Such (Government Efficiency) mandates often waste money on calculations that reveal little.
By Shelley Metzenbaum | July 1, 2009 From Governing Magazine

Shelley Metzenbaum
is the director of the Edward J. Collins Jr. Center for Public Management at the McCormack Graduate School of Policy Studies, University of Massachusetts Boston.

Where are the efficiency and productivity measures? I don’t see any.” I heard this critique a few weeks ago when discussing with a friend the city of Boston’s newly posted quarterly performance reports, dubbed Boston About Results. He was right. There weren’t any. My friend’s expectation that he would see efficiency measures in the report, and his frustration that he did not, are not unusual. As more and more governments move to measure accomplishments and associated outputs, activities and costs, many face mounting pressure to produce efficiency and productivity measures which show “units of output or outcome per unit of input” for every program.

Expectations for improved efficiency are understandable and important, and in these tough budget times government leaders may be sorely tempted to require programs to measure efficiency. Resist the temptation. Instead, insist first that programs demonstrate their effectiveness because it makes no sense to pay for an ineffective program let alone make it more efficient. Then, expect programs to report outcome, output and input trends; hold data-rich discussions about ways to contain costs while improving outcomes; report targets, trends and strategies to the public; and conduct occasional in-depth cost analyses and comparisons.

The current deep recession has states scrabbling for ways to meet their budgets resulting from falling revenues. It is only in times like this that the failure of states to manage its resources becomes visible. Unlike private industry state funds are allocated without knowing what the actual cost of a service should be. State governments assume that all services are managed equally well. No private industry would make this incredibly false assumption. Witness the across the board furloughing of state personnel, yes it does help the public to know what days certain state offices are closed. The assumption is that the pain should be shared equally when the reality is that some services may be significantly over staffed while others are struggling to maintain a decent level of service to the public. Only when essential services are maintained such police and fire protection is there some sanity in across the board furloughs.

The bottom line is that states do not do Work Measurement as performed in responsible private businesses. In my experience as a Management Consultant most functions both private and government are overstaffed by as much as 10% if they do not use Work Measurement as a part of their management policy.

Some states are laying-off employees. Cutting bureaucratic personnel will help fix the current budget shortfall but it will not be a permanent change because bureaucracies will simply replace the personnel when there is a budget surplus. A second problem becomes apparent when staff is cut. The tendency is to cut the most recently hired first, the people actually doing the function’s work and not supervisory personnel. This threatens the capability to meet current workloads.

The key to the successful reduction of state government is in establishing standards something rarely done in government. In industry the establishment of a standard through Work Measurement is a necessary part of operations and of staff reductions. The standard establishes a staffing floor insuring that the essential service being provided by the function will not be impaired or reduced. The standard also provides a base for measuring the effectiveness and the efficiency of the organization in accomplishing its tasks. Without this reporting mechanism the remaining staff employees may simply cease doing their jobs jeopardizing the service provided.

I recommend that reforms begin with the implementation of Total Quality Management (TQM). This reform brings a positive cultural change to the organization. Employees become members of Work Improvement Teams (WIT) and are motivated by empowering them to improve their jobs through innovation. By bringing innovation and continuous improvement to the government’s processes the state will save $ millions through increased efficiency in the future. The reform amounts to a win win situation for government union employees as well as the tax payers of the state by employee empowerment and by ending bureaucratic waste. I have further recommended that after implementing Total Quality Management (TQM) and Work Improvement Teams (WIT) that standards be set using Process Flow Charts. This is followed by replacing the current organization with a two tier form of government based on Steering Management and Functional management.

See the following articles on my website: http://managementconsultant.blogsome.com Article 103. Reforming Bureaucratic Government the Subtle way by Bringing Innovation to Government.
Article 104. Down Sizing State Government the Easy and Safe Way
Article 106. Where do the Government Reform Savings Come From?
Article 112. Using Surplus Government Employees to Take Back Privatized Contracts
Article 113. Private Versus Public Budgeting Practices
Article 116. Private Industry Example of Total Quality Management
Article 117. Overcoming Bureaucratic Resistance to Government Reform
Article 128. Using Private Industry techniques to Privatize (Reform) State Government

California-based Project Better Place, a private company developing an infrastructure for EVs, believes such switching stations are essential to widespread public adoption. But when you look carefully at the economics of swapping batteries for electric vehicles compared with quick charging, swapping batteries just doesn’t stack up. Battery swapping made a lot of sense when most electric cars used lead acid technology but now with lithium-ion batteries which can be quick charged swapping may be a dead issue. Consider the following article from Autobloggreen.

Tokyo to get 200 quick-charge EV stations with plans for more
by Jeremy Korzeniewski on Aug 13th 2008

The Tokyo Electric Power Company (TEPCO), the largest energy firm in Japan, plans to begin installing quick-charge stations for electric vehicles. The initial roll-out calls for some 200 stations to be up and running by March of 2010. TEPCO doesn’t plan to stop there, with 1,000 more stations planned within three years. This planned project coincides nicely with the expected launch of the Mitsubishi iMiev, which TEPCO has been extensively testing these last few years, and EVs from Subaru and Nissan as well. These stations will use technology already developed by the energy company which allows an EV to travel 40 kilometers on a five-minute charge and 60 kilometers on a 10-minute charge. Of course, the total available battery capacity and the ability to accept that much power is dependent on the vehicle’s on-board power pack. Each station is said to cost upwards of 4 million yen (that’s about $36,570).

The $36,570 installation cost will come down when every Filling Station in the nation implements the technology.

Assume that the service rate is 5 cars (stations) every 15 minutes for pumping gas and with eventually 5 quick charge stations. The first stage of implementation would be a single quick charge station probably costing less than the $36,570 figure.

