
developing a training plan that would prioritize the training 
that was needed by each employee to give them the skills they 
need to do their job, and that program is well on its way. But 
in my opinion, it is tied more directly to the total agency 
budget for FTEs, for funding of staff years, than it is to what 
you see in a dollar line item for training. It is much more 
about the staff years and the ability to----
    Senator Voinovich. So, basically, you get money and then 
you have to carve out a portion of it for training. Would you 
be better off if, when putting the budget together, there was 
some real thought being given to the percentage of the budget 
that would be used for training, so it is understood that is 
what it is to be used for?
    Ms. Kelley. That would be one way to do it, but the problem 
that creates is then the employees are not available to do the 
work that the taxpayers need and expect them to do. So I think 
that the real answer is, increased funding for the agency so 
that it can staff with the employees it needs to not only do 
the job but make sure that they have all the skills they need 
and all the training they need. So it is really about increased 
appropriations.
    One of the things that we are very worried about in the 
upcoming budget cycle is the discussion about across-the-board 
cuts. If that happens in any of the agencies, history tells us 
the first place we will see the impact will be in training. 
There will not be time to do the training and there surely will 
not be money, and then all the levels of customer satisfaction, 
employee satisfaction, it will all just roll downhill and we 
run the risk of being further behind next year than we were 2 
years ago. So I am hoping that we will be able to work through 
this and that will not happen.
    Senator Voinovich. I have been through that, and so have 
our employees. It is not easy. I would be interested in your 
recommendations on how you would handle the training budget and 
how it becomes formalized. Ideally, you have the money for 
training and then you have the money for your full-time 
employees--do you get what I am saying?
    Ms. Kelley. I do.
    Senator Voinovich. You are squeezing your training money, 
but at least it is in a separate pot. It is not part of the 
FTEs. So I would really be interested in your thoughts in that 
regard, both of you.
    Do you want to comment on training?
    Mr. Harnage. Well, I will just say that one of the 
significant differences in the Crane situation as well as the 
U.S. Mint than most other situations is that their training was 
designed to prevent a crisis rather than react to a crisis. It 
was a strategic plan where they knew where they wanted to be 
and they planned to get there through the training of the 
employees.
    So at Crane, Indiana, where we did reduce the workforce 
probably 20 percent or a little bit better, the reduction in 
force was the last resort listed on their items. That would be 
the last possible resort. And as a result, through attrition 
and through training, they have been able to keep that promise. 
There have not been any reductions in force at Crane. Even 
though they are operating much more efficiently, much more 
effectively, and saving millions of dollars with less people, 
there has not been a reduction, and they refer to it as the 
University of Crane. They provide training, so that when they 
know they are going to lose somebody, they have somebody being 
trained that is going to remain and be able to pick up that job 
and carry on.
    The same thing with the Mint. As I said, they now have a 
career ladder where people can get promoted and move up, and 
that has increased their productivity and has allowed them to 
work with less employees than what they had before.
    Senator Voinovich. Sure. People are inspired. They know 
they have a chance to get going. But is there a specific line 
item at both of those places for training or not?
    Mr. Harnage. There is at Crane, and I am not too sure there 
is at GSA. There is some training in GSA, but unlike Crane and 
all, there is not a strategic plan to prevent a crisis. It is 
more or less to get the job done today and react to a crisis.
    Senator Voinovich. The last thing I would ask both of you 
is are you satisfied with the formalized incentive package that 
is available? Is it adequate? I would like your comments on it.
    Mr. Harnage. The incentive package----
    Senator Voinovich. Incentives for people coming up with new 
ideas, saving money, and----
    Mr. Harnage. I am not too sure that it is satisfactory in 
that in too many circumstances, the employees do not 
participate in how that incentive will be distributed, how much 
it will be and how it will be distributed. So it is not looked 
at as a real reward, but something that somebody got, that 
maybe all of them were entitled to but one or two got it. So I 
do not know that in my environment that the incentives are all 
too great.
    Senator Voinovich. Is it an across-the-board incentive 
package for all Federal employees, or does it differ from one 
department to another?
    Mr. Harnage. It differs from department to department.
    Senator Voinovich. I would be interested in your comments 
on that.
