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1998 Managing Change Optimas Award Profile U.S. Office of Personnel Management

February 1, 1998
Related Topics: Change Management, Downsizing, Managing Change, Featured Article
Transforming the federal government is like training an elephant to win the Kentucky Derby. At least, that's what most critics would say. One seldom thinks of government as lean, quick and daring -- much less competitive. Just consider the fact that the federal government is the largest employer in this country with more than two million civilian employees. Yet one of the most understated successes in recent years is President Bill Clinton's 1993 initiative to reinvent government-otherwise known as the National Performance Review (NPR). The mandate he and NPR leader Vice President Al Gore set was to create a government that "worked better and cost less." The challenge, however, was to do it. Enter the U.S. Office of Personnel Management (OPM) -- the federal government's human resources department. "People heard this [vision] for many years, but it never happened," says James B. King, former OPM director who served between 1993 and 1997. (King left OPM in September 1997 to assume a senior position at Trinity College in Hartford, Connecticut.) "The government just continued to get bigger and bigger."

Now, five years after Clinton signed Executive Order 12862 (calling for reinvention), the federal workforce is the smallest it has been in 30 years, and the nation's deficit has been cut by 60 percent. And yes, the OPM is gleaming with confidence and accepting praise for its efforts. "The work is certainly not done," says Warren Suss, a government technology consultant and president of Warren Suss Associates in Jenkintown, Pennsylvania. "But there has been a shift in attitude, and the federal government has been able to continue delivering cost-effective services during a major time of cutbacks. And they're not over yet."

To honor OPM's achievements, Workforce awarded the 1998 Workforce Magazine Optimas Award in the Managing Change category because of its leadership during the federal government's reinvention-as outlined in the NPR (visit Under the guidance of King and current Director Janice R. Lachance, the OPM has established a humane model for downsizing government and provided successful outplacement that has guided other agencies, pioneered privatization with the federal government's first Employee Stock Ownership Plan (ESOP) and reduced its own tangled bureaucracy. In short, the OPM has "walked the talk" and looks like a government of the future. It's smaller, more market-driven and focused on results.

HR takes care of its civil servants.

In the past, individuals who applied for federal jobs expected lifetime job security. They also were motivated by a desire to serve the public. So when Clinton announced that the era of big government was over, King knew two things: that government downsizing must be humane and that outplacement was going to be critical. A native of Ludlow, Massachusetts, King grew up in a mill town where his relatives worked in the textile mills. He'd seen layoffs before and didn't want to see himself with a cigar in his mouth, handing out pink slips. "People feel abandoned and left on their own," he says.

In setting guidelines for other agencies -- and for itself -- the OPM thus established that involuntary separations should be an agency's last resort for cutting costs and reducing or restructuring personnel. Moreover, when evaluating options, agencies should focus on the objectives for the change because the objectives would determine which options are most likely to yield the best results. For example, job sharing is a viable option when the goal is to reduce costs and personnel. But job redesign is a better option when the goal is to restructure the workforce. OPM thus recommended nearly 30 options to layoffs for federal agencies. Among them: optional retirements, furloughs, job sharing, freeze promotions, retention of grade/pays, training, voluntary reassignment and retraining.

These flexible options were helpful because the Federal Workforce Restructuring Act of 1994 required the elimination of 272,900 full-time equivalents (FTEs) by the end of fiscal year 1999. (A full-time equivalent equals one 40-hour-per-week job.) At the end of fiscal year 1996, there already were 263,500 fewer FTEs in the executive branch than there had been in fiscal year 1993. Moreover, between January 1993 and January 1997, the federal executive branch nonpostal workforce had reduced its workforce by 14 percent. Most reductions have come primarily through buyouts, early retirement, outplacement and other voluntary attrition, according to King.

In response to Clinton's commitment to provide displaced federal employees with job assistance, OPM also set up a one-stop shop for career transition called the Metro Area Reemployment Center in Washington, D.C. Opened in May 1996, it represents a consortium and is a partnership between the OPM, other agencies, trade union representatives and the governments of Virginia, Maryland and District of Columbia. It offers displaced federal workers career assessment and counseling, job-search assistance, skills retraining, and a career resources and computer lab. Employees also can access the center's Web site through the Internet.