Assuming the mechanical swapping method requires 15 minutes then it would eventually require 5 swapping stations to prevent customer wait time. Each swapping station would require an operator and an automatic drop and replace for the depleted battery and the fully charged battery at an estimated cost of $50,000 (my estimate). In addition a charged battery supply would have to be maintained to insure no wait time for customers. If it takes 4 hours to charge a battery (Using 220volts) then each station will require 16 batteries.

Battery cost will eventually become less expensive but let’s assume $10,000. Now we have a total battery cost $160,000, plus the mechanical changing station at $50,000, ignoring the cost of the operator you now have a Swapping station cost of $210,000. When compared with the Quick Charging station cost of $35,570 you can deduce that the Swapping station concept is a nonstarter. But I hear you say the Swapping time will only take 5 minutes now in order to prevent customer wait time you will need 48 batteries instead of 16 to keep up.

I urge that the Federal Government adopt the Tokyo Electric Power Company (TEPCO) standard for Quick charging stations NOW! Electric car manufactures need this standard now to add the capability for their electric cars to use the quick charging stations.

The state of Texas could save as much as five $ billion using private industry techniques to privatize (reform) the Texas State Government. These reforms can be implemented using the state’s resources. Texas is one of several states that believe in privatizing everything it can in the way of state services. Historically it has been shown that private companies can do the job of performing government services more efficiently. Texas is a leader in the privatization of government services but has done almost nothing to bring private management techniques into government so that it can operate as efficiently and as effectively as a private company. Instead it has followed the practice of contracting out services and is paying a high price to get the efficient government that it wants.

What Texas should be doing is to change the way its government operates so that it is more like that of the most successful and best managed private businesses. State government is supposed to manage the state’s resources and services for the benefit of its citizens. Using this definition makes government appear to be more like a business. Others may view state government from more of an eleemosynary perspective but it still must manage the state’s resources.

So what does the state need to change?
1. The Legislature needs to change its method of budgeting to more like that based in the private sector using Work Measurement and bottoms-up budgeting.

2. Total Quality Management needs to be implemented. This private industry technique has been around in the US since the 1980’s but some form of it is still one of the best ways get efficiency through continuous improvement.

3. Get rid of the bureaucratic organizational structure of government. Downsize to a two tier Steering and Functional management form of government.

4. Modernize State Computer systems to a centralized Relational Database Management system. This is necessary to efficiently manage the states resources and to implement a state wide Customer Relations Management (CRM) portal. This is especially important for managing Medicaid to prevent fraud.

After these reforms are in place you will find that the new state government is actually more efficient and effective than the privatized services that you currently have especially because there is no need for them to make a profit.

1. Change the Method of State Budgeting
One of the main reasons that government is so inefficient compared with private companies, besides their bureaucratic structure, is found in the way that funding and budgeting is done. When private companies need to fix a problem they select the Department of the company that “owns” the problem and asks them to come up with the most satisfactory solution. That is, to find the least costly solution that can be implemented quickly. Once the Department has identified the solution it is costed-out by industrial engineers or budget personnel, funded by the companies’ management and implemented.

When government encounters a problem it is usually first brought to the attention of the legislature by this time the problem is considered to be significant. There becomes an immediate political problem when each political party may or may not consider the problem worthy of consideration. A specific agency may be thought to have responsibility for the problem but they may or may not be asked to come up with a solution. One party may develop a solution to the problem and those against may come up with their own solution. Nearly all government problems are thought to require funding. Therefore there is an immediate effort to determine the funding needed for the solution even before the most satisfactory solution is known. The amount of funding is dependent on the party in power and their perception of the funding required not on the actual funding needed for the most satisfactory solution which may or may not even be known. Once the “solution” is funded it becomes a part of the budget by law. If the problem is thought to be large enough the Legislature may create a whole new agency as the solution. Otherwise the funds are passed to the most likely agency and the matter is thought solved unless the problem arises again at some later date. Note that once the funding becomes law the state’s budgeting personnel have little or no role in determining the level of funding required.
I call this government process Top-Down budgeting where little effort is put into finding the most efficient and effective solution before funding it.

This is the opposite of that done in private industry which I call Bottom-Up budgeting finding the most appropriate solution before funding it. The bottom-up solution is based on Work Measurement meaning that the actual costs in labor and other expenses are known at the time of approval by private companies’ management.

2. Implementing Total Quality Management
Bureaucratic agencies have a reputation for resisting change but it is difficult for them to reject a method that brings innovation to the organization. That method adapted from industry is Total Quality Management (TQM). TQM brings innovation to the lower level of the Bureaucracy through Work Improvement Teams. The WITs meet once a week to discuss how to improve the processes that they use in their daily work. Their activities bring continuous improvement to the methods used in doing their job. A WIT objective is to study their job Function by making a Process Flow Chart of the current job processes followed by a second Process Flow Chart of the improved method. A budget analyst costs out the new method to determine the cost savings and the WIT presents these savings to top management of the Agency.

Top management’s role is to encourage the implementation of TQM by being supportive of the WITs. They should send representatives to the WIT meetings showing complete management support. Each WIT elects it own leader to chair the meetings and over see the making of the Process Flow Charts. The Agencies Top Management must support the TQM implementation or they should be replaced.

The Process Flow Charts provide a record of the costs associated with each process. If a process were to be eliminated all of its costs are also eliminated. A Process Flow Chart is done for each Function and if a Function were to be removed all of its budget will also be removed.
Did I say Budget? What you have now is the real budget for doing the Agency Functions’ not that phony bloated budget that the agency presents each year. True, you must add in the cost of managing the Agency but now for the first time you know what that cost is. This is a bottom-up budget with actual costs for doing the work known. All other costs are for management and fluff (which can be significant). In my experience in industry most unmeasured office areas are over staffed by 10% or more.

