Large-scale Change in Three Federal Agencies Institutional Alignment as a Precondition for Post-bureaucratic Re.doc

large-scale change in three federal agencies: institutional alignment as a precondition for post-bureaucratic reformminor revisions to some of the tables in this paper were made on 10/18. for presentation at the sixth national public management research conference, bloomington indiana, october 2001this is a draft. comments welcome. please do not quote without permission.james r. thompson college of urban planning and public affairs (mc 278)university of illinois chicago412 s. peoria st.chicago, il. 60607-7064(312) 355-0304large-scale change in three federal agencies: institutional alignment as a precondition for post-bureaucratic reformmanagers seeking solutions to performance problems have a wide selection of organizational nostrums from which to choose. prominent among those nostrums in recent years have been programs such as total quality management, business process reengineering, quality of work life, and high-commitment work systems. although each program has distinctive elements, there has been substantial convergence on the interventions with which they are associated. the convergence is not accidental. a common justification for many of these programs is that the traditional bureaucratic model is obsolete. bureaucratic/scientific management approaches to organizing are criticized as costly, alienating, inflexible and not well suited to the modern environment. for example, nadler and gerstein (1992, p. 113) are critical of traditional, “bureaucratic” approaches to organizing in which, “the enterprise was frequently shortchanged of peoples motivation and creativity, which could not be harnessed as a result of narrow, repetitious jobs that had little discretion.” “unintended consequences” of the bureaucratic system include, “communications bottlenecks, decision making in the absence of the information necessary to make decisions, and an incapacity to act brought about by layer upon layer of rules and managerial approvals.” nadler et al. hence urge the adoption of “high-performance work systems” characterized by semi-autonomous work teams, enriched jobs, and a minimum of hierarchy. thus, the resulting prescriptions are abureaucratic in nature; an emphasis on lateral communication and teaming as an alternative to hierarchy as a means of coordination and control, enlarged rather than specialized jobs the creation of structures which accommodate the “horizontal” nature of production processes as a supplement to the more “vertical,” functional orientation that characterizes the bureaucratic form an orientation toward serving the “customers” needs rather than providing standardized service a distribution of authority throughout the organization rather than a concentration of authority at the toptable 1 lists the interventions associated with several of the better known change programs. as shown in table 2, these interventions can be divided into those which require reciprocity on the part of rank-and-file employees and those that do not. thus job enlargement, employee empowerment/participation, and ad hoc coordination/teaming all require an acceptance on the part of employees of a change in roles. to have the intended effect, these interventions must elicit a high degree of commitment on the part of employees to the organization and its objectives. walton (1980, p. 209) associates these interventions with “high commitment work systems” that are, “designed to generate high commitment, to fully utilize high commitment for gains (human and business), and to depend upon high commitment for its effectiveness. if high commitment is not forthcoming, the system is vulnerable.” the underlying philosophy is that of macgregors (1960) theory y or what abrahamson (1997, p. 496) calls a “normative rhetoric” whereby;employees are assumed to have thoughts and social and psychological needs. the satisfaction of employees needs by organizations, teams, and their leaders not only causes employees personal satisfaction, trust, and loyalty, but also unleashes powerful drives in them to achieve the collectives goals and to freely, creatively, and continuously improve the processes necessary to achieve these goals.39to the extent that a change program includes this type of element, implementation success is highly contingent on the disposition of those at lower levels. the second category of interventions in table 2 do not imply any particular philosophy of management and hence are compatible with either theory x or theory y. organizational change in the public sectorquestions regarding the viability of the post-bureaucratic interventions in the public sector are investigated here in the context of theories of organizational change. the concept of a post-bureaucratic form is central to much of the change literature. this model generally conforms to burns and stalkers (19611994) “organic” form, to kanters (1983) “integrative” approach, likerts (1961) “participative” system of management, and mintzbergs (1979) “adhocracy.” “change” generally connotes a shift from a traditional, hierarchical form to one including features such as those listed in table 1. the terms applied to this particular dynamic vary; some that apply include “transformation” (kochan and useem 1992), “revitalization” (kanter, stein and jick 1992), “large-scale organizational change,” (mohrman et al., 1989) and “strategic change” (tichy 1983). there is widespread agreement however, that such change is difficult. kanter stein and jick (1992, p. 5) comment as follows;a new ideal of a focused, innovative, and flexible organization is widely accepted around the world, but it is much more difficult to find practical examples of organizations not born that way that have fully transformed themselves to attain this ideal. is the flexible twenty-first-century organization