Really Reinventing Government
Both parties promise to reinvent government. We asked the father of
corporate restructuring to show them how
by Peter F. Drucker
Vice President Al Gore's promise to "reinvent government," proclaimed with
great fanfare in the first year of the Clinton Administration, produced
only a nationwide yawn. (The similar promise made in the Republicans'
"Contract With America," last year, initially met with no better
response.) There has been no lack of publicity about the Gore initiative
since. Press release after press release has announced the reinvention of
yet another agency or program; big conferences, one chaired by the
President himself, have been convened, and any number of TV appearances
made. Of all the domestic programs of the Clinton Administration, this is
one of the few in which there actually have been results and not just
speeches. Yet neither the public nor the media have shown much interest.
And last November's elections were hardly a vote of confidence in the
Administration's performance at reinventing government.
There are good reasons for this. In any institution other than the federal
government, the changes being trumpeted as reinventions would not even be
announced, except perhaps on the bulletin board in the hallway. They are
the kinds of things that a hospital expects floor nurses to do on their
own; that a bank expects branch managers to do on their own; that even a
poorly run manufacturer expects supervisors to do on their own--without
getting much praise, let alone any extra rewards.
Here are some examples--sadly, fairly typical ones:
* In Atlanta, Georgia, six separate welfare programs, each traditionally
with its own office and staff, have consolidated their application process
to give "one-stop service." The reinvented program is actually getting
phone calls answered, and on the first try.
* In Ogden, Utah, and Oakland, California, among other places, the
Internal Revenue Service is also experimenting with treating the taxpayers
as customers and with one-stop service, in which each clerk, instead of
shuffling taxpayers from one office to another, has the information to
answer their questions.
* The Export-Import Bank has been reinvented. It is now expected to do
what it was set up to do all of sixty years ago: help small businesses get
* The U.S. Geological Survey office in Denver is supposed to sell maps of
the United States to the public. But it is almost impossible to find out
what maps to order and how and where to order them, since the catalogue is
carefully hidden. And the very fact that a map is in demand by the public
all but guarantees that it will be unobtainable. It cannot be reprinted
simply because the public wants to buy it; another government agency must
order it for internal use. If the map sells well, it therefore immediately
goes out of print. What's more, the warehouse is so poorly lit that when
an order for a map in print comes in, the clerks cannot find it. The task
force that the Geological Survey created seven months ago to reinvent all
this has succeeded so far in putting more lights in the warehouse and
making a few other minor improvements.
For the future, however, more-ambitious things are promised:
* The Department of Agriculture proposes to trim its agencies from
forty-two to thirty, to close more than 1,000 field offices, and to
eliminate 11,000 jobs, for savings of about $3.6 billion over five
* Of the 384 recommendations of ways to reinvent government identified by
the Vice President in 1993, about half are being proposed in the budget
for fiscal year 1995. If all these recommendations are accepted by
Congress, they should result in savings of about $12.5 billion over two
But neither the trimming of the Department of Agriculture nor the Vice
President's 384 recommendations are new. We have long known that a great
many agricultural field offices are in cities and suburbs where few if any
farmers are left. Closing them was first proposed in the Eisenhower years.
And a good many, perhaps the majority, of Gore's 384 recommendations were
made ten years ago, in the Grace Report, under President Ronald Reagan.
Nor is it by any means sure that all of these proposals and
recommendations will become law. Mike Espy unveiled large cuts in the
bloated USDA on December 6. But he had announced in October that he would
be resigning effective December 31, and there is no guarantee that there
will be someone at the top of the department committed to presiding over
Even if all of these proposals were to be enacted, the results would be
trivial. The proposed Agriculture Department saving of $3.6 billion over
five years works out to about $720 million a year--or around one percent
of the annual department budget of almost $70 billion. A saving of $12.5
billion looks like a lot of money. But over two years the federal
government spends $3 trillion. An annual saving of $6 billion
-and this is many times more than Congress is likely to accept--would thus
be a cut of no more than two tenths of one percent of the budget. Surely
the only way to describe the results of Gore's efforts so far is with the
old Latin tag "The mountains convulsed in labor only to give birth to a
ridiculous, teensy-weensy Mouse."
The reason most often given for this embarrassment of nonresults is
"resistance by the bureaucracy." Of course, no one likes to be reinvented
by fiat from above. But actually, one positive result of Gore's program
has been the enthusiastic support it has received from a great many people
in the government's employ--especially the low-level people who are in
daily contact with the public and are thus constantly frustrated by red
tape and by such inane rules as the one that prevents their selling the
beautiful Geological Survey maps, of which they are justly proud.