3. Get Rid of the Bureaucratic Organizational Structure of Government
Once you know what the real costs are for doing the Agencies work and top management is working closely with the WITs. The government reform process can begin. First the WIT leaders become the Functional Management of the Agency. Second all the mid management levels between the Functional management and top management become redundant. Top management now assumes the role of a Steering Management Team. Some but not all of mid management may become part of the Steering Management Team. Steering Management has the role of guiding and steering the organization while Functional Management deals with the day to day operation of the Agencies functions. Steering Management is responsible for telling Functional Management “what to do” but not “how to do it”. This is a loose-tight organization with Steering firmly in control of the budget leaving Functional Management free to determine how best to do the job. Those in industry will recognize this as straight from the book “In Search of Excellence- Lessons from America’s Best-Run Companies” by Thomas J. Peters and Robert H. Waterman Jr., Harper and Row, New York, 1982.

What’s different? The multilevel career path is now one step from the Functional management Teams to the Steering Management Team. Gone are the hundreds of hours of endless manipulation of employee evaluations. Gone also is the endless bickering and negotiation over the Agency’s budget. Staff reductions occur more at the management level and less at the bottom of the Agency.

4. Modernize State Computer Systems
State Online Agency Directories aide the public in finding the particular organization they are looking for to provide a specific service such as: answering a question, making a request or filling out an application. Now with the new CRM portal all public queries can be handled through a centralized state 311 telephone number. The 24 hour State Services Call Center can provide almost instant service to the public. This portal eliminates the need for the public to search for a specific government organization. This allows for the complete reorganization of the online services system. No longer requiring public interface, commissions and agencies can be consolidated into a much more responsive and efficient downsized organizations resulting in the elimination of many management and public interface employee positions.

See the following articles for more details:
Article 101. The Hampton Virginia Innovation Story
Article 102. Government Reform of California Agencies and Commissions
Article 103. Reforming Bureaucratic Government the Subtle way by Bringing Innovation to Government
Article 104. Down Sizing State Government the Easy and Safe Way
Article 105. Making Total Quality Management Work in Health Care
Article 106. Where do the Government Reform Savings Come From?
Article 108. Making Total Quality Management Work in Education
Article 111. Example of Total Quality Management in the Classroom
Article 112. Using Surplus Government Employees to Take Back Privatized Contracts
Article 113. Private Versus Public Budgeting Practices
Article 116. Private Industry Example of Total Quality Management
Article 117. Overcoming Bureaucratic Resistance to Government Reform
Article 118. Examples of Cooperative Innovation
Article 119. Not Just Another Grass Roots Movement to Reform Government
Article 120. Collaborative Innovation between States and Federal Government
Article 121. Setting Standards for Widgets and Everything Else
Article 123. The Case for Long Term Implementation of Total Quality Management
Article 124. The Core Features of Innovative Reforms

High Gas Prices Created the Severity and the Sharpness of the Recession and Electric Cars Will Lead us Out of it.

The view of our recent housing values is varied but research shows that one half of the most severely depressed housing areas are in only 35 counties nation wide and one fourth of them are in only 8 counties in the entire nation. Falling housing values and foreclosures can not account for the severe shock delivered by the sudden decrease in consumer purchasing in the fall of 2008.

Because of the very high real estate values in larger cities especially on the east and west coasts the average American must commute long distances and spends nearly all his income on his house payment and on gas for commuting. This situation coupled with American credit card debt averaging an astounding $8000 per person. Then add an extremely low savings rate 0%, it is not difficult to determine that the average American has virtually no discretionary spending funds. Now we introduce $4 Gas prices and the same average American goes in debt and can’t meet his mortgage payment and he ceases to make discretionary purchases forcing the economy to go south after only a few months.

How did this happen? The middle class those who bought the SUVs that get 8 to 10 miles per gallon are the same group that eats out in restaurants and takes the family on short weekend vacations. They found themselves with a problem. Suddenly all their extra cash was being pumped into their SUV which they drove to work.

The occasional market forces that drive up commodity prices such as copper can immediately impact the Construction segment of industry. The price of corn can drive up the price of cereal in the super market. But the price of gasoline impacts all Americans and American industry everywhere instantly killing the economy. Why has this not happened before? It has but went unnoticed because the impact was not as sever and Americans were driving cars getting 18 miles per gallon not 8 and 10. So what does it take to get Americans to start spending money again? That is the way we get out of recessions. Stimulus packages are not nearly enough to end a recession the American consumer must have enough faith in the economy to start buying again.

Here is how I see the end of the recession happening. Middle class Americans will lead us out of this mess. We come out of most recessions when the middle class starts buying automobiles. They will start buying plug-in electric commuter cars by the millions. Detroit may not be able to deliver these cars but the Chinese will and are poised to deliver millions of electric cars to the US. The buyers will keep their SUVs as a second car for shopping and week end trips. Suddenly they will have extra cash to spend for vacations and for eating out. The middle class has always led us out of every recession. They are the ones that start spending the money that enables industry to start up production and hire back workers. Politicians are worried that the stimulus packages will cause interest rates to rise and slow the recovery. But that’s not the way that it works industry waits until they see the consumer demand and that does not depend so much on interest rates.

The question is why didn’t we see this coming? For one thing we don’t believe in interfering in the market place we want the market to set prices. But market fluctuations caused by real or imagined situations can do enormous damage to segments of the economy and can in the case of oil prices deliver a death blow to the nation’s economy.
The second reason is that the automotive industry has been dragging their feet on electric car development for years. The reason is that the auto industry makes much of its money by servicing the internal combustion engine. Electric cars can be serviced by anyone including Walmart and Kmart. This spells the death of the auto dealership service business. In fact the big-box discount store Costco and Walmart could be selling Chinese-designed and Mexican-built vehicles in the US says one auto exec. The CEO of GS Motors — Kathleen Ligocki — told the Hybrid Cars website that she thinks the US will follow in Mexico’s footsteps. GS Motors sold 4,000 China-made vehicles in Mexico last year at…Costco and Wal-Mart.