    Ms. Kelley. For our part, the negotiated award system is 
for annual performance rather than for incentives or for 
savings, which is what you had asked earlier, Mr. Chairman. It 
occurred to me in your prior question that from years ago when 
I worked at the IRS through today, it is very seldom that you 
hear about an employee making a suggestion that saved X number 
of dollars and that resulted in an incentive payment of Y to an 
employee. I have made myself a note to actually go back and see 
if I can get a better handle on how often that happens, because 
my sense is, other than the negotiated awards system for the 
bargaining unit employees that NTEU negotiates, I do not know 
that there is much in the way of a suggestion that saves X and 
results in a reward of Y, and that is something I need to get 
more information on and I will be glad to share with you when I 
get it.
    Senator Voinovich. I would like to know what it is. To me, 
it is not an incentive system just because the employees 
understand that it is there.
    Ms. Kelley. That is right.
    Senator Voinovich. Thank you so much for being here, and 
again, I look forward to working with you. Yes, Mr. Harnage?
    Mr. Harnage. If I could just make one final comment on Mr. 
Akaka's question when you were out of the room, or his 
statement that he was glad to see that GSA had decided not to 
go through with their closures, which was going to cost a lot 
of jobs in the blind community, I am not too sure that they 
have made that decision. As a result of the arbitrator's award, 
they had to go back and begin negotiations with AFGE. In the 
agreement that we reached this week is we have agreed to set 
that arbitrator's award aside if they will turn back the 
calendar and go back to May.
    But I continue to have the impression that this may be them 
just going through the motions, that they do not intend to 
change the end results, just change how they get there. If that 
is true, it is going to be very unfortunate. But being the 
optimist that I am, I have been willing to take the gamble and 
set that arbitrator's award aside and say, OK, let us get back 
to the table. I am sure if the attitude is right, we will reach 
what is best, in the best interest of government and the best 
interest of the taxpayers. But that is going to take constant 
vigilance to make sure that they are just not going through the 
motion.
    Senator Voinovich. The attitude of individuals is important 
and the trust level is very, very important. It is amazing what 
you can do when you have trust. I have seen that in this 
country on a lot of issues.
    Mr. Harnage. That is very true.
    Senator Voinovich. It would be a whole lot different if 
there were more trust. Thank you very much.
    Ms. Kelley. Thank you, Mr. Chairman. I look forward to 
working with you.
    Mr. Harnage. Thank you.
    Senator Voinovich. Thank you.
    Our next witness is Christopher Mihm, and again, Mr. Mihm, 
I want to thank you for your patience. He is the Associate 
Director of Federal Management and Workforce Issues of the 
General Government Division at the U.S. General Accounting 
Office.
    I really appreciate the cooperation that we receive from 
GAO. GAO is working right now to help us evaluate the 560 
education programs that we have to decide whether they are 
really getting the job done. One of the things about this place 
is that they just keep adding. I do not ever see anybody 
subtract. For example, in the education area, there are a lot 
of new ideas. I said, why do we not go back and look at what we 
are already doing, see if there is some stuff that we are doing 
that we ought not to be doing, maybe put the money in something 
that is better, or just plain save the money?
    So your services are very, very important. I hope that your 
team understands that. A lot of us look to you for help, 
because we really cannot do our oversight work without your 
help.
    Mr. Mihm is accompanied by Jim White, who is the Director 
of Tax Policy and Administration Issues, and Bernard Ungar, 
Director of Government Business Operations.
    Mr. Mihm, we will start off with you.

