President's Management Advisory Board Meeting - Part 1

Jeffrey Zients: All right, let's officially start.
So the agenda for our meeting this morning is to review our
2011 initiatives which we're taking government-wide,
IT and the SES initiatives to get an update on strategic
sourcing and update on improper payments.
We'll build in a break or two, and I think this will last a
couple of hours or so.
And let's start by handing it over to Scott to get a sense of
where we are overall.
Scott Winslow: Excellent.
Jeffrey Zients: You are now on page three, Scott?
Scott Winslow: Just behind tab two, page three.
I want to welcome everyone for today's meeting of the
President's Management Advisory Board.
We are going to be in an open meeting today.
As each of these meetings takes place,
it's obviously going to be webcast so all of the
conversation will be broadcast simultaneously.
Just a couple of housekeeping things.
If anyone is looking for rest rooms just out the door to the
right or to the left just at the end of each of the hallways.
Jeffrey Zients: So men's is both directions and women's is both directions?
Scott Winslow: I have been told that's the case by Roxanna.
Jeffrey Zients: Both directions.
I know there's a men's room to the left.
I think to the right for women's, but we will help you --
Scott Winslow: Excellent.
Jeffrey Zients: -- get to the restroom!
(laughter)
Gail McGovern: Thank you, Jeff.
I feel much better now.
Scott Winslow: Additionally --
Enrique Salem: I was thinking the same thing.
(laughter)
Jeffrey Zients: All right, I've already screwed up your two minutes.
Gail McGovern: Sorry, Scott.
Scott Winslow: That's fine.
Coffee is outside if you want coffee.
Water is in here as well.
We are seated today and this office is a little bit closer
quarters than we are typically used to, so apologizes.
We're a little bit on each other but we're all friends and it
ought to be fine.
What I want to do on page three is just walk through the work
that has gone on across the board since 2012.
This really kind of mirrors the time that I have been working
with the President's Management Advisory Board.
We met back in March and chose the two topic areas,
the two focus areas for 2011, improper payments and
strategic sourcing.
A number of meetings have taken place across the course
of the year.
Obviously back in September we approved the recommendations
from each of the two subcommittees.
You can find those recommendations behind tab five
if you are not fully familiar with what those were.
And today we're really going to be reviewing progress that has
been made against those recommendations across the last
six to eight weeks.
As well as looking at some of the early successes that have
come out from the recommendations that you all
have demurred.
And in looking forward, this year when we convene again for a
meeting for the President's Management Advisory Board we'll
be talking again about some of the ongoing work against the
2012 initiatives as well as some of the new focus areas --
Jeffrey Zients: We haven't set the date yet for the early 2012.
Scott Winslow: We have not set the date yet, no.
Enrique Salem: We will be doing that soon?
Jeffrey Zients: Yes, we'll be targeting ski season.
(laughter)
Scott Winslow: Excellent.
Elizabeth Smith: Rubbing it in!
Enrique Salem: What are you saying?
(laughter)
Scott Winslow: With that, let me go ahead and get started.
Steve Van Roekel has just joined us.
It's going to be the information technology updates from
2011 initiatives.
Anything else before we start, Jeff?
Jeffrey Zients: No.
Hey, Steve, just, it's been about a year now that you've
been in this business?
Steve Van Roekel: Yes, a year and three months.
Jeffrey Zients: Yeah, remind folks quickly about your private sector experience,
your FCC experience and then just give a minute or two on
life 15 months in.
Steve Van Roekel: Great.
So we -- I came from about two decades in the private sector on
the West Coast working for a large software company --
Jeffrey Zients: Called Microsoft.
Steve Van Roekel: Yeah, it was a start up when I joined.
Spent a bit of time there as Bill Gates' assistant and then
the last job was part of the leadership team running the
server and tools division, which was a great, a great experience.
We -- in my tenure in server and tools we had 26 consecutive
quarters of double digit growth.
And I only say that because the applicability to government was
keeping the cost line low and keeping the value line going up
and to the right and just a maniacal mindset.
And the difference I think I saw when I came from private sector
to public sector was, you know, the sense of the greater whole
was there in that, you know, my budget never went up.
We never saw, you know, massive increases as our profit line
went up and to the right.
It was always funding other aspects of the enterprise to
scale the business, Xbox, Mobile,
other things were happening in the company, and, you know,
that isn't as apparent in government.
And you have a lot more mindset where I'm going to be insular in
my silo.
I'm going to, you know, whatever value I provide I'm going to
provide here.
And many times looking at our return on investment,
if the ROI is not realized in the silo,
the effort won't be there to realize to drive the ROI and so
you get a lot of that mindset.
So we've been again running, this Administration, I think.
Has been running an exhaustive process to think about how do we
normalize all of that and pull that forward.
I came to the government and to the Administration in 2009.
I came up to the inauguration not looking for a job but a job
found me after a lunch with a friend out here that encouraged
me to join the team and join the Federal Communications
Commission for the first few years running operations there.
And found an agency which should have been on the avant guard of
technology given the oversight of spectrum, mobile,
to some extent Internet and other things.
And found an agency that was very behind the times.
An operating system that I had actually launched almost a
decade before was waiting for me at my desk when I showed up.
And we had just so many, so many bad things going wrong.
With a very low ranking on the best places to work scale in
government, I think we were second or third from the bottom
right above Selective Service coming in.
So it was a tough go from kind of bringing culture and
efficiency and other things.
And the magic mixture of, you know,
improving IT, improving employee relationships and other things
was sort of essential.
It's an interesting thing.
And I think a lot of times when we sit in his PMAP meetings,
you get the question around incentives.
You know, that is one of the most difficult things in
government is you come in, you don't have the financial tools,
the financial incentive tools, you know,
and a lot of the other things.
But what I found to be most powerful in that motion of going
to the FCC was looking at the strategic plan for the agency
which every year you're required by statute to kind of put out
your strategic plan and list your priority objectives.
About every third year reform the agency was listed on the
strategic objectives and then the next year it
would disappear.
And so there was just sort of this constant drum beat,
it was like let's sort of let's mess things up,
and then let's reform and then let's mess things up and let's
reform again.
And there wasn't sort of that captured spirit of
continuous improvement.
