Management of VA: Implementing Strategic Management Process Would Improve Service to Veterans

Published by the Government Accountability Office on 1990-08-31.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                 United   States   General   Accounting   Office

GAO              Report to the Congress

                 Implementing Strategic ;
                 Management Process I.y
                 Would Improve
                 Service to Veterans

GAO   United States
      General Accounting Office
      Washington, D.C. 20548

      Comptroller General
      of the United States

      August 31, 1990

      To the President of the Senateand the
      Speakerof the Houseof Representatives
      This report on managementof the Department of Veterans’ Affairs (VA)
      is one of a seriesof GAO managementreviews of maor departments and
      agencies.The basic principles of strategic managementdescribedin this
      report are applicable to any federal department or agency.The process
      enhancesan organization’s capacity to be responsiveto a dynamic envi-
      ronment, proactively managechange,and avoid crisis management.The
      Secretary initiated a Department-wide strategic managementprocessfor
      VA in April 1990. Successfulimplementation of the processwill require
      the sustained commitment of the current and future Secretariesof VA,
      the Congress,the Office of Managementand Budget, and the veterans’
      service organizations.

      The report presents the results of our review of strategic managementat
      VA. It summarizes and expands on our October 12,1989, briefing to the
      Committees on Veterans’ Affairs of the Senateand the Houseof Repre-
      sentatives, and is a segmentof an ongoing general managementreview
      of VA. As part of that review, we issued a report to the Secretary about
      VA'S information resourcesmanagement.’In addition, we are reviewing
      VA'S financial managementactivities and plan to review other manage-
      ment issues.

      A  strategic managementprocessfocusesthe Secretary’s attention on
      identifying and resolving key issues-the most critical questions that
      affect an agency’sfuture direction, services,and basic values.’ Through
      this process,the Secretary can set a clear direction and move the
      Department toward achieving it.

      Our objectives were to (1) identify lessonslearned from past VA
       Department-wide strategic managementprocessesand (2) develop a
      flexible, secretarial-level strategic managementprocessthat could be
      adapted to VA. We analyzed documentation on VA'S Department-wide
      strategic managementprocessessince 1981, and we talked with former
      administrators, VA managers,and representatives of veterans’ service
      organizations about those efforts. We also reviewed literature on public

       Ihformari~n   Resoums:   wt           Commitment    Needed to Meet Information Challenges (GAO/
       -2.7,          Apr. 19,lDW.
       'These issues are sometimes referred to a, strategic issues.

       Pye 1                                                          GAO/EIBD90109 Muugement       of   VA

                          and private sector strategic management.The results of our review are
                          summarized below and detailed in appendix I.

Background                veterans. It currently employs over 219,090 people on a full-time basis,
                          has an annual budget of about $30 billion, and operates three major
                          components-the Veterans Health Servicesand ResearchAdministra-
                          tion, Veterans Benefits Administration, and National Cemetery System.
                          VA'S mission involves delivering a wide range of services-medical,
                          housing, insurance, education, income, and burial. Its mission also
                          entails using its facilities to educate and train a large portion of the
                          nation’s medical practitioners, through affiliations with medical schools.
                          and supporting researchthat benefits veterans’ health care and quality
                          of life. In addition, VA is responsible for providing medical servicesin a
                          war or national emergency.

VA FacesMajor             Today VA faces significant managementchallengesin effectively fulfil-
Management Challenges     ling its mission. Someof VA'S aging medical facilities have not kept pace
                          with changesin patient treatment patterns. Further, weaknessesin cer-
Today and in the Future   tain information and quality assurancemanagementsystemshave hin-
                          dered VA’S ability to manageprograms and have contributed to delays in
                          service to veterans.

                          Dramatic changesin the veteran population compound these challenges.
                          This population is aging swiftly, and VA will need to make system adjust-
                          ments to meet the medical and income needsof an older population. Pro-
                          jections show the total number of veterans dropping from 27 million in
                           1990 to 13 million by 2040. This implies the need for well-conceived,
                           long-range, nationwide plans to ensure that VA can effectively adapt to
                           these population trends By early in the next decade,most veterans will
                           not have fought in a war, indicating the need to reassessprograms and
                           servicesestablished primarily for wartime or combat veterans.

                           To addressthese challenges,VA must work with groups affected by and
                           interested in VA'S programs. These groups, such as the Congress,vet-
                           erans’ service organizations, and medical schoolsaffiliated with VA hos-
                           pitals, represent veterans and communities dependent upon VA facilities
                           for services and jobs.

                           Pye 2                                        GAo/EuD-w1o9   Muugenaent of VA
                        A strategic managementprocesscould enable VA to managechange
VA Needs a Strategic    proactively and to avoid crisis management.The result would be more
Management Process      effective and higher quality servicesto veterans. Starting in 1981, VA
                        attempted to implement a strategic managementprocess,but design and
                        implementation flaws led to the demiseof these efforts. Without a stra-
                        tegic direction, VA managementand interested external groups will not
                        be able to judge the merits of proposed VA managementactions to change
                        services or programs.
                        A Secretary-led processshould consider VA’S unique operational, cul-
                        tural, and environmental circumstances.It also should focus on gaining
                        support from internal managersand key external groups for changesin
                        services by involving them in the process.Most importantly, strong, sus-
                        tained, and visible secretarial leadership of and commitment to a stra-
                        tegic managementprocessare essential to its success.A future process
                        should consider the following lessonslearned from past efforts to imple-
                        ment strategic managementin VA.

Involve Key Line        Key line managers from headquarters and field offices should partici-
Managers                pate in formulating a strategic direction for VA.Their participation
                        would enhancethe likelihood of congruencebetween VA'S future direc-
                        tion and line managers’ actions. Past efforts did not involve key line
                        managersfrom the field in a meaningful dialogue on key issuesfacing
                        veterans. Without an opportunity to participate in discussionsof these
                        issues,these managersdid not support the efforts.

Ensure That Strategic   The purpose of a strategic managementprocessis to establish a direc-
                        tion for VA basedon the priority needsof the veteran. Planned manage-
Direction Shapesthe     ment actions to achieve VA'S direction should shape its budget. However,
Budget                  VA managerssaid that in the past, the Administrator’s staff did not pre-
                        sent strategic managementas a way to develop a clear future direction.
                        Instead, they used the strategic managementprocessas a budgetary tool
                        to cut costs and implemented it in an “abrasive” manner, ultimately
                        resulting in active opposition by line and staff managers.

Focus on Key Issues     The processshould elevate only the key issuesto the Secretary’s atten-
                        tion. Line managersand top VA officials criticized past Administrator-
                        level attempts to implement strategic managementfor creating a “mean-
                        ingless paperwork exercise.” These past efforts required detailed plans
                        that covered too many component objectives and did not focus on the

                         Pye8                                        GAO/lIBIbWloB   Management   of VA
                            key issuesthat would have benefitted from the Administrator’s

Balance Component Aims      A strategic managementprocessshould foster a shared understanding
With Departmental           of the Department’s future direction among the three components,
                            enhancing consistencybetween their day-today actions and the Depart-
Direction                   ment’s aims. A unified strategic direction for the whole Department,
                            basedon veterans’ priority needs,provides the neededcommon focus-
                            a shared vision of the future. In the past, however, the level of
                            autonomy attained by VA’S components,coupled with a lack of clarity
                            regarding VA'S direction, has sometimesinhibited development of a
                            Department-wide, coordinated approach to addresskey issues,thus hin-
                            dering delivery of servicesto veterans.

Seek Participation of Key   Early in the strategic managementprocess,the Secretary should bring in
External Groups             external groups that influence VA’S policies and operations, such as the
                            Congress,the veterans’ service organizations, and the Office of Manage-
                            ment and Budget (OIKEJ). We recognizethe difficulty in bringing together
                            historically disparate interests, but their early and active participation
                            should lead to somecommon ground of understanding and convergence
                            of interests that could permit VA to advancein new directions. Without
                            the support of these key external groups, VA’S past attempts to plan stra-
                            tegically were not successful.

                            To fill this void in planning and to protect the level of veterans’ services
                            against 0~~‘s attempts to lower VA'S budget, the Congress,supported by
                            the veterans’ service organizations, has becomeheavily involved in
                            details of VA'S management,limiting the Secretary’s ability to changethe
                            structure or delivery of VA servicesto meet the challengesfacing the
                            Department. These limitations restrict the Secretary’s ability to adapt VA
                            to its rapidly changing environment, thereby enlarging the void in plan-
                            ning and inviting further congressionalinvolvement in detailed manage-
                            ment of VA. A successfulstrategic managementprocessshould allow the
                            Congressto reverse this trend.

                            Throughout our review we worked with the Office of the Secretary to
Progress by the             develop a Secretary-led strategic managementprocessthat provided for
Secretary   of   Veterans   (I) establishing a clear, Department-wide direction for VA’S future
Affairs                     actions, (2) identifying strategic issuesconsistent with this future direc-
                            tion, (3) identifying alternate approachesto addressthese issuesand

                            Page 4                                        GAO/HRDBlMo1) Muugement   of VA
selecting the most appropriate approaches,(4) allocating resourcesand
assigning accountability to implement action plans, and (5) monitoring
plan implementation. The processalso provided for the participation of
key internal managersand external groups, such as the Congress,vet-
erans’ service organizations, and OMB.
The Secretary is the linchpin of the strategic managementprocess.The
Secretary should show strong, sustained support for the processto
encourageits acceptanceinto VA’sorganizational culture. We are not
making a recommendation becausethe Secretary established,on April
27, 1990, a new integrated approach-the Secretary’s Strategic Manage-
ment Process-to plan for the future and managethe work of VA (see
app. II). Given the Department’s past problems with strategic manage-
ment and the need to effectively deal with competing interests, the Sec-
retary will need to closely monitor implementation of the new processto
ensure that it is properly carried out.
The Office of the Secretary agreedwith our report’s conceptsand noted
that the detailed approach for implementing a strategic management
processwas very helpful to the Department.

We are sending copiesof this report to the Secretary of VA, the Chairmen
and Ranking Minority Membersof the Committeeson Veterans’ Affairs
of the United States Senateand Houseof Representatives,other inter-
ested congressionalcommittees and subcommittees,and individual mem-
bers. We also will make copiesavailable to others who request them.

This report was prepared under the direction of Linda G. Morra,
Director, Intergovernmental and ManagementIssues,who may be
reached on (202) 275-1655.Other major contributors to this report are
listed in appendix III.