The auto industry even developed the hydrogen fuel cell and announced it as the future of the auto industry all in an effort to save its dealership service business. Even Governor Schwarzenegger was taken in by the ruse by installing hydrogen service stations in California. As you might have guessed hydrogen is a dangerous gas and the cost of infrastructure for dispensing it dwarfs the cost of quick charging stations for electric cars. The fuel Cell engine and hydrogen service stations are dead on arrival.

There is one thing President Obama must do: he must keep gas prices below the two dollar level. I see this as the Achilles heel to convincing the public that the severity of the recession has passed. A significant rise in gas prices instantly affects all Americans and delivers the message: “efforts to slow the recession has failed”. High gas prices blew the economy out the window and it won’t come back till prices are stable at a lower level or until electric cars arrive to drive down the price.

The Promise — and Peril — of Web 2.0

by Zach Patton From Governing Magazine

What a difference a year makes! At last year’s Managing Technology conference in Seattle, the attendees spent a lot of time discussing Web 2.0 tools — interactive sites such as Facebook, YouTube, Twitter, Flickr and open-source collaborative wiki documents. While a handful of state and local agencies had already been utilizing these types of tools, many of the conferees in Seattle worried that they posed insurmountable privacy concerns, security nightmares and productivity issues.

But that’s not stopping D.C. from adopting many third-party Web 2.0 tools. “We’re not going to stand still. Our constituency is demanding that we move forward. People are always asking me, aren’t we concerned that these kinds of tools aren’t ready for prime time? Of course we’re concerned about that. But we’re in technology. We have to innovate. You weigh the risk and you go forward.”

How to Have Effective Health Care Reform
By John Huntinghouse

The steps needed in order to have effective health care reform using a free market approached to the topic.

Step 5
Lower the barrier of entry. To avoid what has happened to the law industry, the medical industry and government have restricted the supply of health professionals who enter medical school or other types of higher education learning for the industry. Thousands of candidates perfectly qualified to enter medical school are not allowed in due to the fact that there are these strict regulations in place to prevent the over saturation of health professionals in the field. This is another example of basic supply and demand principle that affects many of us to timely health care. Many of the family practice physicians are no longer taking new patients because they are completely booked. Those advocates will tout the fact that they are doing quality and cost control. However, this effectively results in market participants (the doctors and hospital in charge of medical schools and residency programs) acting in cooperation with each other to restrict competition, which is a violation of antitrust laws. The Supreme Court has previously ruled that ensuring quality is no defense against such practices. To fix this problem, no new legislation would need to be passed, the government would only need to enforce the laws are that are already on the books. There needs to be a better balance between the strictness of the standards of medical school (not quality of physicians) and the benefits of greater competition. On top of this, there are many states that have laws that restrict nurse practitioners and other qualified health providers from providing needed care that they are perfectly qualified to do. The massive shortage of health providers in rural and underrepresented areas could be filled with such personnel.

Comments by Lawrence Rosier
The author seams to indicate that public heath care insurance should be organized more like car insurance. The selection of a car insurance provider is entirely by customer choice and is valid in any state in the union. Assuming this is the case then employers should supply a block grant of money for health care insurance for each employee allowing them to find the health care provider that best fits their needs.

The primary reason for health care insurance should be for catastrophic injury and illness and not to cover all health care costs. This allows the insured to be protected from unforeseen massive health care expenditures while having affordable insurance rates.

The author indicates that a range of copayments be charged for different medical services and tests and that the copayments should be significant enough to make the policy holder think about the cost of the service and its value to him.

The author also suggests that the number of graduating doctors is artificially held to a predetermined number and should be allowed to expand to allow all graduates that are qualified to become doctors.

Source eHow.com and John Huntnghouse’s website: http://www.huntinghouseblog.com

The following Key material came from Chapter 2 of my book: “Ten Steps to Jumpstarting Government Reform”. You my download a free copy of this small 72 page Government Reform Guide book by clicking on the Ebook download link.

2.2 The Core Features of Innovative Reforms

In the article “The Replication Challenge” by Robert D. Behn, Behn suggests that to successfully replicate an innovation in government you must understand the core driving features of the innovation and its interaction with other key elements. Organizations have different missions and internal cultures which determine how they are managed. To replicate an innovation you must understand not only how it works, its core driving features, but also its effect on the organization’s mission and culture.

The following is from Behn’s article:
“… before the innovation can be replicated, someone has to answer two questions.
First: What are the core characteristics of the innovation? To employ the innovation in a different jurisdictional, political or organizational context, the replicators obviously need to know what, exactly, are the driving features of the innovation.

Innovating is relatively easy. Specifying the core components of the innovation and the cause-and-effect relationships among these components in such as way as to permit other jurisdictions to replicate the innovation is, however, a significant challenge.”

The following is my response to the challenge of Robert Behn’s excellent article. Within the ten steps to Government Reform found in this book there are three major implementations considered on their own to bring reform to government they are: Budgeting For Outcomes (BFO), Total Quality Management (TQM), and Performance Measurement (PM). The reformer needs to strip away all the hype to understand the core idea of each of the above items for success. Also within the ten steps are reforms which I have suggested which bring all of the steps together as a complete interrelated whole. These items are: Functional reorganization, Work Measurement, and the Funding Formula all of which make a major impact to the budgeting process.

The biggest advantage for knowing the core idea is that it allows reformers to cloak the implementation in the unique cultural context that is being used in making the reforms. When each of the reforms is examined for their core ideas they should all interact without discord and mesh with the cultural context. For example the mission statement: “To Make Hampton the Most Livable City in Virginia” seeks to bring together everyone in the community including city employees to work to improve the community. All of the reforms to the city government should fall within the context of the city’s mission statement. Budgeting for Outputs (BFO) takes input from the public to determine what the public wants done. Total Quality Management (TQM) empowers city employees to improve their jobs and provide services more efficiently to the pubic. Work Measurement makes sure that the city’s staffing fits the Function’s task and performance Measurement is used to ensure the quality of the tasks are maintained.