model wrong? we dont think so. the problem is one of change-getting from here to there.for students of public administration, a key question relates to how the peculiarities of the public sector environment affect the possibility, likelihood and tactics of change. the leadership question is particularly relevant. public agencies are generally headed by political appointees whose tenure tends to be of short duration. fundamental organizational change is often of 4-8 years in duration. there are few incentives for an agency head to incur the short-term costs that inevitably accompany change when the pay-off in terms of improved performance will accrue to his/her successors. further, political appointees are often selected for their programmatic expertise rather than for their managerial proficiency and hence tend to give policy matters priority over management matters.another factor that complicates attempts at fundamental change in public organizations is that operational changes often have political implications and hence draw the attention and involvement of outside stakeholders. such stakeholders often have ready access to legislators who can, through formal or informal means, impede the implementation of any changes that threaten favored groups. other purported obstacles to large-scale change in public organizations include, “jurisdiction-wide rules over such functions as purchasing and personnel that are very hard to change or work around,” a culture that deters innovation and change, and employees motivated primarily by concerns for job security (rainey, 1999, p. 132).given these constraints, the question arises of whether large-scale organizational change from a bureaucratic to a post-bureaucratic form is possible in the public sector and if so, under what conditions. theory y-type interventions are particularly problematic in the public sector because success is contingent on subtle cultural factors over which leaders have limited control. for example, civil service rules may impede attempts at culture change. strong leaders may be able to induce cultural change requisite to the application of theory y type interventions but the often transient nature of leadership in the public sector suggests that such effects wont be lasting. one of the few examples of culture change on a large scale in the federal government is the tactical air command under the leadership of bill creech (see osborne and gaebler 1992). the author knows of no studies into whether or not the changes creech wrought have persisted. questions that arise include; are post-bureaucratic forms that incorporate some or all of the interventions listed in table 2 viable in the public sector?are the “theory y” interventions which incorporate a substantial “bottom-up” element viable in an institutional environment where hierarchical accountability prevails?can sufficient influence be brought to bear to induce large-scale organizational change in an environment characterized by diffuse authority and intense “external informal political influences on decisions” (rainey 1991, p. 33)?large-scale organizational change at three federal agenciesthe following case studies of large-scale organizational change at three federal agencies provide an empirical basis from which preliminary answers to these questions can be derived. there are differences in the scope and nature of the three change initiatives. the ssa and vba initiatives involve improvements to the agencies respective disability claims adjudication processes. the disability program represents only one of several major programs at each agency and the hence each change initiative involves a subset of all employees. the irs changes, in contrast, are organization-wide in scope. the irs is also the largest of the three with approximately 100,000 full-time equivalents (ftes). ssa has approximately 65,000 ftes of which about 16,000 are accounted for by the disability program; another 6,000 state employees would also be affected by the proposed changes. finally, the vba has approximately 12,000 ftes of which approximately 6,000 work in compensation and pension (c&p) where the changes have been targeted. there are also differences in the elements of the change program at each agency. the change efforts at ssa and vba have included theory-y type interventions while that at the irs did not. veterans benefits administration. vba phase 1: pre-1992, crisis of performance and the search for alternatives. the seeds of the changes that came to fruition at the vba in the 1990s were planted during the late 1980s. like other agencies and consistent with the priorities of the reagan and bush administrations, the vba promoted the use of total quality management (tqm) as a means of improving performance. the philadelphia regional office and insurance center in particular gained reknown for the successful application of tqm precepts. the deputy director of that office during this period was joseph thompson who had started his career as a claims examiner in the new york regional office and had worked at the national office prior to taking the position in philadelphia. subsequent to his appointment as director of the new york regional office (nyro) in 1990, thompson began applying the tqm techniques he learned in philadelphia. by 1992, 85% of the employees at nyro had been trained in tqm and 27 quality improvement teams had been formed to identify and implement changes that could improve work flow and service. when, after changes mandated by the court of veterans appeals and the omnibus reconciliation act caused the time required to process claims to double, thompson and his staff concluded that a more radical approach to change was warranted (u.s. department of veterans affairs 1999). upon receiving designation as a pilot under an office of management and budget quality improvement initiative, thompson and his staff reviewed the