 Charles A. Bowsher
 Comptroller General
 of the United States

 P8ge 5                                      GAO/EED~lOS   Mumgement of VA

Appendix I
Management of VA:       Background
                        Objectives,Scope,and Methodology
Implementing            VA Needsa Strategic ManagementProcessto Address Its                 10
Strategic Management        Challenges
ProcessWould            Past VA Strategic ManagementEfforts
                        lessons Learned From Past Strategic ManagementEfforts
Improve Service to      ProposedStrategic ManagementProcess
Veterans                Strategic Planning Elements
                        Progressby the Secretary of Veterans Affairs

Appendix II
Secretary of Veterans
Affairs’ Memorandum
Establishing a
Strategic Management
Appendix III
Major Contributors to
This Report
Bibliography                                                                                48

Tables                  Table I. 1: Description of VA Components                              8
                            (Fiscal Year 1989)
                        Table 1.2:Projected DemographicChangesand Related VA                 13
                            Strategic Issues

Figures                 Figure I. 1: Total Wartime and PeacetimeVeterans                     1-I
                        Figure 1.2:The Aging Veteran Population                              15
                        Figure 1.3:Groups ConcernedWith VA’s Mission                         ii-
                        Figure 1.4:ProposedStrategic ManagementProcess                       2s

                        Pye 6                                    GAO/HUD-S+lO9 Management of Li


GAO        General Accounting Office
IMS        Integrated ManagementSystem
mbi        information resourcesmanagement
OMB        Office of Managementand Budget
SMP        Strategic ManagementProcess
VA         Department of Veterans Affairs
VBA        Veterans Benefits Administration

-7                                        GAO/ERD-WlW   Management of VA
Managementof VA: ImplementingStrategic
ManagementProcessWould Improve Service
to Veterans
                                               The Department of Veterans Affairs (VA)* becamea cabinet-level depart-
Background                                     ment on March 15, 1989. The new Department, with its diverse and com-
                                               plex mission, represents a dynamic and difficult managementchallenge.
                                               VA operates the largest health care system and the fifth largest indi-
                                               vidual life insurance program in the United States. It employs the
                                               secondlargest work force in the federal government.

                                               The Secretary, as head of VA, is responsiblefor providing care and ser-
                                               vices to America’s eligible veterans. This mission involves delivering a
                                               wide range of services- medical, housing, insurance, education, income,
                                               and burial. VA affiliates with medical schoolsand usesits facilities for
                                               the education and training of a large portion of the nation’s medical
                                               practitioners. It supports researchthat benefits veteran health care and
                                               quality of life. In addition, VA is responsible for providing medical ser-
                                               vices in a war or other national emergency.

                                               VA  currently employs over 219,000 people on a full-time basis and has an
                                                annual budget of about $30 billion. Table I.1 shows the Department’s
                                                three major operating componentsand describestheir mission, the
                                                number of persons they employ, and their budget and operating

Tablo 1.1: Doscrbtion   of VA Compocrmk (Fiscal Year19891
                        MiSOiOll                                         Employoos          Mm                      StNCtWO
Votorans Hoaith         To develop and operate a national health         2UO,O63FTE’        $1 1.2 billion          172 medical centers,
Sowicr and              care delivery system for eligible veterans;                                                 339 outpatlent
Rasoarch                carry out a program of medical care                                                         clinics.b 122 nursm
Administration          research; and furnish health services to                                                    home-care umts, 28
                        members of the Armed Forces dunng a war                                                     domcllianes, 196
                        or national emergency.                                                                      veteran centers.
Vetoranr Bonofita       To provide financial and other assistance to      12,714 FTEa       $16.9 billion           58 regional offices (at
Administration          vaterans and their dependents and                                                           least one In every
                        survivors. The major benefits include                                                       state, D.C., Puerto
                        compensation and pension, survivors’                                                        Rico, and the
                        benefits, burial benefits, education and                                                    Philippines), lncludrng
                        rehabilitation assistance, home loan                                                        two insurance
                        benefits, and insurance coverage.                                                           centers.
National Cometory       To operate national cemeteries, provide           1,199 FTE’        $47 mullion              113 national
Sy8t.m                  headstones and markers, and administer                                                       cemeteries.
                        grants to aid development of state veterans’
                                                Yull-tme-equ~valent   employees.

                                                %&des     community and outreach clinics.

                                                Pye 8                                                     GAO/EBD-B&IO@ Management of VA
                        Avpcd     I
                        MeMgenK!nt of VA: ImplemelIting stx8tel#c
                        Muugement Proceea Would Improve Service
                        to Veteran0

Strategic Management    A strategic managementprocesshelps focus the attention of a depart-
Process                 ment head on identifying and resolving key issues.Through this process,
                        he or she can set a clear department-wide direction and move the
                        department toward achieving its goals.

                        Key, or strategic, issuesare the most critical questions that affect a
                        department’s future direction, its services,and its basic values. Fre-
                        quently these issuesinvolve more than one component or function. For
                        example, one strategic issue would be how a department needsto adjust
                        to serve a dramatically changing population. Another would be how to
                        remedy persistent systemic weaknessesin service quality. A strategic
                        managementprocess,however, does not encompassall the issuesa
                        department faces on a daily basis. Instead, it focusessquarely on the
                        issuesthat are the most appropriate for the department head to address.

                        A strategic managementprocesswill enhancethe department’s ability to
                        addressthe following fundamental questions:

                        Where is the department going?(Direction.)
                        How will it get there? (Strategies.)
                        What is its blueprint for action? (Budget.)
                        How will it know if it is achieving its direction? (Accountability.)

                        Systematically addressingthese questions can help ihe department head
                        proactively managechangeand avoid crisis management.

                        We began a general managementreview of VA in May 1989.This review
Objectives, Scope,and   is one of a series of GAO reviews of major departments and agencies
Mkthodology             aimed at improving general management.We worked with the Secretary
                        of VA in initiating this review and mutually agreedto begin it by evalu-
                        ating VA'S past strategic managementefforts. Our objectives were to ( 1)
                        identify lessonslearned from past VA Department-wide strategic man-
                        agementprocessesand (2) develop a flexible secretarial-level strategic
                        managementprocessthat could be adapted to VA.
                        This report summarizes and expands on our October 1‘2,1989,briefing
                        to the Committees on Veterans’ Affairs of the Senateand the Houseof
                        Representatives,and is a segmentof an ongoing general management
                        review of VA. The report is the secondin a series about management

                         Page9                                         GAO/HltKbBb108 mgement   of VA
                    wt           of IRi Impl-mlngstnteglc
                    tn vetemIL@

                    practices at VA. Our first report assessedthe effectiveness of VA’S infor-
                    mation resourcesmanagement(IRM) in supporting its mission.’ We are
                    reviewing VA'S financial managementpractices and plan to review other
                    To accomplish our objectives, we interviewed over 70 current and
                    former VA officials from the Office of the Administrator and the three
                    components,representing both VA headquarters and field perspectives.
                    These interviews included discussionswith two former administrators
                    and their top executives. We also interviewed representativesof five
                    veterans’ service organizations. We asked for their views on both posi-
                    tive and negative aspectsof Department-wide strategic management
                    efforts since 1981. We also solicited their suggestionsregarding a flex-
                    ible strategic managementprocessfor VA. We did not review each com-
                    ponent’s planning process,such as the Veterans Health Servicesand
                    ResearchAdministration’s Medical District Initiated Planning Process.

                    We analyzed VA documentation of past Department-wide strategic man-
                    agementprocesses.We also reviewed previous GAO and VA Office of the
                    Inspector General reports and literature on the topic from both the
                    public and private sector. Through this combination of documentation
                    and literature review, coupled with managers’ insights, we identified
                    lessonslearned from past strategic managementefforts and developeda
                    strategic managementprocessthat could be adapted to VA'S unique cul-
                    ture and environment.
                     We conducted our review between May 1989 and March 1990 in accor-
                     dance with generally acceptedgovernment auditing standards. A bibli-
                     ography of relevant documents appears at the end of this report.

                        can address major challengesthat it faces today and in the future
VANeedsaStrategic    VA
                     through a disciplined, Secretary-led strategic managementprocess.This
ManagementProcess    process,relying on input from external groups concernedwith VA'S mis-
toAddressIts         sion, would enable the Secretary to establish a long-term direction for
                     VA. VA managers and external groups would be able to evaluate against
Challenges           this established direction the relative merits of proposed management
                     actions to change VA'S services.As a result, conflicts between VA and
                     external groups would most likely occur lessoften than they have in the
                     past and veterans’ interests would be better served.

                     zInformai~n Resources Management Commitment Needed to Meet Information Challenges (GAO/
                     -2'7,Apr.         19,1990>.

                     page10                                                 GAO/ERD~lOB      Management ofVA
                       Appendls I
                       Management   of VA: Im~lelnelltlng   stmteglc
                       Management Pr0cea8 Would Impnwe Sewke
                       to Veteran8

VA’s ChallengesToday   VA’Smanagerstoday face a wide range of challengesto fulfill its mis-
                       sion-aging buildings, mix of services,and shortfalls in management
                       systems. In recent testimony, the Secretary spoke of the “strain [to the
                       VA medical] . . . system and many of its component parts . . when we are
                       not properly structured to fulfill our missions.”
                       Evidence of this strain is found in what the Secretary describesas VA’S
                       aging medical facilities, built on averageover 40 years ago. Many of
                       these facilities date from before World War II, or the early post-World
                       War II era, with somebuilt in the late 1800s.About 40 percent of VA’S
                       medical facilities will require mJor improvements in the next 5 years.
                       Someof VA'S facilities and its mix of serviceshave not always kept pace
                       with new modesof medical care delivery. Its medical services,estab-
                       lished when inpatient hospital stays were longer and before technolog-
                       ical advancesin treatment and changesin practice patterns, have not
                       always kept up with changesin medicine. New treatment patterns, like
                       ambulatory surgery, have lessenedthe emphasison traditional inpa-
                       tient, hospital-based acute care in favor of a spectrum of medical ser-
                       vices extending from outpatient to extended care. This meansthat
                       hospital stays are becomingshorter, resulting in lowered hospital occu-
                       pancy rates, while demand for ambulatory or outpatient care is

                       VA'S benefits structure also shows evidenceof strain. The Veterans Bene-
                       fits Administration’s (~BA)network of 58 regional offices was organized
                       before today’s state-of-the-art technology made possible more efficient
                       claims processing.Lessthan 50 percent of WA'S regional offices are
                       fully automated. VBA is struggling with aging and inadequate systems
                       that are not integrated and are expensiveto maintain. For example.
                       becauseof inefficient processesthat include exchanging paper records
                       among VA'S componentsand with the Department of Defense,as well as
                       other critical factors, a veteran now has to wait about 5 months for VAto
                       processa claim for disability compensation.