Literature on Budgeting for Outcomes (BFO) recommends that to achieve the best price for a service you may allow private companies to bid against government employees. This is an example of a direct conflict with the core of Total Quality Management (TQM) which seeks to empower employees. I do not recommend that reformers follow this practice.

When all of these changes are made in one year there is a considerable amount of multitasking taking place. I suggest that individual members of the Government Reform Committee be assigned direct responsibility for guiding one or more of the steps.

The reform process is in completing the following ten steps the first year:
1. Appointing the “Government Reform Committee”
2. Managing the “Culture Change”
3. Initiating “Budgeting for Outputs” and “Strategy management”
4. Breaking down Departments into “Functions”
5. Implementing “Total Quality Management”
6. Enabling “Work Improvement Teams” for continuous improvement
7. Determining proper staffing from “Work Measurement”
8. Developing “Funding Formulas” for functions as budget input
9. Implementing “Performance Measurement” controls in the new budget
10. Consolidating changes into “Steering and Functional Management”

A. Core Idea of Budgeting for Outcomes (BFO)
The core idea of Budgeting for Outcomes is in focusing on public priorities identified through surveys and other means as to what the public is willing to pay for a budgeted Function and in developing strategies for obtaining the outcomes desired by the public at the least cost. High priority budget items are funded down the list until all revenues have been expended lower priority items that fall below expected revenues are not funded. Simply put this process allows the public to tell government what it wants done and through priorities how much it is willing to spend on a Function. Then it is up to the BFO committee to find the best strategy for delivering the outcome of the item to the public.

B. Core Idea of Organizing for Functions
The core idea of a Function is to provide a unique budgeted entity for a set of processes that produces a product or outcome. Because Functions can precisely describe a task, breaking down a budget into Functions simplifies the budgeting process. This allows Functions to be easily excluded or included in the budget as a funded entity. Functions are costed-out from Work Measurement using a bottom-up budgeting strategy. In contrast departmental level funding using the Top-down budgeting strategy blurs the issue of just where and how the funds are being spent and leaves open the debate on the amount of departmental funding.

C. Core Idea of Total Quality Management (TQM)
The core idea of Total Quality Management (TQM) is in using what I call Work Improvement Teams (WIT). WITs focus on improving the “processes” of the Functions that they are doing at the lowest level of the organization. I have expanded this Team improvement Idea to all levels of the government organization, first in the Government Reform Committee and then to the Cross Functional Steering Committees. The key core driving element is in having employees take responsibility for decision making power at their level in the organization. The result is the pooling of the innovative resources of the entire organization to focus on improving the problems at hand. The idea can be stated as the driving down of the decision making process to the lowest level of effectiveness while holding those responsible through Performance Measurement. Another way of putting this is to have those who “own” a problem participate in the solving of that problem. The immediate effect is to awaken the idea within individuals that they can make a difference the exact opposite of a bureaucratic environment where individual initiative is sometimes squelched.

D. Core Idea of Work Measurement
Work Measurement provides an actual standard time for doing a specific process. It is arrived at by using either of two methods the analysis of a Function’s Process Flow Chart or by Time-studying each of the Function’s Processes. Work Measurement determines the standard staffing requirements for a Function and along with estimated expenses it is the foundation for a Function’s budget. Only when using Work Measurement does the Performance Measurement of productivity become valid i.e. when it is applied to a known standard time. This is a bottoms-up approach to budgeting using known costs as opposed to Top-down budgeting using estimated costs.

E. Core Idea of Funding Formulas
The staffing level for each Function as determined by Work Measurement of employees along with all expenses incurred by the Function is summed on a spread sheet and divided by the number of either “units produced” or “people served” for a one month period. The result is a Funding Formula which when multiplied by the estimated future “units” or “people served” becomes the next year’s budget. The Funding Formula which may be valid for several years with minor changes can be used as a direct input to each new budget.

F. Core Idea of Performance Measurement
The Performance Management Steering Committee creates performance measures for each Function to insure that the work performed by a WIT in doing the Function meets their requirements. Performance Measurement of productivity becomes valid only when it is applied to a known standard time developed using Work Measurement. The results should also meet the guidelines set by Strategies formed from the public surveys during the Budgeting for Outcomes process.

Note that the following Steps are uniquely of my own invention in order to make the government reform process function smoothly as a complete whole.
4. Breaking down Departments into “Functions”
7. Determining proper staffing from “Work Measurement”
8. Developing “Funding Formulas” for functions as budget input
10. Consolidating changes into “Steering and Functional Management”

Because the Steps provide a complete integrated approach to government reform I fear that those who read only my articles will miss the importance of the steps and the examples provided in the EBook.

My book “Ten Steps to Jumpstarting Government Reform” was based on the premise that a Governor had only a limited time for implementing government reforms and it would require a great effort just to get the reforms started. Thus the first year in office can not be wasted through slow or lack of determined action. Based on my experience reforms only partly in place can be easily thrown out by a succeeding Governor in a “not invented here” manner. This would end the TQM implementation and leave in place the old bureaucratic form of government. I point out in the book that real “culture change” in some cases can take as much as five years to be fully implemented. And I have recommended that the Governor’s reform committee be kept in tact for a number of years to provide continuity for the formation of the new Total Quality Management culture.

If the driving force for change by the Governor is also shared by the majority of the Legislature then a more long term view should be examined. Total Quality Management in industry assumes that there is little over staffing of employees and some form of Work Measurement has already been in place. In the short term view of a government implementation of TQM there exists some conflict within the culture between asking employees to take an interest in their work by promoting innovation and efficiency while at the same time reducing staff resulting from Work Measurement. Fear of losing their jobs can cause employees to withdraw and not participate in the new culture. Therefore any discussion of layoffs or staff reductions should be avoided until TQM and Work Measurement are implemented. Staff reductions should not be made until pressure on the budget will allow no further delay.