management literature and visited several large private corporations which were using innovative management techniques. they also convened focus groups to ascertain the views of their clients on the service provided by nyro. clients complained both about the length of time required to process claims as well as the difficulty of obtaining information on the status of their claim once it had been submitted (u.s. national performance review, 1994a). thompson attributed this in part to the way the organization was structured and to the method used for handling claims. a central problem was the split, mandated by the central office and standard across all 58 regional offices, between a veterans services division, which handled all personal contact with the veteran and an adjudication division which actually processed the claims. when a veteran had a question about a claim, he or she would talk to a counselor in the veterans services division and the counselor would have to retrieve the file from the adjudication division. not having worked the file, the counselor was often unable to respond to many of the questions posed. each time a veteran would call, he/she was likely to get a different counselor and to have to explain his/her circumstances all over again. within the adjudication division, claims were processed in an assembly-line manner with each examiner performing a narrowly-defined task. thompson and his staff determined that a case management model could best accomplish the objectives of both improving customer service and the quality of work life of employees. pursuant to the case management model, the services and adjudication divisions were merged and the jobs of benefits counselor and claims examiner combined into a single position of veterans service representative (vsr). each vsr is assigned a range of claim and social security numbers and handles all claims from that set of clients. furthermore, the case manager takes each claim from start to finish with the exception of disability ratings which are handled by ratings specialists. the intent was to provide the veteran with a single point of contact for all present and future claims and to allow him/her to talk with the worker actually making decisions on the claim.the new structure allows a vastly simplified flow of work consonant with reengineering techniques. instead of a process with as many as 26 steps and multiple hand-offs between workers and divisions, there are now only four steps with a single hand-off between workers. among the advantages are clear accountability for work and fewer delays and errors attributable to hand-offs. the creation of the case manager position and the reengineering of the claims adjudication process have been coupled with the establishment of self-directed work teams. the team structure complements the job changes by extending employee control over certain elements of the work environment. one objective of the redesign was to make the jobs more fulfilling for employees. the consolidation of divisions and the replacement of the claims examiners and benefit counselors with the case manager position allows each employee to perform a greatly expanded range of functions. benefits counselors who had previously been restricted to talking with the veterans and taking claims could see the claim through to completion. claims examiners who previously had no direct contact with veterans could now relate the claims folder with an individual. the intent, consistent with job enrichment theory (hackman and oldham 1980), was to motivate employees to perform well as a consequence of being able to see a claim through from start to finish. vba phase 2: 1993-97, diffusion of the case management model. the quality initiative pilot site designation enabled thompson and his staff to put the changes in place even though they represented a radical departure from how other regional offices were organized and even though numerous waivers of internal rules and procedures were required. after clintons election, thompson and his staff were able to continue their initiative as a “reinvention laboratory” under the auspices of the national performance review (npr). in fact, the office gained a degree of notoriety as the first recipient of vice president gores hammer award. it also received prominent billing as an exemplar of reinvention principles in the 1994 npr report (u.s. national performance review 1994b). the npr influence as well as pervasive performance shortcomings caused vba head john vogel to mandate fundamental changes in claims processing procedures throughout the vba in 1994. the objectives, according to a memo from vogel to the regional directors (1994) were; “improved overall service with an emphasis on customer satisfaction and heightened interaction with veterans and their dependents. “the development of a team environment and decentralization of decision-making authority, with the blurring and gradual elimination of unnecessary division lines “a reduction in the numbers and layers of unnecessary management (with nprs recommended ratio of 1:15 as a goal). “a streamlining of the work processes and a decided reduction of case hand-offs, with a focus on elements of the case management process.”the regional offices were directed to adopt one of four models; each model represented an innovative approach to claims processing developed at one of four regional offices, including new york. the new york model was the most radical of the four; the others either preserved a functional division between the veterans services division and the adjudication division and/or a higher degree of job specialization. although regional offices were asked to submit implementation plans by january, 1995, there was resistance from many offices, including some that were performing well on a comparative basis using the traditional approach to claims processing. in octobe