                       Further strain ensueswhen managementsystemsdo not provide key
                       information for managersat headquarters to determine whether field
                       facilities are providing quality servicesto veterans. This has occurred
                       becauseVA has neither (1) determined what information was neededto
                       assessservice quality and established reporting requirements that
                       would provide the neededinformation nor (2) followed through to
                       assurethat field facilities were complying with established information-

                        Page 11                                        GAO/JERD~loS   Management   of VA
                             to Veteratu

                             reporting requirements. For example, in our Transition Serieswe
                             reported that:3
                         9 Medical centers were not reporting, through appropriate quality assur-
                           ance systems, most of the more serious patient injuries at the centers. In
                           addition, managersat headquarters were not using the information they
                           had to detect underreporting. Also, one-third of the medical centers with
                           surgical residents were not submitting the required reports on their
                           supervision. As a result, headquarters managersdid not know that
                           supervision at many medical centers was inadequate.
                         l Managersat headquarters did not act appropriately to improve field
                           facilities’ servicesdespite having information suggestingthe need for
                           action. Several cardiac surgery centers reported mortality rates above
                           VA'S standard. However, VA managersdid not take steps to determine
                           why these centers were not performing at an acceptablelevel.
                         l The Housecommittee on Government Operations, reporting on VA'S
                           system for measuring performance of its 58 regional benefits facilities,
                           found that managersdid not have adequate information to monitor the
                           facilities’ processingof veterans’ benefits claims.

                             Today, the Secretary and his managersface enormous management
                             challenges.But coping with today’s challengeswithout reference to the
                             tremendous future changesin the veteran population would be short-
                             sighted, as VA recognize!3.

VA’s Future Challenges       VA projects that the nation’s veteran population will undergo significant
                             changesin number, location, and composition over the coming decades.
                             These dramatic changes,coupled with the strains that VA'S system is
                             experiencing, suggestthat VA must adjust its structure and delivery of
                             services.Accordingly, VA will face difficult decisionsas it assessesthe
                             types of services,where they will be needed,and the meansof deliv-
                             ering them effectively to the veteran population.

                              In short, VA must think strategically to cope with the challengesof
                              tomorrow. Its environment requires VA to take a long-term view and
                              grapple with complex, cross-cutting strategic issues.VA has projected
                              that significant changeswill occur in the veteran population and has
                              identified issuesraised by these changes(seetable 1.2).

                              3Veterans Affairs Issues (GAO/OCG89-14TR, Nov. 1988).

                              Pue12                                                   GAO/EUlMCblOg Management of VA
                                           Management of VA Lmplementlng Strateglc
                                           Mana@ment Proceaa Would Improve   Scrvlce
                                           to Veterans

Table 1.2: Projected Demographic Changes and Related VA Strategic Issues
                                         Changes                                            Strategic Issue
Total veteran population                 Decreasrn from 27 2 mllllon in 1969 to 24 1        How can VA assure that It IS efflclently and-
                                           mlllion by 9Ooo.                                 effectively delrvenng servrces given a
                                                                                            declmrng population? (Added by GAO )
                                           Declining to 13 mullion by the year 2040
Veteran population age 66 and oldor        increasing from 6.9 mrllion In 1989 to a peak    How should VA adjust its health care dellveq
                                           of 9 0 million In 1999                           system to meet the needs of an tncreaslngly
                                                                                            older veteran population?
                                            Declinrng to 4.5 million In the year 2040       What IS the optimum balance of acute care
                                                                                            and long-term care for an aging populatron?
Location of veteran population              Nearly one-half of all veterans In the U.S.     Is there a need for new health care facllltm;;7
                                            currently live in erght states.
                                            High rates of mrgratron from the Northeast      What impact does veteran migration have on
                                            and Midwest to the South and Southwest for      the demand for hospital care?
                                            the next decade.
Composition of veteran population           Number of Vietnam-era veterans will surpass     What changes will be needed tn VA programs
                                            World War II veterans In 1993.                  once Vietnam-era veterans comprise the
                                                                                            majonty of wartime veterans?

                                            Post-Vietnam-era veterans will grow by over     How WIII legrslation that may only provide
                                            1 million every 5 years becoming the lar est    benefits to wartime or comoat veterans affect
                                            sector of the veteran population by 201 8       future construction and fiscal oblrgatrons7

                                            Wartime veterans will become a minority of
                                            veterans bv the vear 2013.
                                             Source: Department of Veterans Affarrs. 1989

                                             VA’s projections show, for example, that the total veteran population
                                             will decline to roughly one-half of its current size by the year 2040.
                                             Moreover, as the World War II population decreases,VA expects a slow
                                             but steady decline in the number of veterans receiving veterans’ com-
                                             pensation. VA, in addition, expects a decline in the number of veterans
                                             participating in VA’s insurance program and receiving veterans’ pen-
                                             sions, Barring major wars, VA expects the number of wartime veterans
                                             to becomea minority of all veterans by the year 2013 (seefig. I. 1).

                                             Page 13                                                    GA0/IiED90409     Management of LA
Figun 1.1:Total Wartimo and Porcotlmo
                                        30 Millionr

                                           1980           1990          2ooo         2010   2020       2030               2040

                                                  -       Tot81 V.tuan P~puktiOn
                                                  m       PsaoetlmoVOt.rsnr
                                                  I   I   WaltimoVommlr

                                        Source: Depament of Vetemna Affairs, 1989.

                                        Whiie the total veteran population declines,VAexpects the older veteran
                                        population to grow dramaticaily during the next 10 years, with older
                                        veterans forming an increasingly larger percentageof the total veteran
                                        population for the next 26 years (see fig. 1.2).By the year 2010, one out
                                        of every three VAhospital patients wil.l be at least 76 years of age,and
                                        two out of three will be over 66. In March 1990 congressionaltestimony,
                                        the !Secretarystated that “This age shift, if translated to utilization at
                                        current rates, could bring dramatic changeto the patient mix we will see
                                        in VA health care in the future.” He added that “The health needsof
                                        persons in these older age cohorts . . . could require mqior adjustments
                                        to the system to meet their needs,” since an older person requires more
                                        extended care services and typically has several nonmedical needsin
                                        areas such as housing and income maintenance.The Secretary further
                                        believes that VA “needs to explore a number of avenuesto meet the chal-
                                        lenge of caring for eligible veterans . . ..”

                                        P-14                                                 GAO/BIDBolOg     Muugement     of VA
                                          hfmugement of VA: hIlplementing stntcerc
                                          bluugement W        Would lmprwe !3ecvtce
                                          to vetenlu

Figure 1.2:The Aging Vetoran Population

                                             1980                1990                2000           2010   2020       2030

                                                     -      -   Total Veteran Populatton
                                                     f-         Under 45

                                                                45   To 64
                                                                65 and Over

                                           Source: Department of Veterans Affaw             1999.

                                           Adjusting the VA system to these and other demographic changes,while
                                           resolving today’s managementchallenges,implies that VA must address
                                           strategic issuesinvolving changesin its structure and delivery of ser-
                                           vices. For example, an older population may require converting beds
                                           from acute to extended care, developing new serviceswhile deem-
                                           phasizing others, and reassigning work load and programs among facili-
                                           ties, predicts VA. As another example, the accelerating decline in the
                                           veteran population challengesVA to deliver services effectively and effi-
                                           ciently. This could mean weighing options of providing servicesthrough
                                           nonpermanent arrangements,such as sharing and contracting for them.

 Groups Concerned With                     In addressing these challenges,VA must addressthe legitimate and some-
 VA’s Mission                              times competing concerns of a wide range of groups that have an
                                           interest in or are affected by VA servicesand resources.Thesegroups

                                            P8ge 15                                                         GAO/IIRD~109     Mutagement of VA
-IIt          of VA: Impklw!atlBg   stJue@c
bhugement     Process WoddImptwesavia
to veter8na

can significantly influence VA’smanagementactions as it adjusts to envi-
ronmental changes.Figure I.3 shows someof these groups, such as VA’S
main constituents-the veterans; communities that depend on local VA
facilities for income; medical schoolsthat depend on VA for its patient
work load to help train medical professionals;the Department of
Defense,which dependson VA facilities as a backup in time of war; and
VA employees.Figure I.3 also shows the relationship between these
groups and their representatives, such as the Congress,congressionally
chartered veterans’ seivice organizations, and the Office of Management
and Budget (OMB).


   P8#a 16                                    GAO~108     Muugement   of VA
Figure 1.3:Groups Concemed With VA’s Miuion


    l   DOD

    . Other Federal
      Responribk for

                                          Note: Groups wncemed mth VA’s m&on are genedy any divided.                grouo. of organizatbon that can
                                          place a clarm on VA’s attention. resowces, or output, or is affected by that ol;rput. The Admlnlstratton.
                                          the Congress, veterans’ service orgmizations. and the Secretary and key VA line and staff managers.
                                          highlighted in the shaded area above, are themsefves tamam&         wth VA’s mtswn. These entitles also
                                          represent other -            goups.

                                          The listing of groups raxamed    with VA’s m~ssio~-~IS for diission     only and is not mtended to be all

                                          P8ge 17                                                               GAo/lXltB~lob     Mmmgementof VA
                                  These and other concernedgroups have objectives that sometimescon-
                                  flict with one another, as illustrated in the following examples:(1) a
                                  change in the mix of servicesof a VA medical facility and (2) a potential
                                  shift of emphasis from acute- to extendedcare servicesto meet the
                                  needsof aging veterans.

Change in Mix of Services of VA   In the past, VAhas attempted to changethe mix of servicesat a medical
Medical Facility                  facility on a piecemeal,isolated basis. However, it is difficult to effec-
                                  tively evaluate the appropriateness of these decisions without a broad
                                  direction for VAthat provides a rational context for such decisions.
                                  Lacking this context-one     that would help external groups weigh the
                                  merits of a proposed change-some groups have not supported such
                                  changesand have enlisted veterans’ service organizations and the Con-
                                  gressto stop VA from making them.
                                  To ilhrstrate, the objectives of rural communities that depend heavily on
                                  VA for jobs, and veterans in these communities who seek access to VA
                                  services, have sometimesbeen at odds with VA'Sattempts to achieve a
                                  more effective, efficient mix of services.When a hospital’s patient work
                                  load drops substantially, it may become inefficient to continue operating
                                  that facility with the previous range of services.For this reason, VA has
                                  attempted to change the mix of servicesof somemedical facilities.

                                  However, changing the mix of servicesof a VA facility has sometimes
                                  conflicted with the objectives of the local community. Particularly in
                                  small rural communities where VA facilities often play an important role
                                  in the local economy. The facility may be one of the largest employers in
                                  the community. A proposed change to the facility’s service mix, such as
                                  changing a facility from an acutecare hospital to an outpatient clinic,
                                  may mean that VA will employ fewer individuals, thereby adversely
                                  affecting community income. Further, veterans perceive that the change
                                  may also affect their accessto acute-careservices,causing them to
                                  travel greater distances to another VA hospital to obtain care. Sometimes,
                                  veterans may not fully understand available alternatives in caseof a
                                  medical emergency. For example, VAcould pay for needed emergency
                                  care locally, and transfer the patient to a nearby VA facility when
                                  Becauseof these concerns, local communities have sometimessought the
                                  support of their congressional representatives and veterans’ service
                                  organizations to oppose such changesin services.Lacking a broad per-
                                  spective of a VA-wide strategic direction, VA, the Congress,the service
                                  organizations, and the local community together have difficulty

                                  P4e   18                                      GAO/HRD~lO!d   Muagement   of VA
                                 Appendix I
                                 Management of VA: Implementing SPrtc@c
                                 bhugement Roceee Wodd lmprwe Sendce
                                 to Veter8na

                                 weighing the merits of the changerelative to these interests and the con-
                                 cerns of the local community and local veteran groups.