In the long term view this is not such a difficult problem because employees retire or leave their jobs for other reasons. When doing Work Measurement for the long term and the correct staffing level is known then employees who leave the work place are simply not replaced. The critical point is that for the implementation of TQM to be sustainable it must include Work Measurement. Staffing levels determined by Work Measurement may not be required to be fulfilled in short term reductions but may be done in the long term. All that is required is that the correct staffing level be recognized by budgeting personnel. This prevents a bureaucracy from adding or replacing personnel as the staffing level decreases to that determined by Work Measurement. Once Work Measurement is in place budgeting staffing power then shifts from the bureaucracy to the legislature. The Governor and the Legislature may at some later date complete the final implementation of a Steering Management team and Functional Management teams eliminating the bureaucratic form of government.

In the current recession some states will want to fully implement my recommendations in the short term by reducing staff to balance their budgets. Other states with less budget pressure may want to use the long term approach. The main benefit for the long term approach is that the TQM culture has time to become fully developed and conflict within the culture will be less of a problem.

This website is primarily directed to government leaders who want to implement reforms. But the reforms which I recommend can also be adapted to local county and city governments. Even industry can benefit from the reforms I recommend.

The website has shown significant growth since last October when the recession first became known. In March more than 5 thousand hits were recorded. 53% of the hits came from Russia. I welcome the more than 100 registered participants from Russia. It would appear that the Russians are well aware of the problems caused by bureaucracies perhaps more so than that in the US and Great Britain.

In April as the number of hits reached over 6 thousand it was determined that the increase was primarily from the US. The percentage due to Russian hits decreased from the March 53% to 34% in April.

I have provided copies of my EBook to all of the states. You may download a copy of the EBook “Ten Steps To Jumpstarting Government Reform” by clicking on the EBook download Link then click on the Free User button. I have placed the EBook zip file on a third party site, Rapid share, so you need not fear that your identity will be compromised. I highly encourage you to download this EBook. The EBook puts the material from my articles into an intelligent sequence of 10 steps with added material not found in my articles.

Thank you for your interest Lawrence Rosier

All work involves continuous decision making it is just that we are so unaware of the routine decisions that we make that we don’t recognize them as decisions. Even first time decisions can have a preset approach that can lead to more efficiency.

When a Steering Management Team is involved in making open broad decisions the leader should consider the following process.
1. Prepare for the meeting by visualizing possible alternatives then write down the key impact items for each alternative. Try to assess the size of each impact item and determine where more information is required.
2. In the meeting bring up each of the possible alternatives and call for other alternatives. Review the key impact items for each alternative and quickly eliminate nonviable alternatives. Try to narrow the alternatives to two or three and end the meeting by identifying all the key items where background data is required. The final decision will be based on the results of the background data and reviewed at the next meeting. In the above approach you should allow time for first time decisions but you should never try to put a time limit on them because the quality of the decision outweighs the time spent in making the decision.
Routine decisions are entirely a different matter they can be made efficiently.

The following is an example of routine decision making. A roofing company that replaces asphalt shingles on homes provides estimates to customers. The estimates involve mostly routine decisions. When rare first time decisions are made they quickly become another routine decision. The key impact items in each decision are: driving distance; one story or two story; roof slope, low or high; number of gables; and type of shingles, simple or special. Estimates can be calculated using a simple matrix chart format allowing the estimate to be simply picked off the charts and totaled during a phone call with a customer. Note that all first time decisions are added to the matrix charts and become routine in future estimates. You can think of most first time decisions as simply a routine decision with some new added element.

Lower level decision making, those made by Work Improvement Teams (WIT) focused on improving their work processes, are another example of first time decisions. Decisions should be pushed down in the organization as far as practical. WITs usually meet once a week for an hour. This time is primarily spent in finding ways to improve the function’s processes this involves the collection of data and the development of Process Flow charts leading to the decision for the improved method. The important element is that time is provided for making decisions and the process should not be rushed.

One of the best examples of a WIT making routine decisions is the CBS TV show NCIS. Please ignore the Bloopers and the Behind the Scenes Videos and concentrate on the team meeting scenes, yes they are there. Pick a scene where Gibbs the team leader walks on to the set with the agents Tony, Ziva and McGee. Notice in particular how each responds spewing forth the information collected about the case while Gibbs simply nodes in the direction of each agent to obtain his input. The entire meeting lasts for no longer than a couple of minutes when a decision for the next step is made. This can happen because of the skill and expertise of the members of the team in making routine decisions and all that flashy computer technology they use. You may be taken back by the urgency of the moment thinking that the above scene only applies to Homeland Security. But this can happen anywhere in government by the driving force of the organization’s mission and the WITs determination to get things done backed by the oversight of the Steering Management Team.

You can find short scenes of NCIS on: Youtube

In industry standards are set for manufacturing widgets which are repeated day after day. The main purpose of the standard is to be able to plan in advance the work to be done including Budgeting and to determine the efficiency of the completed task using Performance Measurement. In government widgets sometimes are made but mostly you encounter repeatable processes to do a task which amounts to the same thing as manufacturing widgets. This may cover as much as 60% of government tasks. But for those who don’t make widgets the setting of standards can be complicated and in most non-repeatable tasks will require some time in the collection of data.

I have indicated two main ways to set standards through Work Measurement they are time-study and Process Flow Charts. These two methods cover repeatable tasks very easily. Now for those areas of non-repeatable tasks where the processes vary in time I suggest this method for setting these standards. Select several knowledgeable employees who actually do the tasks to collect data for a few months by recording each activity they do and the actual time to do the activity. From this data you will create the standard. This process is sometimes complicated but not impossible to do. It requires imagination and innovation to make a valid standard. Since this is a non-repeatable standard you will have to rely on history for estimating the number of occurrences for budgeting. For the purpose of Performance Measurement the standard is more useful. In the most difficult instances the standard can be created using a matrix of tasks and simply picking off those that apply to come up with a calculated standard. A calculated standard is most useful for planning the time length of the task for scheduling purposes and less for Budgeting and Performance Measurement.