But let's like wake up every day,
think about how we do things better and,
and that reform and that sense of improvement wasn't in the
hands of the employees from an incentive standpoint.
And so thinking about it, you know,
probably as you go through today I think you are going to get
even more in questions about incentives as we think about
that as sort of one of the things we struggle with in
government is how do we incent people.
Patriotism only gets you only so far.
Gets you a long way.
It's amazing.
But there is other things we can do.
And so I've spent, I came to the White House, as I said,
a year and about three months ago on the --
into an Administration that I think had done amazing work on
really slowing down bad behavior in the spending on federal IT.
We were growing at about a 7% kegger for the last 15
years on spend.
And without tools like depreciation,
without using the balance sheet as a strategic tool,
using it solely as an auditing tool, you know,
growing spend was the only real way to deliver new value.
And so we froze that spend in 2009 and actually on my watch we
have taken it down just a little bit.
Not that I think that hard times are not the time to invest in
technology, because it actually is,
but this is the time to stop bad behavior and to promote
good behavior.
And so the last year in the process we've run through this,
through our learning and Investment Review Board,
spender management --
Jeffrey Zients: You're on five now?
Page five of your report?
Steve Van Roekel: Yeah, page five.
And portfolio staff was really about, you know,
how do we innovate with less.
How do we steal from the OPEX column to give to the CAPEX
column to actually do new things in the context of a flatter
declining budget.
Kind of keep that cost line low and value going up and to the
right and kind of keep that theme going.
And so we, you know, on the heels of this,
have institutionalized a process that I had launched,
Jeff and I actually launched two meetings, two PMAB meetings ago.
Last meeting I gave you an update to talk about that we had
sort of started to see the glimmers of some potential.
This portfolio step process, which is page six,
we basically went out and asked agencies to, first,
gather a bunch of data for us.
Look left to right across the organization and understand,
you know, what's going on inside the organization from an IT
investment standpoint and, you know,
with a particular focus on looking in the dark corners.
Because we know that only headquarters only gets a view
into certain things and we needed to look and cascade
information across.
So we did that.
We then asked each agency to develop or each department to
develop a plan for consolidation with a particular focus on
commodity consolidation.
We thought that was the low-hanging fruit even though
there is departments and agencies are kind of all over
the board on where they are.
And we then, over the months since I have seen you last,
and we were in the midst of that data gathering,
I think when I saw you last, spent the entire month of July
meeting with 28 agencies face-to-face.
And Deputy Secretary Poneman was in one of those meetings.
Jeffrey Zients: Everybody remembers Dan as such a great energy.
Deputy Secretary Poneman: Thank you, good morning.
Steve Van Roekel: And we, so we had a face-to-face meeting with senior leadership
all at the table, deputy secretaries, DFOs,
CIOs and in some cases opponent CIOs, acquisition,
human capital, all the people around the table with the secret
agenda of teaching agencies how to run an investment review
board really based on what we had learned from a lot of my
experience in the private sector and especially the time we had
spent with your companies learning how to do this,
with vendor management as an underpinning and other things.
And what, you know, we saw some really,
had some amazing conversations and saw some really amazing
results on opportunities for people.
So we sat down, kind of fine-tuned their plans
coming in.
And then at the end of September,
required that they all, the end of August into September
required that they all submit final plans with cost saving
targets and what they were doing.
And we also dovetailed these efforts with a new approach to
enterprise architecture and a new approach to some modular
contracting and some other things that are all moving parts
that have to be satisfied to get this stuff done.
And what we saw across the whole of government was really a
spectrum of places where people were as an agency.
A kind of on the far extreme the Department of Fiefdoms where
everybody were highly siloed.
Where everyone was doing separate things.
Where there were a thousand ways of buying a mobile device.
There were, you know, 20 different email systems,
there were all those sort of things,
to an emergence on the other extreme which was starting to
see real service orientation.
Embracing cloud computing, starting to say, okay,
when somebody in the corner of my organization comes to me and
says I need to develop a mobile app, you say, great,
I've got a development environment as a service,
I've got a test environment as a service,
I've got a platform to host it on.
And I always think about that as good parenting, right?
Where you give your two-year-old the choices you want and they
get to choice between them and pulling that in together I think
is a good thing.
We're starting to see that on the other extreme in small
glimmers across government.
And agencies and departments are kind of somewhere between those
two spectrums from starting with consolidate their commodity
stuff to looking at kind of rationalizing their use of apps
at the mission level and looking at --
I think the nirvana at the far extreme is when we start doing
this across government and think about where are we
sharing across.
Our goal now is just let's just focus on the departmental level
and think about how to get that done.
The key elements, I think, to a lot of this,
if you turn to page seven, talk about the earlier results and
some of the learnings we've had on this process were, well,
there were sort of three essential elements to doing this
process right.
One was just the establishment of these investment
review boards.
Institutionalizing in a way that can drive the right behavior,
the right look, cascade decision-making in a way that
can do it.
And we applaud your help on that.
And that's been, and there has been follow-on help where you
actually helped to deliver training and looking at some
of this stuff.
Thinking about how that rolls up and institutionalizes in these
site organizations is essential to getting the job done.
The other secret ingredient of that that we discovered during
this process, and I think you, and it was very apparent in the
meetings that we had with all of you,
is that investment review boards aren't IT investment
review boards.
They're enterprise-wide investment review boards.
You know, we had to have, you know, looking at human capital,
real property, other infrastructure,
IT, all should be laid on the table as levers we get to pull
as a leadership team and think about pulling that
stuff together.
And so the second level, the second essential piece other
than IRBs are evaluation models.
Thinking about how do I get a common view across my enterprise
to value these different investments.
And so we learned a lot in our trip to Adobe on
valuation models.
And some of our other visits and we're now delivering training to
agencies on actually how to establish a rigor behind valuing
this people investment versus this IT investment versus this
other investment and normalize that across.
You can actually stack-rank this stuff and understand where you
draw the line and where to invest and where not to invest.
And then the third component, and this is probably more
relevant in government, is the role of the CIO and the
authority of the CIO to actually reach into the dark corners to
have the authority, have the seat at the table in the
investment review board and then reach down and look at that.