Balancing Acute and              When adjusting the structure and delivery of its services,VAmust con-
ExtendedCare                     sider its role in providing facilities and patient work loads for training a
                                 large portion of the nation’s medical practitioners. To illustrate, if VA
                                 decided to shift its emphasis from traditional hospital-basedacute-care
                                 toward extended-careservicesto adjust VA’S system to an older veteran
                                 population, several, sometimesconflicting, objectives would have to be
                                  1. Shifting resourcesfrom acute toward extended care could potentially
                                 jeopardize VA’S medical school affiliations, thereby impeding fulfillment
                                 of VA’S mission to train and educate medical practitioners. Through their
                                 affiliations with VA medical facilities, medical schoolsdepend on VA for a
                                 patient work load needing a wide range of acute-careprocedures,such
                                  as internal medicine and surgery, to perform their teaching mission
                                  effectively. A resourceshift away from acute care toward an emphasis
                                  on diseasesand injuries of older veterans will limit VA’S acute-carecapa-
                                  bilities and restrict the range of acute-careservicesprovided at w faciii-
                                  ties. This could in turn limit the number of acute-careprocedures
                                  performed and, therefore, the number of medical students trained.

                                 2. Emphasis on extended care also could hinder VA’S recruitment of med-
                                 ical professionals becauseperforming a wide range of acute-careproce-
                                 dures is important to many practitioners. These activities draw students
                                 and research grants and contribute to a practitioner’s professional

Challenges Point to a Need Addressing the major challengesfacing VA today and in the future will
for Strategic Management be   difficult. The legitimate conflicts among concernedgroups’ objectives
                           require informed, rational decisions.Strategic managementgives v~ a
                                  workable mechanismto involve these groups, consider their interests.
                                  and acknowledge the tension amongthem when establishing VA'S future
                                  direction. With such a process,the Secretary will be able to articulate
                                  VA’S long-term future and establish a managementagendaof priorities
                                  for VA managers.A strategic managementprocesswill provide for better
                                  informed decision-making, basedon a recognized,Department-wide
                                  direction. VA managerscan better justify decisionsby linking their pro-
                                  posed managementactions to VA'S strategic direction, In this way, the
                                  needsof the veteran can drive VA'S activities.

                                  Page LB                                        GAO/HBDglHO9   Muugement   of VA
                     bhu#ment     of VA: Implementing Iv
                     Muugement    Procem WoddImpmvefIemke
                     to Veteruu

                     The Secretary can play a lead role in articulating a future VA-an action
                     that can outlive his or her tenure. Institutionalizing a strategic manage-
                     ment processwould give future secretariesa mechanismfor identifying
                     and addressingstrategic issuesand setting a managementagendafor VA.

                     Former administrators and VAmanagershave recognizedthe importance
Past VA Strategic    of an effective strategic managementprocess.VAattempted to put into
Management Efforts   place elements of a Department-wide processstarting in 1981, but dis-
                     continued these efforts in 1988. Until April 1990 the Secretary did not
                     have a processfor dealing with key issuesfacing VA.As a result, VA was
                     operating without a clear and focused direction that could enhancecon-
                     sistency between the Department’s direction and line manager decisions.

                     In 1981, VAinitiated an Integrated ManagementSystem (IMS)to provide
                     “a total strategic review of VArequirements and resourcesfor the
                     future.” It was intended to link Department-wide strategic planning
                     with component planning and budget formulation and budget execution.
                     A former top VAofficial called IMSthe first Department-wide attempt to
                     plan at VA.
                     IMS,however, did not fulfill expectations. Instead of a Department-wide
                     direction guiding VA’Soperations, the budget continued to drive the
                     Department’s activities. Planners did not have the resourcesor the man-
                     date to develop a comprehensive,long-term direction for VA.They
                     focused on the budget formulation and execution phasesof IMS,empha-
                     sizing rigorous analysis of the components’short-term program oper-
                     ating plans and budget requests.As implemented, “IMSwas not strategic
                     planning. Instead, it was a way to analyze the budget in a more struc-
                     tured, programmatic manner,” said a top official.

                     In 1986, VAofficials recognizedthe need to replace the short-term,
                     budget-focusedthinking of IMSwith long-term strategic planning. They
                     attempted to improve IMSby incorporating a Department-wide, long-
                     term strategic planning element. The enhancedsystem was called the
                     Strategic ManagementProcess(SMP).To help the Administrator develop
                     VA’Slong-term direction, VA held Department-wide strategic planning
                     conferencesin 1987 and 1988. The Administrator sought to shape VA’S
                     direction beyond the year 2000 using input received from the 1987 stra-
                     tegic planning conference.This conferenceprovided the first opportu-
                     nity for the three VAcomponent headsto discussstrategic issuesfacing
                     VA.These issueswere “likely to impact the shapeof the VAin the

                      Pwe 20                                       GAO/lIBM&102   Mmugement of VA
                           Appendix I
                           ?danagewUt Of VA Implementing S-U?&
                           Mmmgement hm?sa Would Improve    service
                           to Veterana

                           future,” said the Associate Deputy Administrator for Management,Fol-
                           lowing the 1987 conference,componentswere to develop strategic plans
                           basedon guidance issued.The purpose of the 1988conferencewas to
                           discussthese preliminary componentstrategic plans.
                           The conferences,however, made no lasting impact on the Department.
                           The Administrator’s guidance issued following the 1987 conferencedid
                           not provide a clear direction regarding the major issuesfacing VA.
                           Former and current top VA officials characterized the guidance as
                           “watered down” and “superficial.” The Veterans Health Servicesand
                           ResearchAdministration did not prepare its component-levelstrategic
                           plan called for during the 1987 conference.The Administrator chosenot
                           to issue any guidance following the 1988 conference.VA discontinued SMP
                           in 1988.

                           The successof a strategic managementprocessdependsupon the leader-
LessonsLearned From        ship and sustained commitment of the Secretary. In addition, a future
Past Strategic             strategic managementprocessshould consider lessonslearned from past
Management Efforts         efforts to implement strategic management.

Essential Ingredient   . Secretary’s Leadership and SustainedCommitment

LessonsLearned         . Involve key line managers,including those in the field
                       . Ensure that strategic direction shapesthe budget
                       l Focuson key issues
                       . Balance component aims with departmental direction
                       l Seekparticipation of key external groups

                           These lessonsare basedon conditions that led to the demiseof the past
                           Department-wide efforts. Line and staff managerswithheld their com-
                           mitment from IMSand SMP becauseof flaws in the design and implemen-
                           tation of these two processes.Theseefforts did not elicit the widespread
                           participation of line and staff managersand were administratively bur-
                           densome.Managersalso perceived IMSas a budget-cutting tool instead of
                           a meansto develop and execute a future direction for VA.

                            Page21                                     GAO/liED4blOB   Management   of VA
                   MaMganm      of VA Imp&menting   Samtegk
                   Ibmgement    Proam Would lawrove Service
                   to Vetenna

                   Managersalso describedconditions relating to VA’S internal and external
                   environment as barriers to previous efforts to establish a Department-
                   wide strategic direction for VA. The level of autonomy attained by the
                   componentsand external influences on VA fragmented VA'S direction and
                   weakened the Administrator’s ability to carry out managementactions.
                   As a result, these conditions hindered the commitment of managersto a
                   shared direction.
                   Without widespread internal and external support, VA could neither
                   carry out successfulstrategic managementactions nor articulate a stra-
                   tegic direction for the Department during the past decade.IMSand SMP
                   lost credibility, and the pressureof day-to-day events took precedence
                   over efforts that would lead to deliberate articulation of a future direc-
                   tion. Without a clear direction, neither VA managersnor external groups
                   could judge the merits of VA’S proposed changesto its network of facili-
                   ties and services.
                   We discussthe lessonslearned from past strategic managementefforts

Involve Key Line    For future secretarial strategic managementefforts to succeed,key line
Managers            managersshould participate in formulating a strategic direction. In fact,
                    VA managersemphasizedthat a future processwould most likely fail
                    without the involvement of key line managers.Their participation
                    would enhancethe likelihood of congruencebetween VA’S direction and
                    line managers’ actions.

                    Past efforts did not involve key line managersfrom the field in a mean-
                    ingful discussionof critical questions facing veterans. Without an oppor-
                    tunity to discussthese issues,key managersdid not support the effort.
                    To illustrate, SMPdid not involve key line managerssufficiently in its
                     1987 strategic planning conference,a critical step in the SMPprocess.
                    Somestaff and line officials did participate in preconferencework
                    groups to identify broad policy issuesfacing VA. However, key line man-
                    agers from the field, such as someVeterans Health Servicesand
                    ResearchAdministration regional directors and medical center directors,
                    either were unaware of the conferencethat was to shapeVA’S future
                     direction or consideredit peripheral to their day-today activities. Yet
                     these line managersplay a pivotal role in delivering servicesto the vet-
                     eran and would be principal players in carrying out managementactions
                     neededto achieve VA’S long-term direction.

                    Pye 22                                        GAO/RRD9&lO2   Matqement   of VA
                        Appendix I
                        Management Of VA: Lmplemendng S--c
                        Management Pmwsa Would Improve Scrvlce
                        ta Veterans

Ensure That Strategic   The purpose of a strategic managementprocessis to establish a future
Direction Shapesthe     direction for VA basedon the priority needsof veterans. Effective plan-
                        ning should provide guidance to managersthroughout VA for making
Budget                  decisionsthat are consistent with the Department’s direction. Proposed
                        managementactions designedto achievethis future direction should
                        shape VA’S budget.
                        However, planners at the Administrator’s level did not present IMS as a
                        way to develop a clear direction oriented toward serving veterans’ pri-
                        ority needs.Instead, many VA managerstold us that the Office of the
                        Administrator used IMSas a budgetary tool focusedon cutting costsand
                        implemented it in an “adversarial,” “abrasive,” and “heavy-handed”
                        manner. According to a top line manager,IMS“was seenas an agendafor
                        accomplishing the terminal objectives of the administration . . . to limit
                        VA . . , dollars.” The Office of the Administrator attempted to control the
                        budget, said this manager, by dictating lower budgetsthan the compo-
                        nents felt were warranted by veterans’ needs.Accordingly, the budget,
                        rather than a strategy basedon priorities, guided managementactions.
                        This manner of executing IMScausedresentment among VA managers,
                        who believed that the budget-cutting focus threatened the quality of VA’S

                        As internal opposition to MSgrew, VA managersreportedly turned to the
                        Congressto circumvent the Administrator’s attempts at planning. The
                        Congresspassedlegislation that first cut the planning staff and later
                        prevented it from taking part in budgetary activities. The latter action
                        effectively removed the mechanismthat could have linked planning to
                        the budget. This action handicapped the planning staff and further dam-
                        aged the credibility of MS.The Congressultimately passedlegislation
                        that eliminated the planning staff.

