Management Reform: Using the Results Act and Quality Management to Improve Federal Performance

Published by the Government Accountability Office on 1999-07-29.

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

                          United States General Accounting Office

GAO                       Testimony
                          Before the Subcommittee on Oversight of Government
                          Management, Restructuring, and the District of Columbia
                          Committee on Governmental Affairs, U.S. Senate

For Release on Delivery
Expected at
9:30 a.m. EDT
                          MANAGEMENT REFORM
on Thursday
July 29, 1999

                          Using the Results Act and
                          Quality Management to
                          Improve Federal
                          Statement of
                          J. Christopher Mihm, Associate Director
                          Federal Management and Workforce Issues
                          General Government Division


Management Reform: Using the Results Act
and Quality Management to Improve Federal
               Mr. Chairman and Members of the Subcommittee:

               I am pleased to be here today to discuss the essential role that quality and
               process improvement initiatives such as Total Quality Management (TQM)
               must play in any serious effort to improve the effectiveness and
               performance of the federal government. A look across the federal
               government over the last decade clearly shows that there has been
               widespread interest and effort on the part of Congress, the leadership in
               the executive branch, and within the agencies in making dramatic
               improvements in public management. TQM, with its customer focus and
               concern with product and service quality, is one improvement approach
               that has been widely used in the public as well as in the private sector.

               My major point today is that if federal agencies are to make the major
               improvements in their mission-related results envisioned by the
               Government Performance and Results Act (Results Act), they must have
               management and process improvement initiatives—including those that
               employ the principles of quality management—in place to achieve those
               results. Fortunately, TQM and the Results Act share a common and
               mutually reinforcing focus on achieving program results and customer
               satisfaction, measuring performance, and using performance data to
               identify and select improvement opportunities.

               As agreed, my statement today will elaborate on these points by covering
               three topics. I will first discuss the complex and challenging environment
               facing governments at all levels that is encouraging a recommitment to
               many of the values of TQM and related efforts--efficiency, service quality,
               customer satisfaction, and results. Second, I will highlight selected
               aspects of the federal government’s response to this environment. Third, I
               will discuss several areas where a results orientation and quality
               management share common approaches to improving organizational
               performance and suggest areas needing additional attention for both
               approaches to be successful. My comments today are based on our
               ongoing and past work looking at management improvement efforts across
               the federal government and at high-performing organizations.

               Government decisionmakers and managers in the major democracies
The Focus on   around the world confront a strikingly similar set of challenges to efficient
Government     and effective public management in the 21st century. Driven by citizen
Performance    demands for more economical, efficient, and effective government; the
               pressures of economic globalization; advances in information technology;
               a consistent set of demographic realities; and other factors, many of these
               governments have undertaken major public management reform

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Management Reform: Using the Results Act and Quality Management to Improve Federal

initiatives. While these initiatives have been crafted in response to
different immediate needs, political environments, and historical cultures,
the reform efforts are taking a generally consistent direction.

Performance-based management, the unifying theme of these reform
initiatives, seeks to shift the focus of government performance and
accountability away from a preoccupation with activities to a greater focus
on the results of those activities. Empowering line managers with the
operational authority to achieve results--a fundamental tenet of TQM and
related quality management initiatives--when combined with appropriate
accountability mechanisms, is seen as vital to improving performance and
is thus also acknowledged to be a key principle of performance-based

The public management reforms that governments around the world are
implementing have profound implications for (1) what government does
(in terms of the products and services it delivers and partnerships that are
formed with the private sector and other governments), (2) how it is
organized, and (3) how accountability is defined. Government
decisionmakers and managers are adopting new ways of thinking,
considering different ways of achieving goals, and using new information
to guide decisions. A common lesson of the current range of management
reform efforts is that change does not come quickly or easily. Old ways of
doing business must be critically reexamined and new approaches have to
be developed and institutionalized. This includes, for many organizations,
creating the basic management capacities needed to become more
performance based.

In that regard, our work and that of others over the last two decades has
found that many federal agencies need to build or strengthen the
management capacities that form the foundations of high-performing
organizations. These capacities include (1) a clear mission and vision for
the organization and a sense of direction that is clearly and consistently
communicated by top leadership; (2) a strategic planning process that
yields results-oriented program goals and performance measures that flow
from and reinforce the organization’s mission; (3) organizational alignment
to achieve goals; (4) sound financial and information management
systems; (5) the strategic use of technology to achieve mission-related
goals; and (6) the effective management of human capital—the
organization’s employees—including ensuring that the right employees are
on board and provided with the training, tools, incentives, structures, and
accountability needed to achieve results. Management approaches that
strive to achieve continuous improvement of quality through

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                       Management Reform: Using the Results Act and Quality Management to Improve Federal

                       organizationwide efforts based on facts and data, such as TQM, can be a
                       key attribute of high-performing organizations.