And so we're looking at, you know,
starting to institutionalize that.
We put out, Jeff put out or this office put out a memo about a
year ago, the first one that was issued from me on this topic and
we have been really working hard to figure out how to drive
that behavior.
Jeffrey Zients: CIOs are weak staff at many agencies.
Steve Van Roekel: Many agencies, if they were in a component,
they had more budget and more authority than they may now have
at the top of the work chart which is an interesting notion,
as you can imagine.
So there are some agencies out that are doing
really great things.
The Department of Interior is a great example where there is now
one CIO, this guy right to my right,
Bernie Mazer at the department.
The component CIOs have a different title,
they have a different structure and senior leadership is really
kind of bought into --
Jeffrey Zients: Bernie, contrast that to four years ago.
Bernard Mazer: Can I -- is this a Cole Porter song, "Night and Day?"
(laughter)
Contrasted to four years ago is the tenor of the CIO within the
Department of the Interior was as a policy shock.
There was no service delivery, there was no,
ensuring the delivery of results or measurements or looking
really at the investment from a strategic or a mission
driver perspective.
Jeffrey Zients: How many bureau CIOs were there?
Bernard Mazer: We had 30 people that nominated themselves as CIOs.
Jeffrey Zients: These guys have gone from one guardrail to another; right?
Tim Solso: Gives new meaning to the word chief NCIO.
Bernard Mazer: I don't know, I suppose from a human element perspective there
are a lot of significant durable people that --
Jeffrey Zients: But I mean, Steve, this has now become a model.
Steve Van Roekel: Yeah.
Jeffrey Zients: Going from a worst practice to a best practice.
Steve Van Roekel: Yeah, and we're starting, we've seen this at a few agencies in
different extremes.
The Veterans Administration actually did this through
statute a couple of years ago and other things.
The Clinger-Cohen Act that actually creates the role of CIO
in government actually begins by saying "the head of
"agency shall."
And has all the information.
And I think we are just now getting at that inflection point
where the view of IT is sort of a more discretionary thing
tipping over into more strategic things is starting to be
realized and leadership at Interior,
leadership at many agencies are starting to see this and
realizing, wow, I can do things not only better, faster,
cheaper in my operations, I can connect with constituents,
I can up the productivity in my employees.
I can do all of those things that all of you have certainly
realized I'm sure in your organizations many years ago.
And so we're right at that inflection.
And IRBs, valuation and CIO authorities are sort of what we
feel are sort of in this first wave,
the institutional elements of that.
And the future of this process is we learned a lot, you know,
in the way we gather data, the way we're going to do this.
This is going to be a continuous thing.
The government is just going to start doing portfolio stats
every year.
We're going to pull it in earlier in the year so it better
aligns with our budget cycles.
And start to just encourage through both inspire and push to
move the departments up that maturity model and to into
getting there.
Some of the early results we're actually going to be announcing
kind of the macro results in the very near future.
But we're going to -- and I mentioned sort of a window of
about $500 million last time we met.
By the results I have seen we are going to greatly,
by orders of magnitude, exceed that,
and you will see that happen.
But some early results on page seven, you know,
Social Security Administration is doing Enterprise purchasing
for their computer refresh.
It's 56% savings per unit.
I mean, it's just incredible what's waiting out there.
About $60 million next year happening in this --
Enrique Salem: Steve, can I stop you a second?
What is interesting is, you know,
I see these words computer refresh and you mentioned the
word architecture.
Steve Van Roekel: Yeah.
Enrique Salem: And so the question is do we adopt it kind of the most
current architecture as you think about this computer
refresh and we're not going to necessarily just replace
what we had.
Because you used the word architecture
earlier appropriately.
And I think that's one of the biggest opportunities if you
think about how state of the art is changing --
Steve Van Roekel: Yes.
Enrique Salem: -- with virtualization and other things.
Are we taking advantage of that or are we kind of replacing
what we had?
Steve Van Roekel: Very much so.
And there's, in May, I also about the same time as launching
this, launched this very grand digital strategy for government
that just put out "bring your own device" guidance,
talks about sort of thinking about refreshing Enterprise
architecture, virtualization at home use.
All of this stuff in a secure and private way.
And so there are, yeah, this is all lining up.
They are all rubber ducks all in the same stream from a
delivery standpoint.
Enrique Salem: The reason that I say that is because 58 million of them may
not represent the full savings.
Steve Van Roekel: That's right.
Enrique Salem: Because if you think about what would happen is you these costs
should go down, all the other things around it should go down.
So it may be actually a bigger number,
this may be almost like the capital cost.
Jeffrey Zients: System cost savings.
Steve Van Roekel: It is.
Enrique Salem: The total cost of ownership is probably --
Steve Van Roekel: Absolutely.
And Bernie, do you want to add anything to that?
Because you are the last example on there.
Bernard Mazer: I'm the last one.
The, you know, when we look, the aspects when we look at
architecture in the U.S. government and it's been a
promising effort for ten years and we're really looking at
we're using the term architecture you can use.
So when we look at it from a business perspective like within
the Department of Interior, we are using our Enterprise
architects to create business domains for things like
financial management, procurement systems,
human resource systems.
And then also with our mission drivers,
like we're a revenue collection agency for oil and grazing
cattle and all of that, so we're looking at an architect's
perspective in all the applications there.
When you get into the technical architecture,
this goes when we are looking at we're cloud first in the digital
strategy, with there what we are looking at is, all right.
We have got these lifecycles of three to five years,
we need to swap out some of this equipment,
but some of the things that we are looking at that is really
from an asset mentality perspective.
We're moving towards a service delivery.
We want to, really, our customers and the constituents
within the Department of Interior,
they just want data and information.
And who is hosting that physicality of where those
things are, we're indifferent to that.
So we're embarking upon a lot of activities following on O&B's
guidance and actually leadership is really where are those things
that we can move out to the cloud or where are those things
that we can look at from a federal or a private market
space to look at these types of things.
So we mentioned aspects like with virtualization, you know,
we are in the midst of a data center consolidation initiative.
That's the physicality.