Focus on Key Issues      For a secretarial-level strategic managementprocessto be practical,
                         only key issuesshould be elevated for the Secretary’s attention. The
                         processshould complement, not replace, the components’planning and
                         managementsystems and should require little additional paperwork.
                         Line managers and top VA officials criticized VA’S past administrator-
                         level attempts at strategic managementfor being complex, requiring
                         written details about multiple component objectives, and emphasizing
                         the paperwork processinstead of the content of the plans. The volumi-
                         nous annual operating plans and detailed quarterly reviews, key ele-
                         ments of past strategic managementefforts, were “meaningless

                         Page 23                                      GAO/liRD~lO3   Management   of VA
                         paperwork” and “pie-in-the-sky academicexercises” to line and staff
                         managers.The excessivenumber of objectives in the annual operating
                         plans was too prescriptive and diffused organizational focus. The
                         annual operating plan documentation was reportedly so voluminous
                         that top executives in the Office of the Administrator lacked time to
                         review it. Operating plans were often in error and lacked accountability
                         for plan accomplishment.

Balance Component Aims   A strategic managementprocessshould foster a shared understanding
With Departmental        of VA’S future direction among the three components,enhancing consis-
                         tency between their day-today actions and the Department’s aims. A
Direction                unified strategic direction for the whole Department, basedon the pri-
                         ority needsof veterans, provides the neededcommon focus-a clear,
                         shared vision of the future. In the past, however, the level of autonomy
                         attained by VA'S components,coupled with a lack of clarity regarding
                         VA’S direction, has sometimesinhibited development of a Department-
                         wide, coordinated approach to addressstrategic issues,hindering
                         delivery of servicesto veterans.

                         A certain level of component autonomy is desirable. Autonomy can pro-
                         mote creativity and initiative, allow faster and better decisions,and gen-
                         erate commitment derived from a senseof ownership. However,
                         excessiveautonomy without reference to a common,VA-widedirection
                         can contribute to viewing problems narrowly, independent of the critical
                         Department-wide implications of an issue. It can inhibit a senseof unity
                         and identification with VA as a whole. Conceivably, component actions
                         could be at cross purposes with one another if they lack a shared focus.
                         This could prevent VA from responding effectively to mjor changesin
                         the environment.

                         To illustrate, we recently found that the autonomy of VA’S componentsis
                         an impediment to developing an efficient and effective VA information
                         resource management(IRM)program4 We reported that the central IRM
                         office and its counterparts in the individual componentsdo not work
                         easily or cohesively together, with individual componentscaring “only
                         about their programs . . ..” and not seeing“the department as a whole.”
                         Although each component is striving to improve veterans’ services

                         41nfonnation   Resowxs:   Management Commitment   Need&to   Meet Information   Challenges (GAO!
                         -27,            Apr. 19,199O).

                         Page 24                                                     GAO/liXMMO9         Management    of VA
Appendix I
M8Mgement of VA: rmplemendngstntqfic
lhtugement Rocua Would improve Scrvlce
to Veteruta

through automation, their combinedefforts have not effectively sup-
ported VA as a whole. Instead, IRM initiatives in VA have led to loosecol-
lections of independent systemsthat frequently focusednarrowly on a
component’s needsinstead of the Department’s larger mission and goals.
VA’Ssystems are not integrated, they contain redundant information,
and much of the information requires manual processing,which is labor-
intensive, time-consuming, and error prone, partly becauseof the level
of component autonomy. For example, each VA program relies on a sepa-
rate automated or manual system, but maintains someof the samebasic
data, such as the veteran’s name, address,social security number, and
length of service. Maintaining such duplicative data is expensive and
can lead to errors that delay service. Discrepanciesamongindependent
systems concerning a veteran’s social security number, for instance,
may take months to correct, possibly delaying benefit payments. Addi-
tionally, the lack of automation contributed to a backlog of almost
340,000 adjudication claims casespending in 1989.

Our report on the managementof VA’S information resourcesconcluded
that, although significant information weaknesseshave hindered VA'S
ability to effectively manageprograms and have contributed to service
delays, lasting improvements will require that the componentsand the
central office work together to create a climate of trust, open communi-
cation, and mutual support. We agreedwith the Secretary when he
directed that IRM planning should support overall Department plans and
that communication and coordination among all VA componentsare
essential and must be enha.ncecLs

 The tension between centralized control versus greater autonomy of
 componentswill always exist in any large organization. Both have their
 advantagesand their disadvantages.But VA, lacking until recently a
 clear Department-wide direction, has tilted toward greater component
 autonomy. VA now needsto strike a balance between these two forces by
 establishing a strategic direction for the organization as a whole. This
 will give component managersa commonbasis for making day-to-day
 decisions,thereby enabling VA to be more responsiveto its changing

 %n October 6, 1989, the Secretary signed a memorandum establishing the framework for a strategic
 IRM planning, programming, and budgeting process for VA.

 Page 26                                                     GAO/HRD8&109 wement             of VA
                            lbbmgment 0fV.k lmplenIendngsrr8teglc
                            Mmugement Procae Woald Improve Service
                            to Vetemna

Seek Participation of Key   Early in the strategic managementprocess,the Secretary should bring in
External Groups             the external groups that influence VA'S policies and operations, such as
                            the Congress,the veterans’ service organizations, and OMB. In this
                            regard, VA should attempt to obtain, to the extent possible,consensus
                            from these key groups on its actions to addressthe major challengesit
                            faces. It will be a difficult task to bring together historically disparate
                            interests, but their early and active participation should lead to some
                            common ground of understanding and conve:Lenceof interest that
                            would permit VA to advance in new directions. Without the support of
                            these key external groups, VA'S past attempts to plan strategically were
                            not successful.
                            To fill this void in planning, and to protect the level of veterans’ services
                            against OMB’s attempts to lower VA’S budget, the Congress,supported by
                            the veterans’ service organizations, has becomeheavily involved in VA'S
                            management.The Congresshas done so by imposing certain legislative
                            mandates, Characterized as congressionalmicromanagement,such legis-
                            lative branch involvement has sometimeshampered the Secretary’s
                            ability to carry out managementdecisions.For example, somemandates
                            require VA to notify the Congressbefore taking certain actions regarding
                            (1) any IO-percent reduction in full-time-equivalent employeesin a VA
                            facility of 25 or more employees,(2) any employee grade reduction, or
                            (3) any transfer of an interest in real property above $50,000. VA has
                            proposed several managementactions that were subject to these notifi-
                            cation requirements. The proposed actions were not carried out by w
                            becauseof congressionalconcerns.The National Academy of Public
                            Administration characterizes such legislative mandates as the “most
                             important external impediments to timely decision-making and execu-
                             tive action by the VA.”
                             These and other legislative mandates can limit the Secretary’s ability to
                             changethe structure or delivery of VA servicesto meet the challenges
                             facing the Department. As a result, these mandates restrict the Secre-
                             tary’s ability to adapt VA to its rapidly changing environment, thereby
                             enlarging the void in planning and inviting further congressional
                             involvement in detailed managementof VA.

                             The strategic managementprocess,however, should encouragethe
                             active participation of interested groups to discusskey issuesregarding
                             VA'S direction. Through their involvement, these groups balance con-
                             flicting interests in the face of the need to change.Oncecommitted to a
                             direction for VA, the Congress,veterans’ service organizations, and OMB
                             should then support the Secretary as he executesthe strategy.

                             Page 26                                        GAO/HRD2@1oI) Management of VA
                     M4lugtment    of VA: hplementhg    slirueglc
                     Management    Procew   Would Improve   Service
                     to vtterula

Proposed Strategic   nizations agreethat the Secretary needsan ongoing strategic manage-
Management Process   ment process.Such a processwill focus the Secretary’s attention on
                     identifying and resolving key issuesto addressVA’S critical challenges
                     both today and in the future. This processshould promote sound
                     decision-making within VA. It should enableVA to (1) develop a Depart-
                     ment-wide direction, (2) select effective managementstrategies to
                     achieve this direction, and (3) assignaccountability and monitor imple-
                     mentation progress.
                     In developing a processconsistent with VA’S needsand environment, we
                     examined previous strategic managementefforts at VA and interviewed
                     current and former VA staff and line managers.Wealso consideredpre-
                     vious GAO general managementstudies that addressedthis area, and we
                     reviewed relevant managementliterature. From this, we identified
                     essential elementsof a strategic managementprocessappropriate for CA.
                     Theseelements make up the processframework. VA needsto develop the
                     details of how the processshould be implemented and adapt it as
                      As shown in past VA strategic managementefforts, key internal and
                      external groups’ support of the processand its outcomesis critical to its
                      success.The Secretary can build the commitment of these groups by
                      involving them in the process.It is not likely that the Secretary can sat-
                      isfy all parties on every decision, but they may be more inclined to “buy
                      into” plans if they have been able to expresstheir concernsand have
                      participated in the planning discussions.In this way, they can better
                      understand the context of VA'S actions and the reasonsfor taking them.

                      Successfulattainment of a desired future direction in large part depends
                      upon effective internal managementsystems,such as VA'S financial man-
                      agement, human resourcesmanagement,and information resources
                      managementsystems. Therefore, collaboration of staff managers.such
                      as the Assistant Secretariesresponsible for these systems,with their
                      component counterparts in the strategic managementprocessis essen-
                      tial. For example, coordination between the Assistant Secretary for
                      Information Resourceswith counterpart component information
                      resourcesmanagers is vital in identifying information neededby LA
                      managersto support VA'S direction.
                      The Secretary is the linchpin of the strategic managementprocess.He is
                      the leader in obtaining the support of the key groups and is responsible
                      for articulating VA'S strategic direction and making decisionsvital to

                       Page27                                         GAO/HRfNMOB   magement   of F4
each element of the planning process.The Secretary should show strong,
sustained support for the processto encourageits acceptanceinto VA’S
organizational culture.
The proposed strategic managementprocesshas sevenelements(seefig.
1.4).Elements 1 through 6 comprise the strategic planning aspectsof the
process,while elements 6 and 7 comprise the managementfunctions.
Although faure I.4 depicts a sequential process,it is iterative-suc-
cessful problem solving may require that someelements be revisited.

 Pyt 28                                     GAO/HEDB@lOBWnagtmtnt of VA
                                         Appc*     I
                                         lbhlu@?mentof VA Implemendng str8tedc
                                         to veter8na

Figure 1.4: Proposed Strategic Management Process

                                           1. Commltment to
                                              l    Secretary

                                              l    VA Line and Staff

                                              l    Congress, Veterans’
                                                   Service Organizatlons,

                                             2.      Scan Environment

  7. Monitor implementation
      and Provide Feedback

   6. Establish Accountability
      and Implement Plans

                                             5. Davelop Action Plans
                                                and Link to Budget

                                          P82C29                                 GAO/lDUM@1o9 lbtanagementof VA
Strategic Planning

Element 1: Commitment to

                           . Obtain the support of key groups for the strategic managementprocess.