   TESTIMONY OF J. CHRISTOPHER MIHM,\1\ ASSOCIATE DIRECTOR, 
  FEDERAL MANAGEMENT AND WORKFORCE ISSUES, GENERAL GOVERNMENT 
DIVISION, U.S. GENERAL ACCOUNTING OFFICE; ACCOMPANIED BY JAMES 
   R. WHITE, DIRECTOR, TAX POLICY AND ADMINISTRATION ISSUES, 
 GENERAL GOVERNMENT DIVISION, U.S. GENERAL ACCOUNTING OFFICE; 
  AND BERNARD UNGAR, DIRECTOR, GOVERNMENT BUSINESS OPERATIONS 
 ISSUES, GENERAL GOVERNMENT DIVISION, U.S. GENERAL ACCOUNTING 
                             OFFICE

    Mr. Mihm. Thank you, Mr. Chairman. The point that you are 
making about the overlap and duplication of education programs 
is something, as you know, that we see in program area after 
program area across the Federal Government. There is a natural 
tendency to add new programs on top of existing ones, rather 
than going back and asking about what are we getting 
cumulatively from the effort we already have underway and what 
are we getting individually from various programs and 
strategies that are in place. So we are pleased that we are 
able to support your efforts in this area.
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    \1\ The prepared statement of Mr. Mihm appears in the Appendix on 
page 94.
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    Jim White, Bernie Ungar, and I are pleased to be here today 
to contribute to your ongoing efforts to identify ways to 
improve the management and performance of the Federal 
Government. As you pointed out, Mr. Chairman, successful 
management change often takes years. I believe you mentioned, 
in the case of Ohio, it took 8 years to really get the TQM 
effort that you had there instilled across the State 
Government.
    Our work suggests that six elements are particularly 
important in implementing and sustaining management improvement 
efforts so that they take root and genuinely address the 
problems they are intended to fix. These elements, most of 
which we have discussed at least in passing this morning, are, 
first, a demonstrated leadership commitment and accountability 
for change; second, the integration of management improvement 
initiatives into programmatic decision making, that is, not 
having it be seen as a stand-alone function separate from the 
program work; third, rigorous planning to guide decisions; 
fourth, employee involvement both to elicit ideas and build 
commitment; fifth, organizational alignment to streamline 
operations and, importantly, clarify accountability; and 
finally, sixth, strong and continuing Congressional oversight.
    Our written statement discusses each of these in some 
detail, so in the interest of brevity, I am going to focus on 
the three of those that are most directly related to the people 
aspect of management improvement, that is, leadership, employee 
involvement, and organizational alignment.
    First, in regards to leadership, perhaps the single most 
important element of successful management change initiatives 
is the sustained commitment of top leaders to change. This 
commitment is most prominently shown through the personal 
involvement of top leaders in developing and directing the 
reform efforts, and I think we have heard two very good 
examples of that in the first panel this morning. Top 
leadership involvement and clear lines of accountability for 
making management improvements are critical to overcoming 
organizations' natural resistance to change, marshaling the 
resources needed in many cases to improve management, and 
building and maintaining the organization-wide commitment to 
new ways of doing business.
    Second, successful management improvement initiatives often 
require the active involvement of managers and staff throughout 
the organization. This was clearly the point that you and 
Senator Akaka underscored in your opening statement and in the 
questions that you asked. Our written statement provides a 
number of tools and strategies that high-performing 
organizations have used. I am just going to touch on a couple 
of those.
    First, working with employees at all levels and employee 
organizations, including unions. We heard some good stories of 
that earlier today, of how that is working. Too often, however, 
the opposite is the case at the Federal level. That is, that 
unions and their management are not working well together.
    For example, the U.S. Postal Service's longstanding 
challenges in labor-management relations illustrate for us the 
importance of having shared and agreed upon long-term 
strategies that managers, employees, and unions are all working 
towards. Labor-management relations at the Postal Service have 
been characterized by disagreements that have hampered efforts 
to automate some postal systems that could have resulted in 
savings and helped improve Postal Service performance. Although 
there has been some recent progress, labor-management problems 
persist and continue to contribute to higher mail processing 
and delivery costs than is necessary. So if we could make 
progress on labor-management relationships at the Postal 
Service, we could cut costs and improve mail processing.
    The second key element is training. Simply stated, serious 
management improvement efforts often require a serious 
commitment to employee training and skill building. 
Commissioner Rossotti and Ms. Johnson spoke of the importance 
of training to the reinvention efforts that are underway at 
their respective agencies.
    We did a survey of managers across government in 1996 and 
1997--these are GS-13s and above, through the SES--and found 
overall that the picture was quite gloomy. We found that about 
60 percent or more of supervisors and managers reported that 
their agencies had not provided them with the training 
necessary to accomplish critical results-oriented management 
tasks, things like setting goals, setting performance measures, 
gathering performance information, using performance 
information to improve their operations.