Nor is lack of effort the explanation. Some of the most dedicated people
in Washington meet week after week to produce these embarrassing
nonresults. They include the deputy secretaries of the major government
departments. Vice President Gore--an unusually energetic man--pushes and
pushes. And the driving force behind the whole endeavor is the most
knowledgeable of all Washington insiders, Alice Rivlin, formerly the
director of the Congressional Budget Office, and now the director of the
Office of Management and Budget.
These able people are getting nowhere fast because their basic approach is
wrong. They are trying to patch and to spot-weld, here, there, and
yonder--and that never accomplishes anything. There will be no results
unless there is a radical change in the way the federal government and its
agencies are managed and paid. The habit of continuous improvement has to
be built into all government agencies, and has to be made
Continuous improvement is considered a recent Japanese invention--the
Japanese call it kaizen. But in fact it was used almost eighty years ago,
and in the United States. From the First World War until the early
eighties, when it was dissolved, the Bell Telephone System applied
"continuous improvement" to every one of its activities and processes,
whether that was installing a telephone in a home or manufacturing switch
gear. For every one of these activities Bell defined results, performance,
quality, and cost. And for every one it set an annual improvement goal.
Bell managers weren't rewarded for reaching these goals, but those who did
not reach them were out of the running and rarely given a second chance.
What is equally needed--and is also an old Bell Telephone invention--is
"benchmarking": every year comparing the performance of an operation or an
agency with the performances of all others, with the best becoming the
standard to be met by all the following year.
Continuous improvement and benchmarking are largely unknown in civilian
agencies of the U.S. government. They would require radical changes in
policies and practices which the bureaucracy, the federal employees'
unions, and Congress would all fiercely resist. They would require every
agency--and every bureau within it--to define its performance objective,
its quality objective, and its cost objective. They would require defining
the results that the agency is supposed to produce. However, continuous
improvement and benchmarking need different incentives. An agency that did
not improve its performance by a preset minimum would have its budget cut.
And a manager whose unit consistently fell below the benchmark set by the
best performers would be penalized in terms of compensation or--more
effective--in terms of eligibility for promotion. Nonperformers would
ultimately be demoted or fired.
But not even such changes, though they would be considered radical by
almost anybody in Congress or the federal bureaucracy, would warrant being
called a reinvention of government. Things that should not be done at all
are always mishandled the worst--and thus here we see the greatest
improvements when attempts are made to do better what is already being
Any organization, whether biological or social, needs to change its basic
structure if it significantly changes its size. Any organization that
doubles or triples in size needs to be restructured. Similarly, any
organization, whether a business, a nonprofit, or a government agency,
needs to rethink itself once it is more than forty or fifty years old. It
has outgrown its policies and its rules of behavior. If it continues in
its old ways, it becomes ungovernable, unmanageable, uncontrollable.
The civilian part of the U.S. government has outgrown its size and
outlived its policies. It is now far larger than it was during the
Eisenhower Administration. Its structure, its policies, and its rules for
doing government business and for managing people go back even further
than that. They were first developed under William McKinley after 1896,
and were pretty much completed under Herbert Hoover from 1929 to 1933.
In fact there is no point in blaming this or that President for the total
disarray of our government today. It is the fault neither of the Democrats
nor of the Republicans. Government has outgrown the structure, the
policies, and the rules designed for it and still in use.
The first reaction in a situation of disarray is always to do what Vice
President Gore and his associates are now doing--patching. It always
fails. The next step is to rush into downsizing. Management picks up a
meat-ax and lays about itself indiscriminately. This is what the
Republicans and (as of last December) President Clinton now promise. In
the past fifteen years one big American company after another has done
this--among them IBM, Sears, and GM. Each first announced that laying off
10,000 or 20,000 or even 50,000 people would lead to an immediate
turnaround. A year later there had, of course, been no turnaround, and the
company laid off another 10,000 or 20,000 or 50,000--again without
results. In many if not most cases, downsizing has turned out to be
something that surgeons for centuries have warned against: "amputation
before diagnosis." The result is always a casualty.
But there have been a few organizations--some large companies (GE, for
instance) and a few large hospitals (Beth Israel in Boston, for
instance)--that, without fanfare, did turn themselves around, by
rethinking themselves. They did not start out by downsizing. In fact, they
knew that the way to get control of costs is not to start by reducing
expenditures but to identify the activities that are productive, that
should be strengthened, promoted, and expanded. Every agency, every
policy, every program, every activity, should be confronted with these
questions: "What is your mission?" "Is it still the right mission?" "Is it
still worth doing?" "If we were not already doing this, would we now go
into it?" This questioning has been done often enough in all kinds of
organizations--businesses, hospitals, churches, and even local
governments--that we know it works.