Participants               . Secretary; key VA line (including field) and staff managers;and repre-
                             sentatives of external groups concernedwith VA'S mission, including the
                             Congress,veterans’ service organizations, and OMB.

                           . Agree on ground rules for conducting the strategic managementprocess.
                               Management     Coneidemtione: A critical lessonlearned from previous
                               strategic managementattempts at VAis that the support of key groups in
                               and outside VA is necessary.To begin building this support, the process
                               should first obtain agreement amongthese key groups on the ground
                               rules for the process.This initial agreementcould cover critical aspects
                               of the process,such as (1) its purpose; (2) who should participate; (3)
                               how it will be conducted;(4) the roles and functions of key players, such
                               as the Secretary, the planning staff, and other VA staff and line man-
                               agers;(6) other participants; (6) scheduleof accomplishments;and (7)
                               commitment of necessaryresources.

Element 2: Scan

                           . Obtain data to identify and analyze a range of possible strategic issues
                             and support decision-making throughout the process.

Participants               l   Secretary and VA line (including field) and staff managers,with assis-
                               tance from VA planning staff.

                               P8ge        30                               GAO/EiRD~lOS   Management of VA
             htmqement of VA rmp&mentirlg samtegte
             I+hM@ment Prawn would Improve senke
             to veteruu

TZiSkS   . AssessVA’S internal and external environment.
         . Identify a range of possible strategic issuesand their implications.

             Management Considerations:        Environmental scanning involves moni-
             toring VA’S external and internal environments to identify a range of pos-
             sible strategic issuesfacing VA. External scanningidentifies and assesses
             external conditions that may affect VA in the future, including such eco-
             nomic, demographic, socioeconomic,and technological trends as
         . the projected aging, changing composition, and geographicredistribution
           of the veteran population;
         . the decline in the total number of veterans;
         . possible implementation of someform of state or national health insur-
           ance and its potential as an optional source for financing veterans’
           health care;
         l predicted shortages of certain professionals,such as nurses; and
         . innovations in medical care delivery and information processingand
           communication technologies.

             External scanning also includes identifying the mandates placed on VA.
             Mandates include such externally imposed responsibilities as assisting in
             educating and training health care personnel for the nation and carrying
             out a program of medical research.VA also has the mandate to provide
             veterans with compensation,pension, education, home loan, and burial

             Internal scanning identifies VA’S organizational strengths and weak-
             nesses-the attributes or deficienciesthat may help or hinder attain-
             ment of its strategic direction. Internal scanning could help identify
             underlying wealmessesin VA’S major managementsystemsthat ulti-
             mately may hamper service delivery to veterans. Internal scanning
             would involve assessinginformation received from VA’S performance
             monitoring system and other VA managementinformation systems and
             reports, as well as from such sourcesas GAO, VA’S Office of the Inspector
             General, and independent consultants. For example, persistent problems
             with monitoring and evaluation of program performance, such as con-
             tinuing deficiencies in physician credentialing and privileging, could
             indicate the need to remedy underlying, systemic wealmessesin VA’S per-
             formance monitoring system.
             Participants can identify a wide range of possible strategic issuesfacing
             VA and assesstheir implications by evaluating the relationships between
             VA'S mandates and the data obtained from the internal and external

              P*ge31                                       GAO/HBD9&lOB   Management of VA
                                 G      t ofv4kIlnpkunaltlllg

                                 scanning. Potential strategic issuesfacing VA could include the following:
                                 What is the optimum balanceof acute and long-term care for an aging
                                 veteran population? What impact doesveteran migration have on the
                                 demand for hospital care?Is VA'S performance monitoring system ade-
                                 quate as an early warning system to identify serious weaknessesin ser-
                                 vice quality?
                                 Extending participation in the data gathering beyond the Assistant Sec-
                                 retary’s planning staff can improve the quality of the data and increase
                                 acceptanceof the data’s validity. To this end, these planners should aug-
                                 ment their staff with experiencedspecialists from VA'S components’
                                 planning staffs, perhaps on a detail or rotational basis. Further, partici-
                                 pants should seek input from key external groups during the ongoing
                                 environmental scanning process.Such interaction could include, for
                                 example, sharing relevant information and data sources,as well as dis-
                                 cussing data collection methodologiesand implications of the data.

Element 3: Articulate VA’s
Strategic Direction

                             l   Envision in broad terms VA’S future direction.

Participants                 l   Secretary; key line (including field) and staff managers;and representa-
                                 tives of external groups concernedwith VA'S mission, including the Con-
                                 gress,veterans’ service organizations, and OMB.

T&S                          l   Establish a clear direction for VA’S future actions.
                             l   Select the strategic issuesthat the processwill address.
                                 Management     Considemtions:   Lessonslearned from past efforts
                                 emphasizethe need for a clear, Department-wide future direction that
                                 would provide a common focus to coordinate the actions of components.
                                 Prom the data gathered and evaluated during the environmental scan-
                                 ning process,the Secretary, with representatives of key external groups,
                                 should clarify and interpret VA’Smission-or purpose-and values.
                                 Agreement on the Department’s purpose can help describe,in broad
                                 terms, VA’Sdirection-a best, or ideal, picture of VA in the future. For
                                 example, the Secretary recently envisioned a ,VA that would operate as

                                 Page 32                                       GAO/EED9MOB   Management of VA
APP--    I
M8Mgement of V! Implementtng stnt4ic
bhugemeat Roceaa WoaldImp1~eSen4ce
to Vetemna

“one unified Department, not as three separate agencies”and be the
“best managedservice delivery organization in the Federal govem-
ment.“” With respect to health care, he envisioned a VA that will provide
a complete continuum of care, including preventive, acute, rehabilita-
tive, chronic, and hospicecare.
Consciously articulating a direction enablesthe Secretary and represent-
atives of external groups to set broad guidelines for later planning deci-
sions. The future direction should be the most enduring aspectof VA’S
strategic managementprocessthrough subsequentVA administrations,
becauseit establishesbroad planning parameters and reflects VA'S core
purpose and values.

The future direction provides the context for evaluating and selecting
the strategic issuesthat must be addressedif VA is to achieve its desired
future. Although many possible strategic issueswould be identified
during the environmental scan,participants should select only the few
key issuesthat are most critical to VA'S basic values, services,and ability
to achieve its desired future. The issuesselectedshould be those that
significantly influence the way VAfunctions-issues most appropriate
for the Secretary to address.Focusingon key issuesis consistent with
lessonslearned from past VA strategic managementefforts, in which
planners attempted unsuccessfully to addresstoo many objectives,
resulting in a cumbersome,paperwork-intensive process.

 It is also consistent with examplesof other government planning efforts.
 Former Department of Labor Secretary William E. Brock focused the
 Secretary’s ManagementSystem on areaswhere he believed the Depart-
 ment could make the most significant contribution. The Department of
 Labor’s eight operating component headsthen took responsibility for
 defii      about 36 areasthat becamethe Department’s top priorities for
 the next 1 to 3 years. Secretary Brock placed particular emphasison
 supporting goals that cut acrossmore than one component,seekingcol-
 laboration for more effective use of resources.

 %ee appendix II.

 Page 39                                       GAO/HRWWlO9   Management of VA
                         wnt         of lk Impkment&gStr8tegl~
                         Mmugement Roetu    WonklImproveServle~
                         to veauum

Element 4: Develop

                     . Selectthe best approachesto addresseach strategic issue and achieve
                       the strategic direction.

Participants         . Key VA line (including field) and staff managers.Key external groups
                       participate as appropriate.

T&S                  . Identify alternate strategies to addresseach strategic issue.
                     l Identify barriers to and consequencesof implementing alternatives.
                     . Selectthe alternative with the greatest potential for successand support
                       by external groups.

                         Management     Considerations: This is a multipart processof identi-
                         fying, evaluating, and selecting strategies that will best addresseach
                         strategic issue consistent with VA’Sstrategic direction. The number and
                         identities of participants involved could change,dependingon the issue
                         under consideration. For example, when evaluating strategies for pro-
                         viding long-term care, planners could consult with representativesof
                         private care providers, state agencies,or other federal programs. Mean-
                         ingful participation of key external groups in strategy selection should
                         enhancethe support of these concernedgroups for decisionsmade in the
                         planning process.
                         To illustrate, providing veterans with a complete continuum of medical
                         care raises the strategic issue of how to balance acute and long-term
                         care to meet the needsof aging veterans. One alternate strategy related
                         to this issue could involve establishing centers of excellencefor certain
                         acutecare procedures.For someacute-careservices,such as cardiac
                         surgery, a minimum work load is necessaryto maintain proficiency.
                         When the work load declines below minimum levels in certain facilities,
                         it may becomeineffective to provide the acute-careservicesin those
                         facilities. Thus, VA could consider a strategy of consolidating the work
                         load of several nearby facilities into centers of excellencefor these ser-
                         vices in certain geographic areas.This strategy could envision supple-
                         menting the centers of excellencewith private care providers for cases
                         of emergency or hardship in those areas more distant fromJhe center.

                         P4e a4                                        GAO/EED~loI)   Mmugement of VA
                                    Appendix I
                                    Wment        of VA; Impknwnting Strdrglc
                                    Muugement    Proce88 woald Imptwe sewlce
                                    to Vetemna

                                    An alternate strategy, at the opposite end of the spectrum, could envi-
                                    sion contracting for all such acute-careprocedures.Analysis of a wide
                                    spectrum of strategies would consider the impact on, for example, vet-
                                    erans’ accessto neededservices,VA'S medical school affiliations, and
                                    communities with VA facilities.

Element 5: Develop Action
Plans and Link to Budget

                            l       Develop action plans and obtain resourcesneededto implement selected

Participants                . Primarily component managers.

TX&S                        . Develop detailed action plans basedon selectedstrategies.
                            . Ensure that action plans shape budget submissions.

                                    Management     &MideratiOM:      Component managersmust translate
                                    selectedstrategies into specific short- and longer-term action plans that
                                    will move VA in the desired direction. Action plans should:
                                l List in specific, measurableterms the outcome desired, so that it will be
                                  possible to determine whether the outcome has been achieved.
                                l Provide a time frame to attain the desired outcome, so that results can
                                  be measured at a specific point.
                                . Offer the expectation that, with the proper use of resourcesand staff,
                                  the desired outcome can be accomplished.
                                l Relate directly to a strategic issue,consistent with VA’S strategic
                                     Action planning should be the responsibility of line managers,not staff
                                     planners. They are the ones who must carry out the plans. Their
                                     involvement and commitment are necessaryif VA is to changein
                                     responseto its environment.
                                     As shown by lessonsfrom past strategic managementefforts, VA'S stra-
                                     tegic direction, reflecting the priority needsof veterans, should shape its
                                     budget. Without this vital linkage to the budget, action plans will


                                     P8ge 86                                       GAO/HRD90109   hhnagement of VA
                           become nothing more than “wish lists,” losing credibility and thereby
                           losing the support of those necessary to make the processa success.

