Steve Player speaks with Clay Johnson, Deputy Director, Office of Management and Budget of the U.S. Government.
Steve Player: Let's begin with a brief description of the role of the Office of Management and Budget and your role within it …
Clay Johnson: Originally, it was just the Office of the Budget, which was created in the 1920s to help the president prepare and present to Congress a budget that would reflect his priorities. We don't have enough money to do everything that everybody wants to do, so the president submits what he hopes the Congress will go along with and hopes that they will fund the priorities that he has. Then Congress has their way with it, and they eventually agree on something they can both sign and implement.
In the 1970s, they recognized that they needed to establish an organization not only to help the president put together a budget that would reflect his priorities, but also that would help the federal government to spend the money that was actually appropriated by Congress. That's when they added the management part, creating the name “Office of Management and Budget.”
And in 1990, they created a second deputy. There was already a deputy who did a little bit of everything, and there was a whole lot of attention always being paid to the budget, but not much attention being paid to the management part of OMB. They created a second deputy position in 1990, and I'm that deputy. I'm the deputy director for management at OMB, or what we affectionately call the “M” in OMB.
SP: Your role is really about making the government effective in terms of what it's trying to do …
Johnson: Agencies are obligated to spend the money as Congress says. They can't take money from one program and then spend it on another program. If Congress says you can spend X on Program A and Y on Program B, that's what agencies have to do.
But once they have a certain amount of money to spend on a program, we help them to spend that money more effectively to increase the chances that they achieve the desired outcome.
SP: How have OMB's efforts made a significant difference in achieving the desired outcomes?
Johnson: Back in 2001, the people at OMB identified that we aren't very good at spending the money to achieve desired outcomes because we have really bad definitions of what the desired outcomes are. What the leadership at that time decided was that we needed to take every program in the federal government and establish clear, quantifiable, outcome goals, determine the extent to which we could efficiently measure those goals, and make sure that agencies had a plan for accomplishing these goals so that we can identify what obstacles exist, legislative and administrative, to accomplishing them.
One of the things we found out when we started digging into this the first year was that half of the federal programs we looked at could not demonstrate whether they were performing well or badly. They just couldn't clearly tell you what their goals were, what they were trying to accomplish, or how they were performing relative to those goals.
It took up to seven years to make sure that every program had clear outcome goals — not output goals, not input goals, but outcome goals. And that's hard to do. There are probably still 15 to 20 percent of the programs that I can't tell you we have good outcome goals for. We're trying to do some things in the federal government that are very difficult to do — peace in the Middle East, cures for cancer, man on Mars — and we're trying to do some things that take decades to accomplish or that nobody has ever done before.
We spend $28 billion a year on medical research. We're trying to find cures for diseases that no one has ever found. As a manager, how do you develop a good outcome goal for that? What is an appropriate time frame to achieve that goal? It's very, very hard to do. But that's no excuse for not having as much purpose as is humanly possible to have.
The one thing that did not exist in the federal government to anybody's satisfaction was clear goals and real accountability for accomplishing these goals. We have tended to reward attendance, not performance, and we have tended to evaluate people's competencies, not their performance. We tend to get generally excited in the federal government about passing legislation in the form of bills to address problems and funding these bills with money. And once we have a bill and money, we tend to believe that the problem will be solved or the opportunity will be realized. And I'm here to tell you that the fun has only then just begun, because until you've appointed good people to head up these efforts, good management practices, and clear performance goals, there's no chance of accomplishing anything.
The bill and appropriate amount of funding are just the beginning.
SP: Your extremely complex measurement challenge is to find both outcome measures and the interim process measures. This is much more difficult than figuring out whether revenue grew or not …
Johnson: Yes, it is. People say that we don't have a single outcome goal like the private sector does, e.g., sales or projects. But our bottom line, if you will, is what we will deliver to the American people.
SP: How far have you gotten? And what do you think the agencies will continue past the end of this administration?
Johnson: Well, that's really interesting, because I have been surprised at how extensively it's become the way that they do business. There's an organization called the President's Management Council that I chair, composed of the chief operating officers (or sometimes the deputy secretaries or undersecretary for management) at all agencies. This past spring, we were having a discussion about things we needed to do before the end of this administration to make sure that the career employees were brought in as much as possible to the importance of these management reforms.
And all of a sudden everybody's hands went up, and I said, “Yes, what did I say that was wrong? What's going on?”
They said, “Clay, your premise is all wrong here. This is the way the agencies work now. We have goals and we have conversations, and we manage our improper payments, and manage our real property. And people would be shocked if you sat down with them and tried to say that it's really important that you continue with these reforms. They would be shocked if you came in there and talked to them that way, because that's just the way they run their agencies now.”
This is a reason why the next administration is not going to be able to come in and say I really don't care whether we have good goals or not and I really don't care to make public how we're performing in this area or that area. They're not going to say I really don't care whether we have a lot of material weaknesses or not, because that's just not the case now. This is because it's good for the agencies. The federal employees are not going to allow us to go backward. They are going to only allow us to go forward on these dimensions.
SP: What role does visibility play in these reform issues? How does that drive commitment?
Johnson: We have added levels of transparency in the federal government that I think would have been unthinkable ten years ago, and levels of transparency that most foreign countries are reluctant to add. I was visiting with some members of the English Parliament two days ago, and they have done the same things that we have been doing for several years. For example, we both have a visual scorecard using a green, yellow, and red stop light way of denoting what's happening — great, medium, not so great. The difference is that they don't make it public.
I've met with them twice now over the past several years. I keep telling them you're not realizing but 15 to 20 percent of the potential of these assessments if you don't make them public. The kind of behavior you will drive is unbelievable. … I don't know why they're reluctant to do it, but they have been challenged by some of the members of Parliament, and we encouraged them to do that. … Australia, Japan, other countries are beginning to better measure what's happening, but all of them, without exception, are reluctant to be as transparent as we have been.