After collection of the work data the first thing to do is to look for repeated sets of processes of the same time length these are the standards for some of the tasks or they may be combined into single processes and used in a matrix for calculating the standard for others. Another approach is to look for key impact items (triggers) which make a set of processes unique with their own standard. This approach is used also used in estimating for contacts. See Article 54. Estimating Workload by Determining Impact Triggers.

Standards on Decision Making relate to repeated occurrences of the same type of decision process. I don’t recommend setting standards for unique decisions. The more things being considered and the more important the result should not depend upon the time to arrive at a decision. See Reader Question 4. How do you get Efficiency in Decision making?, Article 4. Finding the Correct Office Staffing Level, and Article 5. Government Bureaucracies and Document Turn-Around Time. For a unique way of using standards with varying processes to calculate Performance Measures see: Article 30. Example of Current Versus Proposed Performance Budgeting.

A general rule for setting standards is that the task should be repeated at least several times before a standard is set. A first time decision may take as much as ten times the second time the process is repeated. Once standards are set they can be used anywhere in the state where the same task is used. They can also be elevated to Best Practices with recognition of those who developed the process. Why are Standards important? They can reduce budgets by more than ten percent.

Homeland Security is trying to find a way to link all of the states’ motor vehicle registration databases. On the surface this appears to be nearly impossible task since nearly all of these databases have been developed as proprietary systems. The answer is to have the federal government develop the software application program for a state motor vehicle Relational Database (RD) and give the software to each of the states. Each state would then load the new RD with the motor vehicle data from their old proprietary database. Since the state RDs are easily linked this would provide a giant national motor vehicle RD which could be easily accessed by law enforcement and Homeland Security.

The system could also become a National ID database. The addition of a thumb print system would make it a fool proof system for Identification. This would save the public, businesses and the Federal Government $ billions in stolen identities.

This is also a simple solution to a much larger problem. State information systems are mostly obsolete proprietary systems that have been developed over the years by adding application programs that were developed or purchased by the state Computer Information Systems Departments. Each state has sunk $ millions into the development of these obsolete systems.

Most states have been developing or purchasing stand alone application programs which store their own data internally. When it becomes necessary to link one application with another a special linking program has to be developed. So that a program can share data with another. This obsolete system is more costly to maintain than a Relational Database Management System (RDBMS) using SQL (Structured Query Language). A RDMS has a different architecture, an application program does not store its data within itself but rather stores its data in separate relational databases (RDs). All application programs in the system can access any of the relational databases (RDs) as it needs data for running its application. This means that the amount of stored data in a RDBMS is significantly less since it is not duplicated over and over as it is in the old application programs.

Now for the innovation, the state of Colorado is in the process of developing a centralized RDMS. This is a large undertaking but it was recognized by the state’s IRM as a necessary step to simplifying and reducing the cost of its computer systems. If the federal government were to fund the development of this RDMS in Colorado or some other state the developed software could be provided to all the other states. Each state would load the new application programs and relational data bases onto its computers. Then they would copy their data form the old system into the new relational databases. The old system would be kept running until the new system is up and proven. Only then would they pull the plug on the old system. The Motor Vehicle RD would only be one of the new RDs.

This centralized state RDMS could be expanded to provide computer services for local counties and cities as well. The state of Nebraska uses its state computing capability to do just that provide computer services to local counties and cities within the state.

This RDMS can be easily integrated with the proposal I made for a centralized Customer Relationship Management (CRM) system to reduce Red Tape and simplify California Agencies and Commissions.

See these articles for background information.
Article 46. Why some Computer System Implementations Fail.
Article 84. The Failure to Manage State Resources due to Obsolete Computer System
Article 101. The Hampton Virginia Innovation Story
Article 102. Government Reform of California Agencies and Commissions
Article 118. Examples of Cooperative Innovation

I started the blog Management Consulting Forum in 2005. At that time I realized that I had a solution for the reform of State and Federal Government which no one had proposed before. The driving force came from the 9-11 and Katrina disasters. Clearly 9-11 could have been prevented if it were not for the FBI’s Bureaucracy and the Katrina bureaucratic disaster, which came after the hurricane, was clearly the fault of the Homeland Security bureaucracy. The objective of the movement is to reform government replacing the bureaucratic form of government with one with fewer levels of government, empower the lower levels to make the appropriate decisions at their level and encourage innovation.

The reform of state government can be described by three main approaches. The centralization of state Information Technology by building integrated Relational Database Management systems. The second is the streamlining of government through the elimination of obsolete and redundant agencies and in combining agencies. When these two approaches are used together through a state centralized 311 telephone portal such as Customer Relationship Management (CRM) you can eliminate a significant amount of Red Tape and provide on-the-spot service to the public. The solution provides instant information to the government employee interfacing with the public through Relational Databases.

The third approach is the method I proposed for getting rid of the bureaucratic form of government. These three approaches can be done independently but the results will be in piecemeal savings compared to a combined effort for reform. I have provided a detailed approach in my book “Ten Steps to Jumpstarting Government Reform”. The book describes in detail the steps to be done in implementing the reforms. I have provided all of the states with copies of my book. Since all state budgets are under pressure from the current recession it is safe to assume that all are looking for ways to make government more efficient.

Given the difficulties facing the states it would appear that reforms could be adopted without objection. After overcoming the obvious objection to change that comes with any reform. There is the difficulty in getting state budgeting personnel to accept the fact that their top-down method of budgeting, the opposite of industries bottom-up method, is wrong. This is a big deal to get budgeting personnel to recognize that the way they have been operating for years is wrong. State legislatures are at fault too and are likely to support the current budgeting method. This is an awful lot for a Governor to overcome even if he has bought in to the new method.