In terms of downsizing its own resources, the OPM has led by example. From fiscal year 1993 to fiscal year 1997, the OPM's salaries and expenses budget has been reduced from $118.4 million to $87.3 million -- a 33 percent decrease in constant dollars. It's total onboard workforce has been reduced by more than 48 percent, while during the same period, the entire federal workforce declined by approximately 11 percent, and the Department of Defense downsized by 16 percent. According to Lachance, OPM succeeded in placing 96 percent of its own employees into other jobs after theirs were eliminated.

The OPM pioneers privatization.
One key strategy in the OPM's dramatic downsizing was the unprecedented privatization of more than 700 employees of its investigations unit, which conducted personnel investigations for the OPM. After nearly two years of planning, the employees formed the federal government's first Employee Stock Ownership Plan (ESOP). Under the ESOP, the employees formed their own company, called U.S. Investigations Services Inc. (USIS Inc.) It was a baby of innovation and tenacity. Soon after King had become OPM director in 1993, he learned the investigations program had been losing money for more than 10 years and was more than $35 million in debt. To lessen the financial hemorrhaging, attrition alone wouldn't do the job. Rather than just eliminate the positions and hand out pink slips, King considered and fought for the ESOP as long as it met three goals: It must do what was best for America's taxpayers; it must provide a seamless transition and continued high-quality service for the federal agencies that would be its customers; and it must be created in partnership with the employees and their unions and serve their best interests.

Some of the investigators resisted. Many employees made their objections known to the media and to Congress, even testifying against the proposal at Congressional hearings. Ultimately, the OPM commissioned a feasibility study by ESOP Advisors Inc. of Reston, Virginia. In June 1995, the agency contracted with Marine Midland Bank of New York to act as trustee in establishing the ESOP. Marine Midland representatives then worked with American Capital Strategies Inc. and the Washington law firm Arnold & Porter to design the ESOP and ensure that it protected employees' interests. Now, besides only serving the OPM, the new business would be able to serve other federal agencies and private sector customers as well.

"We knew this was the best thing to do for the public and federal employees involved," says Lachance. Last October, USIS Inc. cut the price of its investigation services by 18 percent, saving the agencies that contract with OPM more than $1 million annually. Lachance says that in the first year of operation, USIS Inc. created $14.7 million in value to taxpayers that will be repeated over each year of its five-year exclusive contract with OPM. That's equivalent to saving taxpayers $73.5 million.

Reinvention also means cutting the red tape.
In response to the NPR mandate to reform federal hiring procedures, the OPM has made the process quicker and easier. In the past, job candidates could hardly figure out whom to call, which test to take and which form to fill out. And the response time took months. Now, the OPM has delegated agencies with their own hiring authority, has closed 11 local job information centers and has reduced the size of others to cut costs. Through automation and computer technology, it has become easier for people to find out about and apply for federal jobs. For example, the OPM created USAJOBS, a Web site for federal, state and private sector job opportunities (http://www. Technology has clearly improved the delivery of services, says Suss. "One of the movements we've seen is the virtual government, whereby the government cuts across agency boundaries and sets up work teams to address particular issues," he says. That way, team members can communicate without being in the same office or department.

In addition, the OPM also eliminated the outdated, confusing 10,000-page Federal Manual and the monstrous Standard Form 171 job application form. Much of what had been centralized in the manual was delegated to local agencies to make decisions on a more appropriate level.

As the federal government continues to make strides in managing change, Lachance says the OPM will undergo constant self-evaluation. But first, it must operate less as a command-and-control HR agency and more as a consultative body. That means guiding all federal agencies to reinvent themselves as successfully as the OPM is transforming itself. Says Craig Conlin, deputy director of the management systems division in the Office of Human Resources and Education at NASA: "OPM has been a great help during our downsizing. It's been very flexible in interpreting laws and rules for us. Before, we were issued new rules to follow. Now, NASA is more of a partner with OPM." Since 1992, NASA has been reduced from 24,000 full-time permanent employees to 19,000-with no involuntary separations, he says. With such cheerleaders, one thing is clear: The big elephant is headed toward the finish line.

Workforce, February 1998, Vol. 77, No. 2, pp. 60-64.

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