A lot of times consolidation in and of itself will only save 10
to 15% of costs but then when you look at new models of
delivering those things like from the cloud and the like then
the savings can be realized 20%, 30%, 40%, 50% on those things.
Steve Van Roekel: And a lot of the portfolios set conversations were around
service delivery as a model to think about kind of
the inflection.
Many times investment review boards have been around in
government for some time.
They were more of a budget scrub tool where people would get
together and say, okay, you know,
central management at the White House told us we need to cut 5%
from our budget, let's figure out how we peanut butter that in
the least painful ways across the organization.
When instead, you know, those things should be viewed as
opportunities to depreciate and opportunities to
deliver service.
Not just a take motion.
It's a give-take motion.
And so thinking about how do we do more service delivery out to
the end points from a centralized way, I think,
and that inflection from asset management to service delivery
is a great thing.
And the productivity gains that are going to come from a lot of
these things both embracing smarter and better mobile
technology to at-home use and virtualization I think are all
going to -- and we truly believe that many of these are
under representing the true savings that will be seen from
both productivity gains, make them absorb work through that as
well as real cost savings because as you rationalize your
apps and think about that, it's likely you are probably going to
optimize a data center because of it.
It's likely you will probably take some percentage of that and
move it to the cloud and cut 30% to 40% of your costs.
And those aren't represented in just thinking about an email
box, how much it costs per employee.
So there is going to be cascading of benefits I think
that we see across the board.
Treasury is another example where they're actually
consolidating across the Enterprise some of their fraud,
waste and abuse systems and they're going to see about a 14%
savings out of that.
And so we have a lot, over 150 examples of very specific
tactical things that are going to be done that were yielded out
portfolio stat and we'll talk about more of that in the next
couple of weeks, so...
So part of the plus for feedback and sort of started the dialogue
here is, you know, if you think about the role of the CIO,
you should think about the role that an investment review board
plays in your enterprise.
You know, the ability to engage and kind of monitor those
dark corners.
You know, one of the biggest problems we have and one of the
things we think portfolio stat V2 will pick up is something I
am calling shadow IT.
You know, it's the IT that is being put on purchase cards or
credit cards in your case, you know,
the little fiefdoms of people that say I need this and,
you know, Bernie doesn't find out he has got a new data center
until the PO comes across his desk and somebody has bought and
set something up in a far corner field office or
something like that.
Are there mechanisms that you have employed to kind of engage
at that level policy, penalty, incentives.
We'd love to kind of understand that.
Because that's the next wave for us is tackling that.
Enrique Salem: You have to ask yourself, why does shadow IT exist?
You see, you've got to get to the root cause.
The root cause of shadow IT is really to invite people feeling
they are not getting enough service from the
existing capability.
And so you have got to help people understand how do you
deal with that problem.
Because instead of -- the classic issue is I have got
money in my budget, I need service, so I'm going to go
spend that money to get the service I need.
When you think about it more holistically,
you say if I take the piece of the budget I have,
put it into the central pot, I may get efficiencies by
doing that.
And you have got to change the mindset that it isn't
necessarily your money that you spend on shadow IT, right?
It's the businesses or the agencies financial resources.
And so you have got to get into the bottom line, I know,
is service delivery isn't where it needs to be.
It's what creates the issue.
Jeffrey Kindler: Go ahead, Liz.
Elizabeth Smith: I think in addition to that, though,
you see that people want control and want their system to design
it exactly as they want.
So, yes, it is, I totally agree with you, Enrique,
that it is having to do with not marketing the service I want,
but oftentimes they all want to have a very prescribed
architecture and they use that as a reason to opt out of what
will get them 80% of the way there and how much you really
need that 20% customization.
So it is a matter of control.
And I guess the one thing I would just say, you know,
in response to that real world example is we had to move the
approval process to get rid of the CD and E priorities out.
We had to remove --
(cell phone ringing)
That's not mine.
(laughter)
We had to remove the approval process from --
Gail McGovern: It's me.
I'm done.
Elizabeth Smith: Okay, I feel better.
From PO to actual green lighting of it, right?
So the first time you see it shouldn't be when a purchase
order comes across your desk.
It is literally you can't issue a purchase order without a
sign-off and we had to move to that.
And even though it was administratively burdensome,
we delegated it to an administrative assistant who
then would kind of go in and say these are the ones,
are you familiar with all of these.
Because of just that reason.
Bernard Mazer: Right, and what we're doing within the department and
actually it's also a reflection within the portfolio stat is,
you know, it's the procurement or whatever the procurements are
we don't want to see them after the fact.
Elizabeth Smith: Exactly.
You can't green light anything until a signature is done.
Bernard Mazer: Well, what we've done in the department is any procurement
over $2,500, which seems extraordinarily small,
is subject to the CIO's approval.
And some of those things we would have exemptions for
emergency requests or things like that.
But what we're encouraging the bureaus and the offices to do is
give us yearly plans of where they are.
And one of the things that we're doing with the yearly plans is
this is where I am paying homage and just an endless gratitude
for the PMAP is when you guys invited us out to look at how
you were doing things.
And, you know, I don't know if your initial impulse is to say
is the government allergic to, like,
private sector practices or not.
We were certainly not doing that.
And one of the things that I want to reflect on,
and it's related, because it is so complex,
is the vendor management function that we have created
within the Department of Interior.
Its classic thing is with, and I will just use this as a small
example of vendor management office or officer,
is we have multiple disciplines within the U.S. government so we
have got a computer specialist that just focuses on the box.
We have a procurement specialist that assures that the
administrative record is okay so that we're not subject to,
you know, an unfair procurement.
We have others that are looking at it from a strategic sourcing
aspect and all of that.
But there is a hybridization of skills that were never there
within our workforce to say I need to have someone that has
the interplay that knows some contracting and knows
about technology.
And it also knows about the landscape of who those
technology vendors are.
And so one of the things that we did with you all was to say,
okay, how can we set up a vendor management office.
And our first pass at the gate when we did an announcement,
we didn't get the right candidates.
We had candidates emerging out of what we call our capital
planning activities or our Enterprise architecture
activities or contract specialists.
So we had to redo the whole application again and then
really focus on what we call the skills and abilities about do
you know about licenses.
Do you know about what -- who are the players like in a
particular sector like telecommunications.