The overall answer is almost never "This is fine as it stands; let's keep
on." But in some--indeed, a good many--areas the answer to the last
question is "Yes, we would go into this again, but with some changes. We
have learned a few things."
An example might be the Occupational Safety and Health Administration,
created in 1970. Safety in the workplace is surely the right mission for
OSHA. But safety in the American workplace has not improved greatly in the
past twenty-five years. There may be slightly fewer disabling injuries now
than there were in 1960 or 1970, and to be sure, the work force has
increased tremendously over those years. But considering the steady shift
of the labor force from highly unsafe to fairly safe work (for example,
from deep-level coal mining to the safer surface strip mining, and
especially the shift from inherently dangerous manufacturing jobs to
inherently safe office and service jobs), safety in the American workplace
may actually have deteriorated since 1970. Such a result may mean that we
have been going about the task in the wrong way. In OSHA's case we
actually understand the problem. OSHA runs on the assumption that an
unsafe environment is the primary cause of accidents, and it therefore
tries to do the impossible: create a risk-free universe. Of course
eliminating safety hazards is the right thing to do. But it is only one
part of safety, and probably the lesser part. In fact, by itself it
achieves next to nothing. The most effective way to produce safety is to
eliminate unsafe behavior. OSHA's definition of an accident--"when someone
gets hurt"--is inadequate. To cut down on accidents the definition has to
be "a violation of the rules of safe behavior, whether anyone gets hurt or
not." This is the definition under which the United States has been
running its nuclear submarines. Anyone in a nuclear sub, whether the
commanding officer or the most junior seaman, is punished for the
slightest violation of the rules of safe behavior, even if no one gets
hurt. As a result, the nuclear submarine has a safety record unmatched by
any industrial plant or military installation in the world; and yet a more
unsafe environment than a crowded nuclear sub can hardly be imagined.
OSHA's program should, of course, be maintained, and perhaps even
expanded. But it needs to be refocused.
This analysis will consider a number of agencies whose mission is no
longer viable, if it ever was--agencies that we would definitely not start
now if we had the choice.
The mission may have been accomplished, for instance. An example is that
most sacred of cows, the Veterans Administration's 171 hospitals and 130
nursing homes. When they first became accredited hospitals, around 1930,
competent hospitals were scarce in the rural areas and small towns where
many veterans lived. Today a competent hospital is easily accessible to a
veteran almost anywhere. Medically, most VA hospitals are at best
mediocre; financially, they are costly to the government. Worst, they are
not neighborhood facilities, and thus veterans-
especially elderly, chronically ill ones--sometimes have to travel far
from their communities and their families just when they most need
community and family support. The VA hospitals and nursing homes long ago
accomplished what they were set up to do. They should be closed and the
job contracted out to local hospitals and HMOs.
Or there may be no mission left. For example, would we now establish a
separate Department of Agriculture? A good many Americans would answer
with a loud no. Now that farmers are no more than three percent of the
population, and productive farmers are half that (and "agribusinesses" to
boot), a bureau at Commerce or Labor is probably all we need.
Some perfectly respectable activities belong elsewhere. Why, for instance,
should a scientific agency like the Geological Survey run a retail
business? Surely there are enough businesses around, map stores or book
chains, to sell its maps. Or they could be offered in the catalogues of
firms that sell outdoor gear.
Continuing with activities that we would not now choose to begin is
wasteful. They should be abandoned. One cannot even guess how many
government activities would be found to be worth preserving. But my
experience with many organizations suggests that the public would vote
against continuing something like two fifths, if not half, of all civilian
agencies and programs. And almost none of them would win a vote--that is,
be deemed to be properly organized and operating well--by a large
Together the qualified yea votes and nays are likely to be awarded in any
organization to some three fifths or two thirds of programs and
activities. The thorny cases are the programs and activities that are
unproductive or counterproductive without our quite knowing what is wrong,
let alone how to straighten it out.
Two major and highly cherished U.S. government programs belong in this
category. The welfare program is one highly visible example. When it was
designed, in the late 1930s, it worked beautifully. But the needs it then
tackled were different from those it is supposed to serve today: the needs
of unwed mothers and fatherless children, of people without education,
skills, or work experience. Whether it actually does harm is hotly
debated. But few claim that it works or that it even alleviates the social
ills it is supposed to cure.