    At the request of the Subcommittee, we are going back into 
the field and doing this survey again to see if there has been 
any improvement over the last 3 years, but nevertheless, when 
you have the key employees and managers in the Federal 
Government telling you that they have not received the training 
to do the key management tasks that they need to do, that is a 
very disturbing picture.
    Senator Voinovich. You are saying 60 percent?
    Mr. Mihm. Sixty percent or more in each of various 
categories that we looked at said that they had not received 
the training that they needed.
    The third key area of employee involvement is devolving 
authority. Employees are more likely to support changes when 
they have the necessary authority and flexibility to advance 
agencies' goals and improve performance, but we have found that 
much work appears to be needed across the Federal Government in 
this regard. Let us go back to the survey.
    We found that less than one-third of non-SES managers--this 
is at the GS-13s, 14s, and 15s levels--felt that to a great or 
very great extent they had the decision making authority they 
needed in order to accomplish their goals. Only about half of 
the managers said that they were being held accountable for 
results, that is, rather than just adherence to the 
requirements of a position description. And again, this is part 
of what we are resurveying managers at the request of this 
Subcommittee.
    My final point this morning concerns the need for 
organizational alignments to streamline operations and clarify 
accountability. We have heard from earlier panels some of the 
changes underway in terms of organizational alignment at GSA 
and IRS. Equally interesting, in our view, are some of the 
actions that have taken place at the Office of Student 
Financial Assistance.
    Last year, Congress created a new organizational structure, 
and this gets, I think, directly to the questions that you were 
raising, Mr. Chairman, about creating incentives and really 
being very clear about creating the right incentive structures 
that we want. The new structure exemplifies, in our view, new 
directions and accountability for the Federal Government by 
appointing a Chief Operating Officer who reports directly to 
the Secretary of Education. That Chief Operating Officer for 
Student Financial Assistance is held directly and personally 
accountable through an employee contract for achieving 
measurable organizational and individual goals. The Chief 
Operating Officer may receive a bonus for meeting performance 
goals or may be removed for not meeting them, which, as you 
well know, is not common in the public sector. Likewise, the 
Chief Operating Officer is to enter into annual performance 
agreements with his or her senior managers, and they are also 
eligible for substantial bonuses when their contract 
requirements are met and removal in the cases where they are 
not.
    In summary, Mr. Chairman, we have found that successful 
management improvement efforts often contain a variety of 
critical elements that I mentioned at the outset of my 
statement. Experience has shown that when these elements are in 
place, lasting management reforms are more likely to be 
implemented that ultimately lead to improvements in the 
performance and the efficiency of government.
    This concludes our statement. Jim, Bernie, and I would be 
happy to answer any questions that you may have.
    Senator Voinovich. You have had an opportunity to hear the 
presentations of the people from GSA and from IRS, and then 
from the respective union presidents. I would be interested in 
your observations on the extent to which there is quality 
management as I have defined it across the Federal system. It 
seems to me, and this is why we had the IRS in, that they have 
a handle on something there, and from what Bobby Harnage said, 
he at least seems to be satisfied with what they have at the 
Mint and at Crane.
    Mr. Mihm. I am not familiar with that.
    Mr. Ungar. It sounds familiar, but I am not sure.
    Senator Voinovich. I am just saying that at least they seem 
to be happy with it. But what is your general observation, 
across the board, of the extent to which what I would define as 
quality management or quality partnership, as distinguished 
from the Results Act and performance plans is in place?
    Mr. Mihm. I think that, and this is sensitive to me because 
I have responsibility for the Results Act back at GAO, I think 
if you are looking across the Federal Government for the 
elements that, as you have defined as quality management, you 
will find many of those elements in place, but there is a long 
way to go in virtually all of the agencies. In regard to what 
implementation of the Results Act has taught us and especially 
what the gaps are and why it suggests we need more efforts of 
the type that you are suggesting, Mr. Chairman: When we looked 
at the annual performance plans that agencies have issued for 
fiscal years 1999 and 2000, one of the key weaknesses that we 
saw is that agencies were not able to articulate how what they 
did on a day-to-day basis, leads to broader programmatic 
results. This gap in agency performance planning--this gap in 
agency understanding about what they do--is to us indicative of 
a lack of understanding in agencies of how we can go about 
improving performance when our performance goals are not being 
met. You will recall that under the Results Act, the reports on 
performance are due this coming March.