Do you know how to work with other people.
Do you know how to work with contracting officers.
Do you know how to work with budget specialists.
Do you know how to work with the financial
management specialists.
And I can say that based on your insights that you provided from
the visits and everything is, you know,
at this month we're going to be paneling some
candidates for that.
But we are -- it's a work, it's a labor of love that we're doing
in terms of the moving this attitude it's my money,
I have the right to do whatever I want with it.
And we're really moving it into, and I don't say it publicly too
much, but we're looking at it from an architecture or a
strategic perspective on these are the things that are
necessary to accomplish the mission and then how can we look
at it from a more Enterprise or horizontal perspective of
helping you to accomplish that mission.
Jeffrey Kindler: Can I just -- following up on that, a comment and a question.
I was going to make the same comment that Liz did.
My experience with this Shadow IT has to do to the desire for
customization and this notion that --
and it relates to Enrique's point.
I can't get exactly what I want, therefore I'm going to go do
it myself.
So they're kind of related points.
And I'm wondering -- and it goes to your question here about how
do we ensure that PortfolioStat plans are executed
upon effectively?
My question is to what extent are the financial goals that are
being identified in these plans built into the budget process
such that they have to deliver on them so that it doesn't
become a sort of nice to do, go see what you can get and
we'll do it?
To what extent is it actually built into the process?
Because it seems to me if you actually establish these savings
goals and they can only achieve it through the kind of rigor
you're describing and it doesn't allow for customization and
freelancing and doing your own thing,
they'll have to achieve those goals.
And it ensures the plans are executed.
And it minimizes -- it's a virtuous circle.
It does require a little bit of command and control.
No doubt.
So my question is, is this embedded in the
budget processing?
Or is this a sort of collateral exercise?
Steve Gould: I'm glad you asked.
This is the first year in sort of an unprecedented way we have
dovetailed this.
And the way we did it was our budget guidance that is being
played out right now was basically the departments,
in a cascading way, had to cut 10% of the OPEX column.
And we gave them categories of here's the stuff we want
to see cut.
Reaching through PortfolioStat, we're going to sit right with
you and we're going to work on getting 10% out.
We're going to automatically give you a 5% back.
But you have to spend that 5% in these other categories of
things; have citizen phasing, productivity,
things that align with kind of our architectural principles and
sort of the spirit of what we're doing here.
And then we asked departments to give us 5% of
priority add backs.
You know, tell us, in a prioritized list,
what additional 5% of things you would do to net to zero.
And then that gives us a lever, as sort of senior leadership
levels, to look across the whole of government and say, you know,
these guys are being smarter here, smarter here.
We can aggregate based on presidential priorities.
We can do other things that we look at to sort of think about
how we shape the macro budget from a federal level.
But it sort of gave us the tools to basically incent
this behavior.
I would say, you know, on the whole,
looking through a lot of the government and seeing what's
coming through PortfolioStat, we've been pretty
successful in that.
I think it's very much a crawl, walk,
run thing to change culture.
And I think we're still in the crawl stage.
But I think, as we get to V2 of this and V3,
it's great learning.
The question, you know, is beyond that.
We do budgeting once a year.
How do you instill this culture of like sort of where ROI is
realized throughout the year is sort of what we're probably
struggling with the most.
Jeffrey Zients: I want to make sure that I'm playing a little bit of the
timekeeper here.
There's two major hard wirings.
One, Jeff, what you just did which is budget,
and the other Steve talked about earlier which is the CIO that
really is like Bernie now, a strong CIO according to Dan
who's the COO or CEO of the organization.
I think we're pretty convinced that we want to really
push on that.
And we have the ability to take it from a concept to 25 Bernies
across the government.
We believe it's the right answer because it's how we're going to
ultimately get strategic sourcing done.
It's how we're ultimately going to have strong PortfolioStats.
It's also, importantly, how we're going to attract the very
best and brightest to do the job.
Because in policy shops, you're not going to get lots of burns.
But before we do that real hard push, is there any slow down,
caution here about what I guess could be,
to pick up on what you just said Jeff,
could be characterized a little bit as command and control?
I think it is.
Jeffrey Kindler: That's what it needs to be.
Jeffrey Zients: I want to make sure before we make that push,
because we're about to gear up and really go toe to
toe, get done.
Elizabet Smith: In this area, I think we all say our experience is that it took
that to get it done.
Jeffrey Kindler: Absolutely, absolutely.
Elizabet Smith: This is one area where it does take that.
Jeffrey Kindler: I mean, to me it's very similar to the conversation we had last
time about strategic sourcing.
There are some things that require customization.
There are some things that are strategic that should be agency
determined or, in our world, business unit focused.
And there are some things that shouldn't be.
And, you know, you've got to make the call and be honest
about it, seems to me.
Greg Brown: I think the way to reinforce that is --
because it is command and control.
And we've all experienced it.
But as much as possible, even though it may seem
insignificant, sprinkle the stories, examples,
and vignettes as to why.
So it's the constant, in our world,
well corporate wants to do it, not the division.
Jeffrey Zients: Right.
Greg Brown: And it's lack of empowerment, and $2,500 approval,
and goes against autonomy.
And you hear all the objections.
Jeffrey Zients: Twenty-five dollar approval.
Greg Brown: Twenty-five dollars?
Okay.
(laughter)
Jeffrey Zients: You thought the numbers were big in government.
Greg Brown: The flip side is any reinforcement in examples,
illustrative, simple, examples of Interior does this,
Social Security does this, Treasury does this.
And even though we're doing X contraction,
the life cycle total cost of ownership is Y.
And don't assume that people know that.
And so to draw that linkage is really, really,
really important because it takes you from a big brother
punitive, I'm smarter than you are, to a we're all in this,
I need your help.
Gail McGovern: I was going to make a comment about the command and control.
Sign me up for it.
But I have a feeling that your employees are probably more
similar to Red Cross employees than for-profit employees.
And there's a combination here of setting the budget to be
restrictive enough that people can't go off on the
customization route, because this is why you get the
Shadow IT.
And customization is really expensive.
But rather than saying thou shall not do this, that,
or the other thing, if the budget is set in such a way,
they'll say, whoa, I can't afford the Shadow IT.