And then there is that mainstay of U.S. foreign policy during the Cold War
years: military aid. If it is given to an ally who is actually engaged in
fighting, military aid can be highly productive: consider Lend-Lease to
Great Britain in 1940-1941, and military aid to an embattled Israel. But
military aid is counterproductive if it is given in peacetime to create an
ally--a principle that Plutarch and Suetonius accepted as proved. Surely
our worst recent foreign-policy messes--Panama, Iran, Iraq, and Somalia
are prime examples--were caused by our giving military aid to create an
ally. Little, if any, military aid since the beginning of the Cold War has
actually produced an ally. Indeed, it usually produced an enemy--as did
Soviet military aid to Afghanistan.
The favorite prescription for such programs or activities is to reform
them. President Clinton's welfare reform is one example, as is the welfare
reform proposed by the new Republican majority. Both are quackery. To
reform something that malfunctions--let alone something that does
harm--without knowing why it does not work can only make things worse. The
best thing to do with such programs is to abolish them.
Maybe we should run a few--a very few--controlled experiments. In welfare,
for instance, we might try, in some carefully chosen places across the
country, to privatize retraining and placing long-term welfare recipients.
Indianapolis Mayor Stephen Goldsmith has achieved promising results in
this area. In health care we might try several different approaches in
different states: for example, managed competition in California, home of
the strong and experienced health-care wholesaler Kaiser Permanente;
single-payer health care on the Canadian model in New Jersey, where there
has been support for it; and in Oregon rationing on the basis of medical
expectations, which is now being tried for the care of indigents.
But in areas where there are no successes to be tested--for example,
military aid--we should not even experiment. There are no hypotheses to
test. We should abandon.
Rethinking will result in a list, with activities and programs that should
be strengthened at the top, ones that should be abolished at the bottom,
and between them activities that need to be refocused or in which a few
hypotheses might be tested. Some activities and programs should, despite
an absence of results, be given a grace period of a few years before they
are put out of their misery. Welfare may be the prime example.
Rethinking is not primarily concerned with cutting expenses. It leads
above all to a tremendous increase in performance, in quality, in service.
But substantial cost savings--sometimes as much as 40 percent of the
total--always emerge as a by
product. In fact, rethinking could produce enough savings to eliminate the
federal deficit within a few years. The main result, however, would be a
change in basic approach. For where conventional policymaking ranks
programs and activities according to their good intentions, rethinking
ranks them according to results.
An Exception for Crusades
Anyone who has read this far will exclaim, "Impossible. Surely no group of
people will ever agree on what belongs at the top of the list and what at
the bottom." But, amazingly enough, wherever rethinking has been done,
there has been substantial agreement about the list, whatever the
backgrounds or the beliefs of the people involved. The disagreements are
rarely over what should be kept or strengthened and what should be
abandoned. They are usually over whether a program or activity should be
axed right away or put on probation for two or three years. The programs
that people do not agree on are the ones concerned not with results but
with "moral imperatives."
The best American example is the war on drugs. After many years it has had
little effect on substance abuse and addiction, and much of the effect it
has had is deleterious. But it underlies the destruction of our cities in
that addicts are prostituting themselves, mugging, robbing, or killing to
earn enough for the fix that the war on drugs has made prohibitively
expensive. All the war on drugs is actually doing, in other words, is
enriching drug dealers and penalizing and terrorizing nonusers, especially
in the inner city. But the war on drugs is a crusade. What lies behind it
is not logic but outrage. Stopping it, no matter how beneficial, would be
"immoral." The smart thing to do is to exclude such crusades from the
rational analysis involved in rethinking. Fortunately, there are never a
lot of them. As for the rest--more than 90 percent of all programs and
activities--rethinking will in all probability produce substantial
Surely, it will be argued, even total agreement among highly respected
people will be futile. Congress will not accept anything like this.
Neither will the bureaucracy. And lobbyists and special interests of all
persuasions will be united in opposition to anything so subversive.
Perfectly true: action on rethinking is impossible today. But will it be
impossible tomorrow? In the last presidential election almost one fifth of
the electorate voted for Ross Perot, the man who promised to get rid of
the deficit by slashing government expenditures. A substantial
number--perhaps another fifth--agreed with his aims even though they could
not bring themselves to vote for him. Just now the federal deficit is
declining. But even without health-care reform or welfare reform the
deficit will again grow explosively, at the latest by 1997. And then the
demand for cutting the deficit may become irresistible and overwhelm
Congress, the bureaucracy, and the lobbyists. If no rational rethinking of
government performance has yet occurred, we will in all likelihood do what
so many large companies have done--apply the meat-ax and downsize. We will
then destroy performance, but without decreasing the deficit. In fact, it
is predictable that the wrong things will then be cut--the things that
perform and should be strengthened.