    In other words, when we look at implementation of the 
Results Act, we see in many cases some very good goals. 
However, we are not seeing the infrastructure underneath, 
either in the programs or the management systems in place that 
lead us to have a great deal of confidence that agencies are 
going to be able to tell you, ``We did not meet the goal but 
here is what we are going to do in order to improve 
performance.''
    I do not know if Jim or Bernie have specific comments on 
GSA or IRS in that regard.
    Mr. White. I will respond, Mr. Chairman, in terms of IRS. I 
am responsible for the work we do on IRS at GAO. Your 
definition of total quality management started out by 
mentioning the focus on external and internal customers, and 
that is the approach that IRS has taken. The three goals they 
have established for IRS now to support their mission statement 
are service to all taxpayers, service to each taxpayer, and 
they also have a focus on employees and developing employee 
productivity.
    But you also mentioned in discussing quality management 
implementation. IRS at this point has a plan. The hard part of 
what IRS is trying to do is going to be in the implementation 
phase, and that is where things like training come into play.
    There has been a lot of discussion about training here. I 
would just like to point out that I think training needs to be 
complimented by things such as the employee evaluation system, 
that training alone will not change the culture at an agency. 
Training alone will not dramatically change the way IRS 
employees interact with taxpayers. Training needs to be 
supported by other changes at the agency, such as with the 
employee evaluation system.
    Our work on their evaluation system shows that it does not 
currently support the new mission statement. The IRS recognizes 
that. It is going to take several years before they get a new 
evaluation system into place. They have begun work on that. But 
it has to be an approach that focuses on all of these areas 
simultaneously.
    Senator Voinovich. Does everyone at the IRS have a 
performance evaluation every year, that they sit down with 
their supervisor and go over?
    Mr. White. Yes. What we found when we reviewed, and this is 
the existing old employee evaluation system, all employees get 
evaluated. The evaluation right now often focuses on 
enforcement of tax laws. There is very little focus on service 
to taxpayers.
    Senator Voinovich. Have they revised it? I have seen all 
kinds of performance forms--we have one in my office--that have 
been put together. Have they revised the evaluation forms that 
they use to reflect that, or are they still using the old ones?
    Mr. White. They are still using the old ones right now. 
They have recognized the need to do this. It is going to take 
several years to get a new process in place. In the meantime, 
we have given them some suggestions in a report we recently 
issued on how they could better use the existing system. For 
example, in the narrative portion of the employee evaluations, 
managers could put more of an emphasis there on customer 
service than they are right now.
    Senator Voinovich. If somebody became the new secretary of 
X and they reviewed the management of their department, if they 
called your office, could they get what you consider to be the 
best examples of performance evaluation forms?
    Mr. Mihm. Yes, sir. We would be happy to work with them on 
showing them the best practice to the extent that we have seen 
it. We would be pleased to.
    Senator Voinovich. That is nice to know that it is 
available. Mr. Unger.
    Mr. Ungar. Mr. Chairman, I can comment just briefly on GSA 
and the Postal Service in relation to your initial question. I 
would say that both had a common experience back in the early 
1990's, and that was that both GSA and the Postal Service were 
in crisis situations. In the GSA's case, we did a study in mid-
1995, we call them management review studies, of several 
agencies, and at GSA, if you will go back a few years, I think 
that no customer was happy with GSA. I think they were calling 
for GSA's demise and you had a number of things coming 
together, the National Performance Review and so forth, at the 
same time. GSA did go through quite a transformation.
    In terms of your definition of TQM, I think the biggest 
change that I have seen in GSA that has turned it around is its 
customer focus. It went from an organization that did not care 
about its customers to an organization that really does care. 
It went from an organization that provided mandatory compliance 
and participation with almost all voluntary participation now, 
and that really did require a complete change at GSA. Now, I do 
not think they are where they need to be yet in the areas you 
have talked about, but they are certainly a lot different today 
than they were 7 or 8 years ago.