So, in a way, you're almost forcing the issue for them to
abandon the Shadow IT.
And then there's the appeal.
You don't have financial incentives.
You don't pay as well as the for-profit world.
And there, the appeal is, along with stories, you know,
is this a good use of our taxpayers' dollars?
I mean, I always ask that question, over and over again.
Is this a good use of our donor's hard earned dollars?
If they were in the room with us right now,
would they be pleased to see that we have 700 different IT
departments sprinkled around the American Red Cross?
That appeal that I said once, literally everybody started
saying no, we've got centralize it, we've got purchase together.
I mean, people are working here for a reason.
Jeffrey Zients: And the reason they're working here is the mission of their
agency, not the back office of their agency.
Gail McGovern: Exactly, exactly.
They hate the back office of the agency really.
Jeffrey Zients: And we're capped in terms of how much money we can spend,
which I think is a good thing.
And therefore, it forces our back office to be as efficient
as we possibly can so we can spend more money on the mission.
So that's the incentive.
Gail McGovern: That's the appeal.
So there's the carrot, the mission.
And the stick is just set the budget so low --
and this is what we wound up doing at the American Red Cross.
It was amazing.
Our chapter said, take this, take all the IT,
centralize marketing, centralize our HR systems.
Because it was an affordability issue.
And everyone wanted to fulfill the mission and didn't really
care, to Jeff's point, about the back office.
Debra Lee: I would just add another important carrot is --
back to your point, Steve, earlier --
is if people see the systems improving, you know,
if you have antiquated systems and you aren't able to get your
work done and all of a sudden, you know,
new folks are coming in and they may be laying down the law but,
at the same time, they're making things better.
So you can be more productive and the systems work better.
I think that's an important part of it.
Steve Gould: I think it gets to the stories thing too.
Debra Lee: So you're not just, you know, being punitive.
You're actually helping people and assisting them.
And that's an important part of it.
Jeffrey Zients: So we should -- you know, the first couple of years,
we spent a fair amount of time getting the piloting,
picking some low hanging fruit.
We started to shift as Steve arrived in IT to how do we start
to hard wire in so that things go beyond the time we're here.
I think what PortfolioStat, which would not have happened
but for Pmagine [phonetic] but is one of,
across all of government, one of the top five hard wiring in
things we've done, but for this group,
it would not have happened.
Steve's had a little role in that too.
But I just want to thank you.
And we should just keep pushing on it.
Jeffrey Kindler: Could I ask one quick question?
Jeffrey Zients: Please.
Jeffrey Kindler: I know we're on a time constraint.
But this question I'm going to ask a lot, maybe,
as we go through this.
There's going to come a point in time --
maybe it's soon or maybe it's four years from now --
Jeffrey Zients: I'm not tracking.
Jeffrey Kindler: -- when there's going to be a transition of some kind.
This is a non-political comment.
How do we sustain something like this so it continues beyond the
tenure of the great people that have done it?
Steve Gould: Yeah.
I think part of it is policy, budget formulation,
starting to get it in.
The key though is culture, you know,
teaching agencies how to run an investment review board,
teaching discipline, how to institutionalize the notion of
depreciation, steal from the bottom of the list to give to
the top, you know, steal from the OPEX column to give to the
CAPEX column.
You know, there are pressures applied to our government right
now that will drive that behavior.
We're just trying to fast track it.
You know, cyber security, fiscal pressure, consumerization,
technology, all those things are applying so much pressure to the
function of IT and government.
We'll get there.
Jeffrey Zients: Jeff, something like PortfolioStat,
if we were to stop now, I would worry about it because we're not
-- to use, Debra, what you were talking about,
it hasn't quite gotten all the way through all the (inaudible).
Assuming we have a little more time to do it,
it will get there.
Because remember, you know, Steve's great deputy
Lisa is here.
At OMB, Steve comes and hopefully stays for a long time
and then eventually goes.
But the bulk of Steve's team is here to stay.
The bulk of Bernie's team is there to say.
So as long as we can get kind of macro level, Debra,
what you were talking about, which is success,
I think it would be hard wired in.
And OMB and the agencies are working together.
But it's hard.
And that's why we've got to pick our few things and bang
on them hard.
Jeffrey Kindler: Fantastic.
That's great.
Jeffrey Zients: Good job.
Jeffrey Kindler: Thank you.
Great job.
Steve Gould: Thank you, guys.
Jeffrey Zients: John Berry, who all of you know well.
How are you, John?
John Berry: I am doing great.
Thank you all.
And before some good news and to thank you all for the training
program that we now have up fully running as far as senior
executives, sort of in three components of it --
we have sort of an immediate on boarding training which is,
you know, you come in the door, rather than just being given the
key to the office, you now have a welcome approach in some of
the core briefings that you need to achieve success.
And then we had a program that you've heard from,
Dan and my colleague at the VA, Scott Gould,
the Deputy Secretary there, who's helped us to put together
a program called Leading Edge, which is focusing more on career
development for senior executives who've been in for a
longer period of time.
But we have this critical juncture.
And as many of you pointed out to us,
the period you've really got to focus, where they're excited,
they're wanting to make a difference,
they're coming in the door, is empower your people in that
first 18 months and really hit them hard with a formal training
program that is rigorous and effective.
We piloted that over the past year with working with each of
you and your HR shops.
And I'm extremely grateful for that.
As a way to get to the last question which was just how do
you keep these things alive, we have formally now embedded this
in the Federal Executive Training Institute so that they
have assumed the responsibility and, therefore, sort of,
you know, this program will keep going.
Jeffrey Kindler: Terrific; that's great.
Speaker: And yesterday was our inaugural -- you know,
we're out of the pilot phase and into a formal, you know,
career phase.
And we launched it yesterday.
And it was about leading people.
It was a five hour very intensive program.
And our very own Debra Lee was our keynote speaker.
And I will just highlight -- these are a few of the comments
that we received from the 75 senior executives who were
in attendance.
Jeffrey Zients: Debra says to go slow here.
(laughter)
Are there any graphics, John?
(laughter)
John Berry: I just got these this morning.
So I apologize.
You know, it was just yesterday.