                       As the federal response to demands for a higher-performing government,
The Federal Response   Congress, over the last decade, has put in place a statutory framework to
to Demands for         promote, create, and sustain high-performing federal organizations. In
Improved Performance   enacting this framework, Congress sought to shift the focus of government
                       decisionmaking and accountability from the activities that agencies
                       undertake to a focus on the results of those activities. Congress’
                       framework includes the Chief Financial Officers (CFO) Act of 1990 and
                       related financial management legislation; information technology reform
                       legislation, such as the Clinger-Cohen Act of 1996 and the Paperwork
                       Reduction Act of 1995; and the Results Act. The key requirements of these
                       Acts are as follows:

                       • The CFO Act, as amended by the Government Management Reform Act
                         of 1994 and the Federal Financial Management Improvement Act of
                         1996, is the most comprehensive financial management reform
                         legislation of the last 40 years. The CFO Act sets expectations for
                         agencies to develop and deploy modern financial management systems
                         to routinely produce accurate, reliable, and timely program cost
                         information and to develop results-oriented reports on the government’s
                         financial condition.

                       • The information technology reform legislation is based on the best
                         practices used by leading public and private organizations to more
                         effectively manage information resources. These best practices help to
                         ensure that information technology dollars are directed toward prudent
                         investments that achieve cost savings, increase productivity, and
                         improve the timeliness and quality of service delivery. Under these
                         laws, agencies are to better link their technology plans and the
                         management and use of information resources more directly to their
                         programs’ missions and goals. This involves, among other things,
                         redesigning inefficient work processes and using performance measures
                         to assess technology’s contribution to achieving results. This is
                         important because our work with leading organizations has shown that
                         information technology projects aimed at improving performance that
                         do not involve process improvement may fail to yield any significant,
                         long-term benefits.

                       • The Results Act was enacted in part to improve federal program
                         effectiveness and public accountability by promoting a new focus on
                         results, service quality, and customer satisfaction. The Results Act is

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Management Reform: Using the Results Act and Quality Management to Improve Federal

  intended to improve the efficiency and effectiveness of federal programs
  by establishing a system to set goals for program performance and to
  measure results. The Results Act requires executive agencies to prepare
  multiyear strategic plans, annual performance plans, and annual
  performance reports. The Act also requires the President to include
  with his annual budget submission a federal government performance
  plan. In each of the first two plans, covering fiscal years 1999 and 2000,
  the President’s plan has shown an array of management objectives and
  initiatives dealing, for example, with responsiveness to the public,
  service delivery, and program performance and management.

During the same time frame that Congress was establishing a statutory
framework, other, often complementary, federal management
improvement efforts have also been under way. The most noteworthy of
these efforts, the National Performance Review, now known as the
National Partnership for Reinventing Government (NPR), was launched by
the administration in March 1993. NPR shares many of quality
management’s principles, such as a focus on customers. NPR’s initial
focus was to make the government "work better and cost less," and its first
phase made recommendations to reinvent government systems and
individual agencies' programs and organizations. As part of the NPR and
under the direction of a presidential Executive Order, over 200 federal
agencies established customer service standards. A second NPR phase,
undertaken in late 1994, was designed to identify additional programs that
could be reinvented, terminated, or privatized, as well as to reinvent the
federal regulatory process. NPR has continued to evolve, and it is
currently working with 32 “high impact” agencies that have a high degree
of interaction with the public and business and it has recently focused on
working to improve services that government delivers in partnership with
local, state, and other federal agencies and the private sector.

A related executive branch initiative, the President's Quality Award
Program, is the most important statement of quality management
principles within the federal government. Since 1988, the program has
given awards to federal government organizations for (1) improving their
overall performance and capabilities and (2) demonstrating a sustained
trend in providing high-quality products and services that result in the
effective use of taxpayer dollars. The Office of Personnel Management
(OPM) manages the program and its award criteria, with several
modifications, are closely aligned with the Malcolm Baldrige National
Quality Award Criteria.