    Similarly, at the Postal Service, they were not making very 
much--in fact, they were losing money for a string of years and 
they finally realized that something had to change and it did 
change at the Postal Service. They actually adopted the Malcolm 
Baldridge quality criteria as the whole framework for their 
management approach to doing business. Of course, it is a 
business, like GSA is. They have made a lot of progress over at 
the Postal Service. As Chris had mentioned, they still have a 
long way to go with employee involvement and working with their 
employees, but it is a problem that they have had for many, 
many years. As you said in the State of Ohio, it is not going 
to be solved overnight.
    Senator Voinovich. Right. Again, we have had some examples, 
and it would be interesting from my perspective if you apply my 
definition of what quality is, I would be interested in your 
looking at the two examples that Mr. Harnage gave, and then the 
IRS, to see how they compare.
    I am looking for an agency where this is working to observe 
the organizational structure that has been put in place, 
understanding that for it to be successful, the leader has to 
be involved. I think one thing people have to understand is 
that if this is going to work, if you take Federal agencies, 
the secretary has to get involved. I am not patting myself on 
the back, but our program in Ohio worked because I was 
committed to it. In fact, when I got my 3-day training, five 
union presidents got their training at the same time, so they 
knew I was committed to it. I showed up.
    It would be interesting to define what it takes to get it 
done, find some really good examples, then see if we can share 
that information, best practices, with some of these other 
agencies, and see if we cannot help those agencies that are 
trying to change.
    My thought is, and I will be candid with you, is that I do 
not expect to get a whole lot done next year, because it is the 
last year of the administration and you have agencies that are 
wrapping up. In Ohio, I think we spent the last 6 months trying 
to get things ready so that we could pass the baton to the next 
administration. You are really not doing new stuff, you are 
just trying to make sure that whoever comes in will be able to 
continue without any real hitches.
    Who knows how the presidential election is going to work 
out, but the fact is that I would like to use this next year to 
keep working this thing to get it into a position where if this 
administration is succeeded with another Democratic 
administration, that we can go to that administration and talk 
to them about it, or if there is a Republican administration, 
that we could sit down with them in the beginning and talk 
about some of these things, because I suspect that even if Vice 
President Gore ends up being the next President, he is going to 
have new secretaries, and certainly if a Republican is elected, 
they will have new folks in there.
    I think the ideal would be to try to get to them right at 
the gate and share with them what they could be doing that 
would really make a difference in terms of the performance of 
their respective agencies.
    I have this feeling, and maybe I am being disrespectful, 
but I have been watching and lobbying the Federal Government 
for 18 years. I was President of the National League of Cities, 
and then Chairman of the National Governors Association, and I 
have seen administrations come and go. So often, it looks like 
the new secretaries come in and they get assistant secretaries, 
deputy assistants, and so forth, and they get all involved and 
very little attention is paid to the rank and file middle 
managers and folks that have been around for a while.
    I will never forget, this is a long time ago, Bill Saxby 
from Ohio became the Attorney General of the United States and 
I was one of his assistant attorney generals and I came down to 
see him sworn in. It was in the Great Hall at Justice. I looked 
at the expressions on the faces of the people that were there, 
I really studied them, and all I read was, ``We were here 
before you and we will be here after you.''
    Mr. Mihm. And they were.
    Senator Voinovich. Yes, they were. That is the group of 
people that we need to reach, I think, if we are going to 
really see some changes made in the delivery of services to the 
people of this country.
    Mr. Mihm. The issue that you are raising, Mr. Chairman, is 
a substantial one and we have found that the lack of political 
attention to management improvements can kill a management 
improvement effort. Obviously, the vast majority of people that 
come to Washington for political positions do not intend that 
their legacy would be ``a sound management infrastructure.'' 
They come for policy reasons. Often, turnover is very high in 
these political positions and certainly does not last the 8 
years or so that would be needed to sustain a management reform 
effort.