Management Elements

Element 6: Establish
Accountability and
Implement Plans

                       l   Assure implementation of action plans.

Participants           l   a managers and staff.

Tasks                  l   Assign responsibility for implementing action plans.
                       l   Make action plans a reality by incorporating them into     operations.
                       l   Link individual reward system to plan implementation.

                           lbna@ment       Considerations:     After the Secretary and his staff review
                           the components’ action plans for consistency with VA’S strategic direc-
                           tion, specific units and individuals would have responsibility for imple-
                           menting the plans. VA managersvoiced frustration with the lack of
                           accountability  in past planning efforts, indicating that the planning
                           efforts were nothing more than paperwork drills.

                           Personnel performance systems should link action plans with the per-
                           sonnel reward system, thus stimulating individual commitment to
                           Department-wide   initiatives. For example, a former VA manager sug-
                           gested that, to underscore the importance of managing strategic change,
                           a could link performance awards, bonuses, appraisals, and Senior Exec-
                           utive Service contract23 to the implementation    of action plans.

                                                                            GAO/HpD(10109 bhugement   of VA
                         IeMgement of VA Implementing str8teglc
                         M$tPatPt  Rocae Would Impmve !hvice

Element 7: Monitor
Implementation and
Provide Feedback

                     . Evaluate progress in implementing action plans.
                     l Ensure that relevant information flows between the components and the
                       Office of the Secretary.

Participants         l   Secretary and VA managers.

                     . Monitor progress toward implementing action plans.
                     l Periodically report progress and problems to the Secretary.
                     l Assessadequacy of action plans and take necessarycorrective
                     l Fine-tune strategic managementprocessas required.

                         Management Considerations:       The final two elements in the strategic
                         process,assigning accountability and monitoring performance, represent
                         the managementdimension of the processand are essential elementsin
                         managing strategic change.They signify the importance of continued
                         top managementinvolvement throughout the processto attain the
                         desired outcome. Monitoring the implementation of action plans is neces-
                         sary to assessany obstaclesto plan implementation and take corrective
                         actions. In addition, monitoring could reveal the need to revise part of
                         the strategic managementprocess.
                         Effective review and monitoring do not require extensive controls. The
                         experiencesat both VA and other agenciessuggestthat when monitoring
                         becomescomplex and involves excessivepaperwork, strong opposition
                         results. The Secretary’s ManagementSystem at the Department 01 Labor
                         features monitoring that is effective in assessingprogress and providing
                         feedback, yet is flexible and not burdensome.This system keeps
                         reporting paperwork to a minimum, building on existing departmental

                          P8gt 37                                    GAO/IilUb9GlO9   Management of X4
                       BhMgement Rocua Wotdd Improve ScrvIce
                       to veteruu

                       Throughout our review we worked with the Office of the Secretary to
Progress by the        develop a Secretary-led strategic managementprocessthat provided for
secretary   of &term   (1) identifying strategic issuesthrough a collaborative process,(2)
Affairs                developing a Department-wide strategic direction basedon analysis of
                       these issues,(3) identifying alternate approachesto addressthese issues
                       and selecting the most appropriate approach, (4) allocating resources
                       and assigning accountability to implement managementactions, and (5)
                       monitoring implementation of the actions. The processalso provided for
                       the participation of key internal managersand external groups, such as
                       the Congress,veterans’ service organizations, and OMB.
                       On April 27,19!30,the Secretary established a new integrated
                       approach-the Secretary’s Strategic ManagementProcess-to plan for
                       the future and managethe work of VA. The approach provides for a
                       structured, yet dynamic processfor (1) the Secretary to determine and
                       articulate the strategic direction for VA for the next 5 to 10 years, (2) VA
                       managersto develop and implement policies and programs to support
                       the Secretary’s strategic direction, and (3) the Secretary to monitor the
                       progress made in accomplishing these objectives. Also, the strategic
                       plans will be linked to the budget formulation and execution processes.
                       The Secretary will basethe strategic direction partially on discussions
                       with external groups. This approach demonstratespositive progress
                       toward development of an effective strategic managementprocess(see
                       app. II). The Secretary will need to monitor closely implementation of
                       the new processto ensure that it is properly carried out.
                        The Secretary established a VA Commissionon the Future Structure of
                        Veterans Health Care in April 1990. He indicated that VA'S system of
                        health care facilities had not been subjected to a broad, thorough review
                        in 26 years. The Commission’sprimary duties are to examine VA'S cur-
                        rent system configuration and quality of facilities and servicesand, in
                        consideration of probable future medical care needsof eligible veterans
                        who are expected to use the system, determine whether changesin mis-
                        sion and programs (at individual facilities) may be necessary.The Com-
                        mission will consist of a group of experts with backgrounds in such
                        fields as medical care, health science,health policy and economics,edu-
                        cation and research, and veterans’ issues.The Commission’swork will
                        fit well with the aims of the Secretary’s new strategic managementpro-
                        cess as VA addresses the challengesof today and tomorrow.

                        Pye98                                         GAO/liRD8@109 Management of VA
~~&ary   of Veterans Affairs’ Memorandum
Estziblishinga StrategicManagementProcess

                                    THE SECRETARY OF VETERANS AFFAIRS

                 April   27, 1990
                                               Sttata#C   Diraztion
                  Wer the next 5 t0 10 years tha maphica         of the veteran papulation
             will amtinue to change dramatically.    In addition, wa anticipats changss in
             health care delivery ard benefits administraticm.     These &mnges, coupled with
             tight lUgets, a dmnging uorkforce, and advances in te&nology, are just a
             few of the trends we nust take into aamnt as w plan for the future.         tiile
             t!me trenda my be pcdictable,     the wy we respoti to thm is up to us. md
             M will respad.
                 l%is is our visiar for VA in the years ahead - a stratsgic directim           as
             to what VA should look like and what we shaAd achieve in the long run.

                  AU of the Department’s efforts will be geared to providing the most
             ~sionate,        hish quality services to veterum and Umir fanilies.         we nust
             leadthemderalgovwmmtinimpleamting                  mtalqualitymnagementand
             quality assurance program         We lnrst a@asize    the gzovision of the most
             effective kinds of treatment and servi~s to our veterans. We shall use
             maWal, information and other te&nologies to praaote the best care possible.
                  Ox Departmnt mat be the mo6t reepsive        am3 bsst manaqedservia
             delivery   organization in the Federal goverment.   We shall seek to tailor
             serviar    to meet the needs of our veterans, ratit   than requiring veterahs to
             adapttothow8ysof        th8DepKtment.   Wanust simplify and streamline the ways
             in bIbi& we do bJsiness.
                   We shall operate as cme unified Departmnt, not as three separate
             aghndss.       0.x policy direction will be centralized.   Olr policy
             irpla#wtation      will tm decentralized.  we shall monitor our progress and hold
             ours&m        accmntable for achieving stated objectives.
                  The one essential    ingredient   to success in these efforts   is a dedicated,
             profwrional,     -11 trati       uorkfora.   W ahall amtinue our efforts to
             recruit   and tetlrfntopnotchindividuals       for &allengingcaresrs    inn.  Job
             satisfmtion    for fellow mployees is essential for providing high cl,lality
             serviasrto    our veterans.      To that end, the opportunity for professiaml
             developllant, frcm entry level to top managawnt, will b a high priority.
                  With resmt to VA’s health care systedn, we shall emphasize meeting the
             hmltb -e        meds of our elderly veterans. Ws will more precisely define the
             patient populaticms we will serve. We will implement eligibility
                  we will mdernize our health care system to ensure that eligible veterans
             receive the appropriate types and levels of are meded. we will provide
             amtinuity    of care. The ampltte amtinuum of Care envisioned will include
             preventive, acute, rehabilitative,  chronic and hospia care.

                 Page 3B                                               GAO/HEMMO9 Management of VA
          seaetuy   of veterans Affald  Yemorandtun
          Emtabuehing a strategic Management Ravu

     Ws will use a mix of primary, saxndary   and tertiary    care setvias.  Care
will be provided in both institutional   and noninstitutional     settings. When in
the best interwts   of ax veterans, wa will shift frcm inpatient to outpatient
care, amnuhity-based, hane-bssed and nursing hme care services.
     With respect to VA’s knefits    systee, accurate and timely delivery of
berrfits  to veterans are the criteria    by which we shsll judge our work. We
will enhanm &nefit8    delivery through an aggressive Mp and telecammica-
tioos modernization program aimed at spading the process of placing necessary
informatim in the hands of our employees to batter povide servioes to
veterans.   Purthermore, we shell redesign claim processing pramdures to take
full advantags of state-of-the-art     technology,
     A8 the veteran papllation agee and as population movanents QXllr, the
nut&err aud locatianr of regiaml offices likely will r-ire         ad$ustmeut. WC
will pursue a pcogrm of reglonalizatiou      of those servicer that truly do not
require fam-to-faa     ccntact with tmeficiariw.      The sccimies achieved will
k used to improve availability     of tboee services in which direct amct      is
naedsd.   Ws shall collocate regicnal offias     and medical centers wherevsr
doing so will help provide better services to vetsfans.
     M also will rem@20 the &anging bemfits          ueeds of the veteran
pqulation.   ltm current array of benfim      largely grew out of the needs of
our ueterana returninq  hme after World mr II.       These tmsfits  my not bs the
roe suitable   for ths 2lst aantury.   Ws will undertake a thorough exanihation
of tba package of vlr banfits.    Wa shall develop legislatfcm to eliminate
imquitiw        and iuamsicrtencies    fn bsmffta     provided to future beneficiaries.
     With rwpact to IAe Waticmal Cemetery Syste& we will make the benefit of
burial in a national cmetery a realistic   mnsideration  for veterans. cm
objective is that by the turn of the oantury, three out of far veterarm will
live no further than 75 milw from an open national cemetery. We will expand
public amterms    of veterans’ eligibility for burial in a national cemetery
and will impove the services provided by the National Cemetery system.
     With reepsct to the VA’s role in the Federal goverment, we shall lead,
not follow, in our delivery of health are, benefits ati burial programs. In
additicm, VA will be a more active participant    in coordinating efforts and
*8ring reecurcem with other plblic   and private-sector    health, benefits and
hrrial      pogram.

     ‘IMa virian will guide us through the Strategic famgemmt Promss, a
new integrated approach to plan for tbe future and manage the work of the
Dsputmmt.       Ibis P-8   povidea a structursd,   yet dynimic framswork for
arrying out the strategic   direction of the Department. Attached is a
amoramba frm Deputy Secretary Anthony J. Principi whiti describse the
Strategic ramgment Proasr.
         lbe future represents a challenge for all       of us.   I look formrd    to
working      with you in mee+q these cballengee.