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                     Management Reform: Using the Results Act and Quality Management to Improve Federal

                     The award criteria are updated annually to reflect the best approaches
                     within the public and private sectors to systematically improve
                     organizational performance. OPM’s assessment criteria for the year 2000,
                     issued this April, underscored the essential connection between achieving
                     mission-related results and quality and process management. The criteria
                     are designed to define a quality system, the key elements of a quality
                     improvement effort, and the relative importance and interrelationships of
                     these efforts. The assessment categories include leadership, strategic
                     planning, customer focus, information and analysis, human resources,
                     process management, and business results. According to the Director of
                     OPM, organizations that have used the criteria claim two important

                     • “First, they can apply a disciplined approach for assessing and
                       measuring performance on several important business factors:
                       customers, products, services, financial, operational, and human

                     • Second, managers are better able to target key performance gaps, set
                       improvement priorities, and introduce better and innovative ways to
                       work with customers, partners, suppliers, and the workforce.”

                     I mentioned at the outset of my statement the important interconnection
Performance-Based    between efforts to improve agencies’ mission-related results and efforts
Management and TQM   (through TQM and related initiatives) to improve the efficiency and
Share Common         effectiveness of the programs and processes that make those results
                     possible. The approaches that are shared between performance-based
Approaches           management efforts and TQM underscore the essential nature of this
                     interconnection. These shared approaches are grounded in the
                     understanding that implementing and sustaining major change initiatives
                     requires a cultural transformation for many agencies. In enacting the
                     Results Act, Congress understood, and the experience of TQM initiatives
                     show, that organizational change and real performance improvement do
                     not come quickly or easily. Today, I will highlight five areas where a focus
                     on mission-related results and TQM share common approaches to the
                     direction the needed cultural transformations should take and how those
                     transformations can be accomplished.

                      The President’s Quality Award Program: 2000 Information and Application, U.S. Office of Personnel
                     Management, April 1999.

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                         Management Reform: Using the Results Act and Quality Management to Improve Federal

Strong Leadership is     Successful implementation of the Results Act and of quality management
                         principles requires the demonstrated and clear commitment of agency top
Essential to Improving   leadership. Strong, visible, and sustained commitment to change requires
Performance              setting a clear and consistent vision of where the organization is going.
                         Political appointees and top-career officials must work together to
                         communicate this vision throughout the organization, teach people what
                         their roles are in accomplishing this vision, and hold them accountable for
                         fulfilling those roles.

                         In looking at the experiences of leading organizations that were
                         successfully pursuing management reform initiatives, we found that four
                         top leadership practices were central to making the changes needed.

                         • First, successful leaders devolve decisionmaking authority in exchange
                           for accountability for results. Leading organizations create a set of
                           mission-related processes and systems within which to operate, but they
                           give their managers extensive authority to pursue organizational goals
                           while using those processes and systems. Consistent with quality
                           management principles, these organizations invest the time and effort to
                           understand their processes, how those processes contribute to or
                           hamper mission accomplishment, and how those processes can be

                         • Second, successful leaders use a range of tools to encourage a results
                           orientation. For example, employee incentive and accountability
                           mechanisms are aligned with the goals of the organization. In addition,
                           leaders use informal mechanisms, such as staff meetings and personal
                           contacts, to reinforce to managers and staff their commitment to
                           achieving the agency’s goals and to keeping those goals in mind as they
                           pursue day-to-day activities.

                         • Third, successful leaders take steps to build the necessary expertise and
                           skills. These leaders view training as an investment in human capital,
                           rather than as an expense. And, as human capital and quality
                           management experts have pointed out, organizational learning must be
                           continuous in order to meet changing customer needs, keep skills up to
                           date, and develop new personnel and organizational competencies.

                         • Finally, leaders in successful organizations integrate the implementation
                           of separate organizational improvement efforts. As I have suggested,

                          Executive Guide: Effectively Implementing the Government Performance and Results Act
                         (GAO/GGD-96-118, June 1996).

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                              Management Reform: Using the Results Act and Quality Management to Improve Federal

                                 the management reforms now under way spring from various sources.
                                 Some of these reforms may be self-initiated, such as TQM; others
                                 mandated by legislation; and still others may result from administration
                                 initiatives, such as NPR. Our work has shown that the top leadership of
                                 each federal agency needs to meld these various reforms into a
                                 coherent, unified effort. Traditionally, the danger to any management
                                 reform is that it can become a hollow, paper-driven exercise. Leaders
                                 who integrate performance-based management into the culture and day-
                                 to-day activities of their organizations will help avoid that danger.

Clear Goals and               A central principle of both TQM and performance-based management is
                              that a clear understanding of what is to be accomplished and how progress
Performance Measures          will be gauged drives daily operations. Organizations that implement the
Should Drive Daily            key principles of both reforms recognize the importance of using results-
Operations                    oriented goals and quantifiable measures to address program performance.
                              Both TQM and performance-based management also recognize that
                              desired results can have several dimensions, for example, customer
                              satisfaction, program costs, social outcomes, and operational
                              transparency. Our work shows that federal agencies still have a ways to
                              go in establishing the necessary balanced sets of goals and performance
                              measures. Our summary assessment of the fiscal year 2000 annual
                              performance plans that executive branch agencies provided to Congress
                              earlier this year will be released shortly. That report will detail our finding
                              that agencies need to develop performance goals and measures that better
                              depict the complexity of the results federal agencies seek to achieve. On
                              the other hand, all of the performance plans we reviewed contain at least
                              some goals and measures that address program results.