Debra's inspiring and thoughtful presentation,
refreshingly different and informative;
critical private sector insights,
but also her personal story during the Q&A session was
very powerful.
And having the business perspective and the case study
was a true home run.
(applause)
Debra Lee: I may have a next career.
John Berry: It was really wonderful.
And so we're very grateful.
Debra Lee: I must say, I was very impressed with the group.
The questions even -- John opened up the session.
And what was it, 8:30 or 9:00?
John Berry: Opened it up by saying, you know, I'll take any questions.
And there were lots of questions before anything --
and really good questions.
John Berry: It's an engaged, powerful group.
Debra Lee: And I was impressed with the questions I received.
It's a good group.
John Berry: You could see -- and the overall rating of this,
not just the speakers but the effectiveness and the
organization of the program was very high.
And we'll be able to share with you all --
we're going to break this down.
But by next week, we'll have all the stats and the numbers.
And we'll be able to share that through the email to each of
you so you can see the direct results from this.
But, you know, again, wouldn't have happened without your help.
The quality level, the focus areas to hit on.
And I think what was really -- one of the comments we also
received, and I received this during a break from someone,
is the divergence of, you know, of experience that came together
in that five hours of retired senior execs who had been award
winners, prestigious presidential distinguished rank
award winners.
These are like one of ten people in the government who win this
level of award.
You know, Nobel Prize type of achievement.
One of our federal employees won the Nobel Prize this past week,
I should point out, at the National Institute of Standards
for his work in quantum physics, you know.
So conveying that level of quality, of energy,
but also having the leadership of a CEO,
a major CEO take the time to come in and bring the private
sector component, it's been a phenomenal success.
So, you know, we're just grateful.
Tim is in the batter's box, I think.
Our next one -- and this goes to that last comment too about
potential transition.
The next course we're planning specifically on November 8th.
And the thematic is Leading Change Amidst
Organizational Change.
Whether it is a second term or a new administration,
there will be a transition.
And there will be new people.
There will be new leaders, new teams.
And how do you maintain that focus and energy
throughout that?
So that's going to be our focus the next one.
Tim is going to be our main speaker at that one from
the PMAB.
So November 8th we'll be hitting off with that.
And then moving into the March program,
which will be business acumen, building coalitions,
and then the final one of the program, results,
driving results.
Jeffrey Zients: How do people get selected to go to these different sessions?
John Berry: Each agency, we solicit from their senior executives.
And the agencies, we tell them the group we're aiming at here.
Jeffrey Zients: The tenure.
John Berry: We're looking at the senior executives who are within their
first 18 months.
So we're looking at that cadre of your workforce.
And then agencies look at, you know, okay,
is this person in town that day, et cetera.
Jeffrey Zients: Our goal is, you know, to fill all that demand, right,
for that first 18 month period.
John Berry: Absolutely.
And so yesterday we hit about -- I think that final count ended
up being about 82.
So it was a pretty good turn out, you know.
And we had -- what we're getting better at is the last minute
slots, so finding people who then have been pulled off for
some emergency who've created an opening.
We have a back-up team now that we can immediately slide in
there so we don't waste seats.
So it's been very effective.
So can't thank you enough.
And Debra, would you like to add anything?
I mean, you were there.
Debra Lee: A lot of the executives there were very new.
You know, people told me stories about moving from North
Carolina, other places.
So that was refreshing.
But, you know, I really could feel the commitment and their
desire to be better.
I mean, even though they were new to SES,
they were mid-career people.
So they had had experiences other places.
And they were, you know, excited about bringing those experiences
to bear in helping the country and the government.
But also the desire to be better.
And you could tell that by the questions.
You know, just really thoughtful questions.
The question of incentives did come up a couple of times.
Speaker: In what context?
What were they asking?
Speaker: You know, are there -- I think you were asked what other
incentives are there other than -- you know,
since there's not a lot of money to be passed around
in government.
And John gave a very good answer.
And I love your statement about, you know, being upbeat and,
if you have a bad day stay at home because, you know,
leadership requires passion and commitment, and, you know,
everyone's looking up to you.
So I thought that was really good.
But I was just really impressed by the group,
the diversity of the group, their backgrounds.
It was very impressive.
So glad to do it.
And, you know, they seemed interested in BET.
You know, you worry that an entertainment industry company
may seem very far removed from what they do in government.
But you realize that management is management.
And passion is passion.
And, you know, their stories translate.
So it was a lot of fun.
John Berry: Really, really great, great stuff.
And then, on the next program, the standardized
appraisal system.
We've gotten that out in to sort of the top ten,
the largest agencies of the government all up and
running now.
You see there on this sheet, page 13,
the one thing that I'm going to try to really press hard on is I
believe that we can get 14 done in 13.
And so my team is just hearing that right now,
but I've really been looking at this.
And I think we can push this up a year and get it done.
The success rate, the buy up, the take up of this has
been phenomenal.
Everybody who's done it has come away and said,
why didn't we do this before?
You know, the point of -- you said, you know,
the continuity and the consistency for this group,
as you all know, it's, in a 1.8 million size workforce of
something we call the federal government, you know,
we have this veneer of 6,000 people that are our
senior executives.
And, you know, so treating them more with greater consistency
and holding that standard of professionalism,
it's so important that we do that.
And so I think our goal should be to achieve the 96% almost
100% of the government in the 13 time frame.
Jeffrey Zients: That's fantastic.
Jeff, to take on your (inaudible) question,
this is great because it will get done.
And it won't get replaced.
Jeffrey Kindler: It's embedded now.
Jeffrey Zients: It's embedded.
However, that's an important step.
The real value will be in managers taking these seriously,
putting in the time and energy.
So it's the right base for it, and it's a hell of
an accomplishment.
But off that base we've got to get people focused on this to
make it a priority.
Jeffrey Kindler: But they see the value, right.
Jeffrey Zients: Yep.
Jeffrey Kindler: Presumably.
So that becomes a virtuous circle.
Jeffrey Zients: Yes.
But we got to get that humming.
But to get this foundation in place is great.
John Berry: Great, great accomplishment.
Jeffrey Zients: No one's going to undo that.
No one's going say I want to undo a --
John Berry: That's our hope.