When the decision was made before I got here to develop a scorecard and assess using green, yellow, or red each quarter to evaluate how each agency was doing with regard to their financial management practices, human capital practices, commercial services management practices, IT practices, and program management practices, they had to go to the White House for permission to use this scorecard.
The White House chief of staff said, “Well, this is great, but is this going to be public?” And they said, “Yes, it's going to be very public.” And they said, “Well, wow, what happens if there's a whole lot of red in the fall of 2004, the next time there's an election?” And the people in charge said, “Well, then that will be a problem. But that's why it won't be all red. The bar is set high. It's hard to achieve green standards, but everybody who knows anything about this understands what it means to be green and how hard it's going to be for agencies to get to the green level of performance, so they have appreciation for that. The level of candor and the level of transparency about how we're performing give it so much credibility. We will get so much credit for the candor and transparency and the efforts we're making to fix things that they will fully understand why it's not a sea of green yet and why there's still some red three years from now when the next president is running for reelection.”
And that's exactly the way it's played out.
There is still probably 15 percent of all of the different management practices and management activities that we look at that are in an unacceptable state. They're rated red. But it used to be that 85 percent of all of our management practices were in an unsatisfactory state. So we've made huge strides. We haven't hit a home run every time up, but we've been very transparent, very forthcoming, and very objective in our assessments. No political bias.
One of the complaints that was made early in the process was that we were “biasing the scores” to really try to get rid of programs that we just didn't like, that we Republicans didn't like. And we replied by saying, “Okay, well, show us where the assessment of the program in question is not objective.” And nobody could do that.
So again, it's thought to be very objective, very straightforward, very much for purposes of calling it what it is. The American people know that the federal government is not in an all-green state. They know that the federal government doesn't work to anybody's satisfaction. In fact, I think they're surprised to see as much work here as it does.
I don't think that any government, any organization, any public organization ought to be afraid to publicly share with their constituents how they're performing. I think that anybody whose money is being spent — in our case, taxpayers' — but any charity, for instance, who's getting somebody else's money and spending it to accomplish some mutually desired goal ought to be transparent about how successful they are or not with the people who help to fund them.
SP: You have said, “Transparency is magic.” Is there any magic to how the government did it?
Johnson: Well, what happened was that we started talking to agencies directly, and we asked them, “Where would you be proud to be a year from now in your financial management practices? Where would you be proud to be in your human capital practices?”
And we would explain how OMB would define a satisfactory set of financial management practices. And then we asked them, “So how far toward accomplishing this ultimate state of affairs do you want to be in a year from now?” And agencies would say, “Okay, well, if you put it that way, we'd like to reduce whatever material weaknesses exist by this amount and be doing our audit and financial statements within this period of time.” So OMB's role was to help them to accomplish their goals, not the other way around.
SP: What key things have you learned during your time of government service in working with the federal agencies?
Johnson: I think that we have begun to establish a basic level of purposefulness that didn't exist. There's more attention to be given to how we measure performance. There's more transparency. And my encouragement to the next administration is to build upon this, to take every agency to a higher level by the end of Fiscal Year 2009, which is next September 30, a year from now basically, by which time to have begun to install good individual performance management practices.
I mean performance management, which is where manager and employee sit down and agree on performance goals and the manager helps them throughout the year accomplish those goals and continues to give feedback throughout the year. There must be active participation and interaction between employee and manager to set goals and then work to accomplish them.
That's a never-ending process. And so it's pretty crude in the first year, a little less crude in the second year, and so forth. So we're in about Year 2 with most of our agencies and with our management. My encouragement for the next administration would be to continue to build on that so that we continue to get better at goal-setting at the individual employee level, at the program level, at the agency level, at the management practice level, and so forth. And more and more real accountability will evolve for accomplishing those goals.
I often tell reporters, “If you could only ask one question of a public figure or the head of some agency, the question you should ask should be, ‘What do you want to be held accountable for accomplishing next year?’”
Somebody did ask the president that at a press conference about three years ago, and he stumbled a little bit and gave some answer. Anyway, somebody asked me that afternoon whether I had fed that question to the reporter. I said, “I didn't feed it to him, but it's a very good question!”
SP: Clay, that brings up an immediate question. One of the huge problems we often hear about in government is about the tenure of the leadership. How do you keep people accountable if they know they're going to be rotating so quickly?
Johnson: Well, if you have really clear goals, what the new bunch inherits is a bunch of clear goals. Now, they can choose to go faster or slower or raise the bar or lower the bar, but they inherit a certain level of purposefulness.
Earlier in my career, I was in product management at Frito Lay for eight years. They would rotate product managers from product to product about every 18 to 24 months.
When I was the product manager for some product, I thought I was the king of that product. When we were just really getting rolling and doing things that had never been done before, top management would move me to another product, just when I felt that I was really accomplishing great things.
They knew a new person is going to come in and keep improving. They're going to keep 80 percent of what you're doing. But there is 20 percent in there that probably can be done better, and this new person is going to identify where to improve. So you're always trying to build on success.
So the idea of rotating people every three years is not a problem, as long as the new person coming in doesn't inherit a blank blackboard.
If you have to start at ground zero every time somebody comes in, that's a problem. But often that's not a problem with changing leaders. That's a problem with never having the basics in place in the first place.
SP: Well, it seems like you certainly made a good dent in it in your tenure here.
Johnson: We're going to give the taxpayers a full eight years' worth here. And so, probably by about December, I'll start thinking about what to do next. I want to continue to work. I like working and I'm pretty good at some things, but I haven't figured out what that means yet.