Building the Organization’s   High-performing organizations appreciate that effectively managing and
                              developing an organization’s human capital is essential to achieving
Human Capital is Key to       results. Organizational success is possible only when the right employees
Achieving Results             are on board and are provided the training, tools, structures, incentives,
                              and accountability to work effectively. High-performing organizations
                              gather and use employee-related data such as employee skills and
                              satisfaction. Such data are tied to measures of organization or unit
                              performance, including results, customer satisfaction, and productivity.

                              Federal agencies still have significant room for improvement in making
                              this vital link between their human capital planning and their mission-

                                The work was done at the request of Senator Fred Thompson, Chairman of the Senate Governmental
                              Affairs Committee; Representative Dick Armey, Majority Leader of the House of Representatives; and
                              Representative Dan Burton, Chairman of the House Government Reform Committee.

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                            Management Reform: Using the Results Act and Quality Management to Improve Federal

                            related goals and strategies. Most of the performance plans we reviewed
                            do not sufficiently address how the agencies will use their human capital
                            to achieve results. This suggests that one of the central attributes of high-
                            performing organizations--the systematic integration of mission and
                            program planning with human capital planning--is not being effectively
                            addressed across the federal government.

Programs and Processes      High-performing organizations understand and articulate how their day-to-
                            day operations and processes contribute to mission-related results and
Must be Linked to Results   improved customer satisfaction. Such understandings of how processes
and Customer Satisfaction   and strategies relate to achieving results are important to pinpoint
                            opportunities to improve performance and reduce costs. Simply stated, an
                            organization cannot improve performance and customer satisfaction if it
                            does not know what it does that causes current levels of performance and
                            customer satisfaction.

                            Our review of the fiscal year 2000 performance plans suggests that much
                            work remains in this area. Although most of the agencies' annual
                            performance plans relate strategies and programs to performance goals,
                            few plans indicate specifically how the strategies will contribute to
                            accomplishing the expected level of performance. Further, agencies in
                            some cases provide no strategies at all. For example, Health and Human
                            Services’ (HHS) Administration for Children and Families (ACF) has a goal
                            to provide children permanency and stability in their living situation and
                            related performance measures, such as increasing the percentage of
                            children who are adopted within 2 years of foster care placement.
                            However, ACF does not identify the strategies it will rely on to achieve this

Decisions Should be Based   Both TQM and Congress’ statutory framework for performance-based
                            management seek to create decisionmaking proceses that are based on
on Sound Data               accurate, reliable, and timely data. Unfortunately, significant progress is
                            needed across virtually all agencies in this regard. Most of the fiscal year
                            2000 annual performance plans we reviewed provide only limited
                            confidence that performance information will be credible and they lack
                            information on the actual procedures that agencies will use to verify and
                            validate their performance information. For example, regarding the
                            validity of data that will be used to measure progress in offering outreach
                            services to homeless and mentally ill persons, HHS’ Substance Abuse and
                            Mental Health Services Administration (SAMHSA) states “since the
                            sources of data are the local agencies that provide the services, the quality
                            of the data is very good.” SAMHSA appears to be assuming that these data
                            are valid, but the plan does not indicate whether SAMHSA will verify the

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Management Reform: Using the Results Act and Quality Management to Improve Federal

quality of these data or that it has conducted prior studies that provide this

In summary, Mr. Chairman, high-performing organizations consistently
strive to ensure that their organizational missions and goals drive day-to-
day activities. Experience has repeatedly shown that fundamental
performance improvements occur when organizations transform their
cultures so that achieving results becomes the driving concern of daily
operations. Program and process improvement techniques, including
TQM, thus have important roles to play in agencies’ cultural
transformations and thereby in helping them achieve their goals and
deliver the products and services at the cost and with the quality that the
American people are rightly demanding.

Mr. Chairman, this concludes my prepared statement. I would be pleased
to respond to any questions you or other Members of the Subcommittee
may have.

Contacts and Acknowledgement

For further contacts regarding this testimony, please contact J.
Christopher Mihm at (202) 512-8676. Individuals making key contributions
to this testimony included Justin Brown, Elizabeth Bowles, Susan Ragland,
and Bill Reinsberg.

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