But if we have a plan that shows how and where the government needs to be
rethought, we have a chance. In a crisis one turns to people who have
thought through in advance what needs to be done. Of course, no plan, no
matter how well thought through, will ever be carried out as written. Even
a dictator has to make compromises. But such a plan would serve as the
ideal against which the compromises were measured. It might save us from
sacrificing things that should be strengthened in order to maintain the
obsolete and the unproductive. It would not guarantee that all--or even
most--of the unproductive things would be cut, but it might maintain the
productive ones. Within a few years we are likely to face such a crisis,
as the federal budget and the federal deficit resume explosive growth
while taxpayers grow ever more resistant to tax increases and ever more
contemptuous of government and its promises.
In fact, we may already be very close to having to reinvent government.
The theory on which all governments in the developed world have operated
at least since the Great Depression (Harry Hopkins, Franklin Delano
Roosevelt's adviser, called it "Tax and Tax, Spend and Spend") no longer
delivers results. It no longer even delivers votes. The "nanny state"--a
lovely English term--is a total failure. Government everywhere--in the
United States, the United Kingdom, Germany, the former Soviet Union--has
been proved unable to run community and society. And everywhere voters
revolt against the nanny state's futility, bureaucracy, and burdens. The
landslide in which California's voters last November enacted Proposition
187, abolishing health care and even free public education for illegal
immigrants, is but one example. But the countertheory that preaches a
return to pre-First World War government has also not proved out--the theory that was
first formulated in 1944 in Friedrich Hayek's The Road to Serfdom, and
that culminated in neo-conservatism. Despite its ascendancy in the 1980s,
despite Ronald Reagan and Margaret Thatcher, the nanny state has not
shrunk. On the contrary, it is growing ever faster. As the new Republican
majority is soon going to find out, neither maintaining nor curtailing the
nanny state is acceptable to the public.
Instead we will have to find out what government programs and activities
in community and society do serve a purpose. What results should be
expected of each? What can governments--federal, state, local--do
effectively? And what nongovernmental ways are there to do worthwhile
things that governments do not and cannot do effectively?
At the same time, as President Clinton learned in his first two years,
government cannot opt out of the wider world and become domestic only, as
he so very much wanted it to be. Foreign brush fires--in Bosnia, in
Rwanda, in the former Soviet Union--have to be attended to, because they
have a nasty habit of spreading. And the growing threat of international
terrorism, especially if used as a weapon by outlaw governments, will
surely require more government involvement in foreign affairs, including
military matters, and more international cooperation.
By now it has become clear that a developed country can neither extend big
government, as the (so-called) liberals want, nor abolish it and go back
to nineteenth-century innocence, as the (so-called) conservatives want.
The government we need will have to transcend both groups. The megastate
that this century built is bankrupt, morally as well as financially. It
has not delivered. But its successor cannot be "small government." There
are far too many tasks, domestically and internationally. We need
effective government--and that is what the voters in all developed
countries are actually clamoring for.
For this, however, we need something we do not have: a theory of what
government can do. No major political thinker--at least not since
Machiavelli, almost 500 years ago--has addressed this question. All
political theory, from Locke on through The Federalist Papers and down to
the articles published by today's liberals and conservatives, deals with
the process of government: with constitutions, with power and its
limitations, with methods and organizations. None deals with the
substance. None asks what the proper functions of government might be and
could be. None asks what results government should be held accountable
Rethinking government, its programs, its agencies, its activities, would
not by itself give us this new political theory. But it would give us the
factual information for it. And so much is already clear: the new
political theory we badly need will have to rest on an analysis of what
does work rather than on good intentions and promises of what should work
because we would like it to. Rethinking will not give us the answers, but
it might force us to ask the right questions.
Now is the time to start, when polls show that less than a fifth of the
American public trusts government to do anything right. Vice President
Gore's "reinventing government" is an empty slogan so far. Yet what the
slogan implies is what free government needs--and
Peter F. Drucker is a writer, a consultant,
and a professor of social science at Claremont
Graduate School. He is the author of more than
twenty books, including Managing for the Future
(1992) and Post-Capitalist Society (1993).
Copyright © 1995 by The Atlantic Monthly Company. All rights