UPC: 6003

           Page 40                                                 GAO/IiED~109     hfanagementof VA
          lkawaTy     of vetuuu     Affald Memormndum
           mabllshlng    a strategic Management Process

                                                          Offfd  of the Secretary
                                                          Department of Veterans Affairs
                                                          Hmhinqtcm, D.C. 20420
                                                          DATE: Aprfl 27, 1990
rammax         m.     0*90-2

1. This m-ran&m       establishes the SocreUry’e     Strategic  Manaqcnant Process,
a mu integrated    appr&      ts plan for the future and manage the uork of ths
Department of Veterans Affairr.      This app=oa& provides a structured, yet
dynamic pcoo3ss for (a) ths Scretary to dstermins and articulate        the Strategic
direction for tbs Dqartment for the mxt five to ten mrsr           (b) VA mnagers
to developand implementpoliciea       andprogrsmto      support the Sacrotary’s
strategic diraztion;    ard (c) ths Swretary to monitor the progress made in
acamplishing        these objectives.
2. Ihs stratagic   Hemgammt Procmr is eswtially          a four step process.
First, tkn! Secretary deteainea the strategic    dircrtion    of tlm Dapartment.
seccnd, objectivea are develm       to support this direction and integrated into
ona ahesive Dqsttraeb strategic plan. Third, the strategic plan is linked
directly to the tudqt fobllatian      and exeaMar ~~oassea. And, faxth, a
mnitorfng   ycltr   la developed and used to maaura our progreaa and hold us
aocountable for achiwingourobjectives.
3. The prtiry roles of the tmpartment’s top managers in the Strategic
amagmsnt Prams are defirA as follm:

      a. T%e Sbcrotary   makes strategic planning assufgdam and determines the
strataglc  dkactionof     theMpmtroo~.      918 strategic direction  is based on
his asmsmtmt of ths strangths and weaknesses of tb Departmmt and his
amaideration    of tha viawa and r eumedationa      of m Field and Central Office
mnager8.     The Sscretary also barr his strategic     direction ~1 discussions
with extamal ocganizatio~    ad on othez fakora dircrtly   OK indircrtly
related to pcoviding service   to veterans. Rw strategic direction paints a
general picture of what the VA should look like in the future.
     b. The secretary’s     strategic direction is the guidance for the
forulation  of all objctives       am3 inttiatives    irreludsd in the Department's
strategic plan and budget request. *            Secretary approves the strategic plan
ami the Department’s    tudgst suhisdon.

     c.      Rw Scretary monitors the bnplemmtatim of the mpartmmt’s
strategic      plan. Be receive periodic rapcts  on specific objetives,   mid-year
review       of pimary objetivee, and tisf-year   reviews of all objectives.

            P8ge 41                                               GAO/IiED~lOB    Management   of VA
             tiizg!fY  eteramAlxaim’bfenlorandam

lmcmtmm            m.    00-90-2                                                    April 27, 1990

    secretary’s           Policy Council
      lhs Srcretary's Policy Council, consisting of the Deputy Secretary,
kQlinistration      heads, Assistant Secretaries and General Counsel, serves as the
pimary body within ths Departrmnt to provide policy assistance to the
Sacretary     throughout the strategic  Hanagenent Pramsa.   The Deputy Secretary
chaira   the Policy -1.
    Mninistration             Heads
     a. Administration H&     ~ovida views and r emmmdations to the
Secretary for use in developing his strategic direction.  Field involvenent                     is
        b.    Administration         Atis      &Map      and maintain planning processes which are
wed to fornulate     spscific, measurable objectives      and initiatives    and milestone
data8 for achieving    thm.      Such objectives and initiatiw        must be consistent
with ttn secretary’s     strategic   direction.  Field participation      is expected.
    c. Administraticm Heads work with the Assistant Secretary for Finance and
Planning to drMlOp the Department’s strategic  plan and tadget request. They
wxk tOgether to raMtOr ths implanentatian of ths strategic plan and the
exaattion of the kudgst.
        Iwistant        Scretariea          and Staff   Offi-   Directors
        a.     Assistant     Secretaries and Staff office Directors provide views and
rmatiana                   to tAe Secrebry  for use in develolping his strategic direction.
Field        immlvawnt        is essential.

      b. Assistant    secretaries    snd Staff Offia Directors develop and maintain
planning praceesea which are used to fomulate specific, measurable objectives
arm3initiatives     and mileatom datas for achieving them. Such objectives and
initiatives     nust he amsistent with ths Secretary's strategic direction and
mpport the Administration         mads~ objectives.  Field participation is expected.
      c. Assistant Secretaries and Staff Office Directors work with the
Aaaistant Screary     for Finarm  and Planning to develop the Department’s
stratagic   plan am3 tud+t reguest. 'Bay work together   to monitor the
hplrmtatiar      of ths stratagic plan and the excolticn of ths budget.
        A8aistant        secretary for Finarm ard Planninq
        a. The Assistant Secretary for Pinanca and Planning facilitates       the
 d8velopmnt      of ths Dapamwnt's strategic plan. Ths Assistant Secretary
 integratas all Adndnistratian,     Assistant Secretary     and Staff Offiar objectives
 ard initiativas      into a Department strategic plan. The Assistant Secretary
 forwards tha stratsgic plan to the Secretary’s        Policy Council for review and
 reaxanendations, thsn to the sscretary       for approval.    The Secretary resolves
 any unresolved matters.

               Pa#e 4%                                                       GAO/HBlNk%lO9Management of
neMoRAMxlMm. O&90-2                                                       April   27, 1990

     Assistant      Secretary for   Finance and Plmlnq,    continued
     b. Ths A88istant Secretary for Pi~na and Planning facilitates         ths
develmt      of the Departmnt’s t&get raqwst.          The Assistant Secretary
eIIoure8 that the la-t    reqmst i8 basad on tba Dspsrtmsnt strategic      plan.
The Assi8tant Sscretary intsgratas    all Admini8tratian,    Asafstant secretary and
Staff Office txdget rsquests into om Dqartnmt IWgst ceque8t and revises
ths strategic plan aaxrdingly.      The revissd strategic plan and &3get request
are forwarded to ths Secretary’s    Policy Council for revisw and rtaonmcnda-
tions, then to the Sbcreixuy    for approval.   Rw secretary rs8olves any
unresolved matters .
     c. mC A8si8tant secretary for Pinarm and Planning develop8 a system to
monitor tbe implmentation of Dqurtmental objctive8.     Ttm monitoring systen
is not paper-intensiW or onerous.   The A88istant Sscretary coordinates ths
prograarr reviews povidsd to ths Secretary.

4.   T+m Strategic r4magmmt Pra~8s will be u8ad for fiscal year 1992 and
beyond.   Housver, only for the fir8t year, Pr 1992, the process will be
sanewhat mdified.    Tbs Assistant secretary for Pinam and Planning will
provide you with a modified timetable for Py 1992.
5. Attachment A illustrates the Strategic Management Proa% as fully
implawnted.  It provides an overviaw of the roles and responsibilities                  of the
Departmnt’s      nmagecs     and the general   time frams for ea& phase of the
Proce88. Attaciment 8 provides additional infornmtion about ths major steps
of the ProoSS. Attaciunmt C provides yidMa      for the fornulation of
objctiw   .
6. In mry,       I blieve we have bfom us a &mllenging opportunity.       An
opportunity to plan and man- strategically    to help us povide the highest
quality 8mvi~8 to veterans and thair fanilie8.     ‘Iha Sacretary and I are
amitted    to making ths Strategic Hanaganent Proce88 work and look forward to
Wrking with you on this Proa%88.
7. PSSXSSICN: This manorandumwill               rmain in effect   until           rceded or


DistribUtiOn:        6003
.SS (723)

          P8ge 49                                                 GAO/HpDBo1OB Management of VA
I       STRATEGIC MANAGEMENT                      PROCESS*

    +   This chart reflects the strategic management process
        as fully implemented.   For the first year, FY 1992,
        the process will be somewhat modified.

                                                        GAO/ERD~lOB   Management of 1

      FEE              MAR            APR      1      MAY          JUN     1       JUL
    IMW Awl.
    ormtuka’                           IMWBad**1Cdl
   PkUlM    CalI       Dowtom                                      cudam   a inm~am      I

      AUQ 1             SEP         OCT        -       DEC
  I aovlMotra- I

                                          Ml6ymr                           End-of-year
                                         Rwlew8 of                             R0Vl.W
                                          Primary                     l         of rll
                                         Obkotlvn                          Objootlnr

    l fhls ohart retlootr thr l trrtoglo managenont orocwo l o
   fully Inptomentad. for the tlrrt yaw. FY 19@2. the proooor
   will bo romowhrt nodlflod.
   + Porlodlo      uodator on l ~ooltlo oblootlvoo,   aa noodod.

       PWM                                                          GA0/EED-8@109 Management of VA
       Appc*     n
       seaetuy of vetuutm Amh’      Mewtorutdnm
       EHAbi.bhlng 8 str8teglc Bhugemettt Proca8

                                                                   Attidment      c

     TM sctetary’e   guidants for &velq+ing the objectives for the
mpartment’s strategic plan in aa tollam, with supplmental information                 to be
provided by the Auiatant *rotary     for pinancc~ and Planning:

    0 Objstivea   will   ba clear,   aDncise, cDncret3 and measurable.
    0 Objectivea will    bo for pY 1992 and bayand.
    o Objetivee   will be pogram-specific  am3 will describe the change
      envisimed   and the time frame for a&ieving that drange.
    0 A bmselim will be povided for each objective.   Piscral par              1990 will
      serve u the reference point for determining the baseline.
    o A distimtion  will TV mm& Mzwen prinury and other objectives due to
      the steep and ccaplexity of the VA’s mission and the large number of
    0 Cbjactivea requiring     new, additifnal   or rnodffied legislative      authority
      may tn! iItcluded.
    o objactivw   which are bold and inmvatim        are enauraged.

    %&de      Hospital-W    K~w Care (HBBC) Servi~s in all VA medical
    centers by fY 1993. (Baralfna: 71 IimC programx, Fy 1990)

    s       ovw, by FY 1992, the paraantage of casea in whicfi VA and the veteran
    amplate an alternative     to ham loan foreclosure    to 4 percent for field
    8tatiarrr where the duratiat   of forecloxfure plus any re&mptia period is
    120 daya or la,     and 6 percsnt for field statiorrs where the redemption
    prial    la greater than 120 days. (Bnselim:       2.8 paLant,  FY 1990)

    %gram      fund8 and develop plana to construct ameteriea    by 1995 in the
    five areas arrantly   undergoing an Enviromental Impact Study (EIS)
     (Dallas, Seattle, Chicago, Cleveland, and Albany).   (Baseline: 65 national
    cmeteries which are opn to new interments, pY 1990).

        P8ge 16                                                GAO/lIRIb~lO8 Mmagemtentof
kg      Contributors to This Report

IHuman Resources
                    Walter P. Gembacz,Project Manager
 Division,          Barbara H. Bordelon, Deputy Project Manager
 Washington, D.C.   Frederick K. Caison,Senior Evaluator
                    Robert J. Wychulis, Senior Evaluator
                    Donald L. Bumgardner, Evaluator

                     Page 47                                  GA0/ImDalH~   Mulegemettt of VA

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Page 51