    One of the things that we have been urging Congress to do 
is to use the confirmation process, to ask questions (and I say 
this obviously knowing about the recent one for the Deputy 
Director for Management) to use the confirmation process to 
make clear to political appointees that Congress is putting a 
great deal of interest and emphasis in sound management and 
improvements within agencies, that it is not something that is 
just other duties as assigned or something that they should 
staff out. It is something that they will be held personally 
responsible for and be asked about when they are up for 
oversight and appropriations hearings. That sends very, very 
powerful messages.
    Mr. White. Mr. Chairman, if I might, the point you are 
making about middle-level management is a point that we made in 
July in testimony before the Ways and Means Committee in the 
case of IRS, that IRS has very strong leadership now at the 
top, leadership trying to manage this massive change effort, 
but the IRS is so big and the amount of change required is so 
large that top management alone cannot do it. Change is only 
going to be implemented if middle-level management gets 
involved in planning the details of it and then in actually 
carrying out the change.
    Senator Voinovich. Yes. That raises another point that hit 
me when you were talking about the Results Act and the 
performance plans to comply with the Results Act. It would be 
interesting when you are going through these plans, and you are 
doing that now, it would be interesting to find out just how 
much involvement there has been in some of those agencies with 
the folks that are down the line. The really great plans are 
the ones where somebody has realized that if they are really 
going to put something together, that the effort has to involve 
a lot of folks.
    Mr. Mihm. We have actually touched on that as part of the 
survey that we did of managers and they are surveying again. 
This is non-SESers, but it is still managers within the Federal 
Government. Less than half of them said that they had been 
involved in developing performance measures. Less than half 
said that they had been involved in analyzing data on the 
performance of their programs. Less than half said that they 
had been involved in using performance data to determine 
whether or not performance goals were being met. In fact, only 
about a third of the non-SESers said that, and when you look at 
the SESers, it only climbed to a little bit over 50 percent.
    So, basically you have, of the executive cadre of the 
Federal Government, only a little over half are reporting 
involvement in using performance data to determine whether or 
not the goals at their agency were being met. That is a 
depressing picture, in our view.
    Senator Voinovich. There is a lot of work to do. I look 
forward to working with you and putting something together that 
we can share with the next group, not taking anything away from 
the people that are there, but as I said, I have been around 
this business a long time and I know next year is not going to 
be the greatest year to come in with a lot of innovation.
    I was interested, and I thought Congress was smart, that 
Mr. Rossotti has a 5-year contract, which I think is terrific 
because he has some time, not enough to complete it, but at 
least to get started with it. I thought that was a really good 
move on the part of Congress.
    Mr. Ungar.
    Mr. Ungar. Mr. Chairman, I just wanted to reemphasize, I 
think, the importance of your point, that regardless of who the 
individual is who is going to be the head or the top person in 
an organization, without that person's personal involvement, I 
do not think you are going to get down to the middle management 
level. I have responsibility not only for GSA and the Postal 
Service, but also the Mint, and I think the common thread 
through those three, plus my personal experience in GAO where I 
headed up our quality program for a few years, is that without 
that personal commitment and active involvement of the top 
person, it is probably not going to succeed. So the more that 
the Subcommittee can get at that or the full Committee during 
confirmation process, if they get a commitment from whoever the 
top person is for implementation, it would be very important.
    Senator Voinovich. For the new folks that are coming in, it 
would be interesting to have a management primer for them, and 
basically ask them to come in and talk about what they would be 
doing, what do they think about this, does it make any sense to 
them, is it foreign to them, if they are supportive, and if 
they are supportive, what they are going to do, so you get a 
sense right off the bat about how committed they are to the 
management of an agency.
    We have some good folks in the Federal Government, some 
good folks, and I respect them. But I think too many times, 
people get the job and they think of it as, well, I am the 
secretary and my job is just to go out and give speeches and 
they forget about how important it is for them to pay attention 
to management. If they are not involved in it personally, then 
they ought to have somebody who is right next to them that 
every morning gets up and worries about management.
    Thanks very much, and as I said, I look forward to working 
with you. Thank you.
    Mr. Mihm. Thank you, sir.
    Senator Voinovich. The Subcommittee is adjourned.
    [Whereupon, at 11:10 a.m., the Subcommittee was adjourned.]



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