With things like -- just going to something like the resume.
Anybody who comes in and wants to go back to knowledge,
skills and ability, essay questions would be nuts.
Jeffrey Zients: Just to recruiting, John's moved to a resume based system for
recruiting, which is so right answer.
Gail McGovern: Well, moving to consistency, I think,
also is a signal to the SESs that they have a career
in government.
And it doesn't start all over again in another branch
of government.
So it's just a way that is telling them you care about
them, I think.
John Berry: One of the things we discussed at a previous meeting --
I've tried this now in three different positions in my
government career over the past 25 years.
It is real hard to, you know, to get the movement of the people
that you really want to move.
You want to be able to move your best.
But because what you have at the top of agencies is so few people
who are there that you can -- you know,
who have the depth and that you can really lean on and count on.
And there's a tendency of I can't spare --
you know, I'm here for 18 months, 2 years,
I can't spare this person for a nine-month rotation type of
thing even though we know the importance of it,
we know the criticality of it.
So one of the things we've been working with the DEPS execs on
is, you know, it may not work in our case at the SES because what
you don't want is people saying well,
I have this SES that I would love to move but that's the
exact wrong person we want to be shifting in that boat.
Jeffrey Zients: What we have done is we've hard wired in rotation before SES.
John Berry: So that's where that focus has been.
To take sort of pre -- what we call our 13, 14,
15 level and are now focusing that rotational effort at
that level.
And we're finding better success there.
Gail McGovern: That's where they're learning.
Exactly.
Jeffrey Zients: John, any questions or requests for counsel from this group?
John Berry: No.
And I also want to thank you.
I asked for your help on some of our --
you gave me very important feedback on our employee
viewpoint survey and how you approach what actual tools and
mechanisms you use.
And we're actually going to be coming out to a couple of the
firms and kicking the tire more directly with our detailed
people, with your detailed people.
But even just the initial input you gave us since the last
meeting, I think, helped us to re-craft a direction we
were moving.
So very, very helpful.
And grateful for that.
Jeffrey Zients: Dan, you want to jump in here?
Speaker: I might just add that that conversation we had at the last
meeting about the painfulness of going through the real review
really informed what we were doing because what we found is,
as Jeff and John just said, you're not going to see people
go back to these old fashioned ways of doing business.
We, in the implementation of this reform,
had to really overcome deep institutional biases,
at least two dimensions.
Number one, we are, par excellence, a technical agency.
So the already present predilection to sort of take SES
away from its roots to thinking about areas of expertise as
opposed to your top veneer of leaders,
we had gone pretty far down that road.
And working very closely with John,
we came up with other approaches.
What we found, you really had institutional concerns to
begin with.
People were not comfortable, first of all,
making the shift to a leadership orientation, and secondly,
being candid with themselves, with their superiors --
this is a conversation we had last time --
and with the people they're evaluating.
This goes together with the phrase --
I think you just used it -- peanut butter.
And there tends to be this sort of homogenization of evaluations
which became sort of empty, relatively speaking.
And so actually, when we went from the four levels to the five
levels, it facilitated moving away from that because you were
able to acknowledge specific nuances that, otherwise,
you're making a pretty draconian choice.
And people don't want to fall, you know,
too far into the next bin.
So what it took in our case was really going to workshops.
We had to make training in initial instances mandatory
because there was a lot of inertia against these
kinds of things.
And then people, as they were forced to face --
and I guess Greg was making the point about specific examples
where the names were moved to protect the innocent --
specific personnel challenges that had been faced and how
people dealt with it, then the people,
our SESs came back and said, you know what,
this actually is helpful.
And I think it facilitated the whole integration.
I think we're, all of us, preoccupied by how you weave
something into the culture and the DNA of the organization.
Beyond the changing of forms, which is absolutely
indispensable, I would call that a necessary but not
sufficient condition.
So I think that it is now well launched.
It's going to take a couple of cycles to get there.
But then you will, ideally, end up with this kind of cadre where
you can take this guy from there and put her over there and so
forth and really get the benefits of management.
I guess the only other thing I would say is we had already been
starting to move in that direction because we recognized,
in interviewing our own people with Bob Derek,
the level of job satisfaction that,
although they had become sort of immured to this rating system,
it was pretty undifferentiated and not really sort of painful
wire scrubbing.
We have found that, now that people are going through this
process, that you are actually getting the cultural acceptance.
It didn't take as long as I feared.
People, especially SESers, are used to being head of the class.
And when you do it from the top with them,
then it's easier for them to carry out down through
their organization.
So I think that it's going to continue to be a static process.
We'll continue to -- we should take feedback and push that
through so -- if it doesn't go, it will get stale, I think.
But I really think that we have, now,
turned a corner in terms of moving SES back toward the
original conception that John has been working so hard,
for the last couple of years, to do.
Jeffrey Zients: Anything before we switch gears?
Jeffrey Kindler: I just would make the comment, this is fantastic,
how far this has come.
I mean, when we started talking about this, whenever it was,
a year or so ago, this is an area I personally have some
passion for.
And I just congratulate you guys on great achievements.
John Berry: Well, we're already looking forward,
in terms of building the great framework of work that we
believe will help regardless what happens in November,
going forward of what do we need in the civil service,
in the workforce, the 21st century.
And one of the key questions we startled to wrestle with --
I was out in Portland, Oregon last week with Nike.
And we're looking at the classification system which has
-- you know, it was developed in the 19th century.
(laughter)
And it governs, you know, issues of great complexity in the
federal government.
But one of the things, you know --
and it gets into very sensitive areas of, you know,
how do you achieve equal pay for equal work but still have enough
flexibility to achieve some of the hybridization that Interior
was talking about, and recognizing people need multiple
skill sets in the 21st century, not silos.
And, you know, so we started working on that program,
looking forward.
And again, I think this is one where each of you have --
there is no right magic answer here.
And, you know, wanting to learn from your experience and how
you've wrestled with this very interesting and difficult topic
is going to be, I think, critical for us going forward.
So I'll be working with Jeff on --
we'll have to figure out how we tee this up in such a way that
we don't waste your time.
But I think it would be a next one where your input early on
could revolutionize this approach.