The difference between the two methods of budgeting follows. I call the government process Top-Down budgeting where little effort is put into finding the most efficient and effective solution before funding it. This is the opposite of that done in private industry which I call Bottom-Up budgeting, finding the most appropriate solution before funding it. The bottom-up solution is based on Work Measurement meaning that the actual costs in labor and other expenses are known at the time of approval by a private companies’ management. This is at the heart of the reform but in my proposal I have found a better way of doing Work Measurement. Rather than using time study as found in industry I propose using Total Quality Management and other techniques for a much more humane approach.

See the following articles for background information.
Article 89. Focusing America’s Anger and Anxiety on the Root Cause- the Need for Bureaucratic Reform
Article 92. Article on Downsizing by Donald Rumsfeld
Article 94. Reforming FEMA and Homeland Security
Article 97. Getting Innovation by Changing Organization Culture
Article 101. The Hampton Virginia Innovation Story
Article 102. Government Reform of California Agencies and Commissions
Article 103. Reforming Bureaucratic Government the Subtle way by Bringing Innovation to Government
Article 104. Down Sizing State Government the Easy and Safe Way
Article 105. Making Total Quality Management Work in Health Care
Article 106. Where do the Government Reform Savings Come From?
Article 113. Private Versus Public Budgeting Practices
Article 116. Private Industry Example of Total Quality Management
Article 117. Overcoming Bureaucratic Resistance to Government Reform
Article 118. Examples of Cooperative Innovation

Reprint of Stateline’s excellent article on innovative cooperation: “States team up to save in tight times” By Daniel C. Vock, stateline.org staff writer, April 3, 2009.

The governors of Minnesota and Wisconsin still like to spar over their interstate sports rivalries, but the recession is pushing them to team up in delivering some basic state services to save taxpayers on both sides of their border up to $10 million to start.

In Minnesota, school districts already purchase equipment through the state or through one of nine regional cooperatives, first created in the 1970s. One, the Northwest Service Cooperative, for instance, works with 43 school districts and organizes food programs, negotiates contracts for office supplies, trains local school staffers on how to comply with federal workplace-safety laws and sells 54,000 health insurance contracts a year.

For more information see my articles:
Article 21. Centralized Purchasing- The Best Way to Balance State Budgets and Article 28. Centralized Purchasing- Making Centralized Purchasing Work using Aggressive Negotiation.
For even more purchasing clout try joining a national purchasing organization see:
UScommunities.

When you want to reform government from the toxic bureaucracy of FEMA (see Article 109) to that similar to the top place that Americans want to work, NetApp and Google (see Article 116) you will find resistance. This is a bold broad step that even most of private industry has not yet made. In private industry all you have to do is convince the CEO that the change will bring big savings and innovation to the organization. But in government the state’s governor may not have the clout needed to change long standing bureaucratic agencies. These agencies have power from the state legislature and can out last a governor faced with the need to be elected and with term limits. The key word here is POWER. Bureaucrats love power it is reflected in the various levels of an organization’s career path. With each promotion a bureaucrat gains more and more power over his fellow workers and to make his own decisions. If those who work for him fail to follow his bidding he can always manipulate their performance appraisals. Remember during the Katrina hurricane when mayor Nagin of New Orleans made a plea to FEMA for supplies and he said on national television “all they want to do is to get me to sign off on their org chart”.

The approach I recommend is to look for an opportunity which will provide a chance of successfully bringing change. The best opportunity is in a time of tight budgets such as most of the states are currently going through. State Legislatures across the nation are looking for ways to cut back their budgets. I would start with this small crack in the bureaucratic armor and force the implementation of Total Quality Management at just the bottom level in the agency. This can be done if the head of the agency approves the implementation. He may reluctantly do this at first as a result of pressure from the legislature for reform but he must eventually give his full support to the implementation. Now you have a situation similar to that found in the auto industry where TQM was fully embraced throughout the organization by Honda and Toyota and treated as a gimmick by American auto manufacturers resulting in a loss of market share.

Once TQM is installed in the agency the door is open to install Work Measurement through Process Flow Charts as I have suggested elsewhere (see Article 103). Work Measurement will provide the budget for the real work that the agency does separated from the management budget. Now the power shifts to the budget committee in the legislature because there is no debate as to how much work there is to be done within the agency.

The legislature can then complete the reform of the agency by first eliminating one or two layers of bureaucratic management and forming the organization into Steering and Functional Management. When the Steering Management Team is formed over staffing will become obvious when they try to squeeze a large number of managers into a single conference room for the first meeting. This restores budgeting power with solid numbers to the legislature.
See the following: Article 113. Private Versus Public Budgeting Practices

Each year Fortune Magazine surveys industry employees all over the US to determine the top “100 Best Companies That Employees Want to Work For”. The number one ranked company is NetApp. Headquarters: 495 East Java Drive Sunnyvale, CA 94089. Here is what Fortune said about NetApp:
What makes it so great?
Employee enthusiasm for the legendary egalitarian culture helped catapult NetApp to No. 1 after six years on our list.
Typical of its down-to-earth management ethos, NetApp early on ditched a travel policy a dozen pages long in favor of this maxim: “We are a frugal company. But don’t show up dog-tired to save a few bucks. Use your common sense.” Rather than business plans, many units write “future histories,” imagining where their business will be a year or two out.

So why talk about private industry when the subject of this blog is Government Reform? The answer is that you need a “vision” of what can be done firmly implanted in the minds of reformers. And you do this by examining the best of what others are doing in industry and in government. You need to write a good mission statement and begin to shape the culture of the organization. It helps if as many people in the organization as possible share in the development of the mission statement and agree with where the direction the new culture is going. This is where you start with Total Quality Management “having a shared vision”.

The NetApp Story
NetApp creates innovative storage and data management solutions that help our customers accelerate business breakthroughs and achieve outstanding cost efficiency. Our dedication to principles of simplicity, innovation, and customer success has made us one of the fastest-growing storage and data management providers today.

The NetApp Culture
NetApp is committed to achieving market leadership by living our values and embracing strong principles.

Get Things Done!

Before reading this article I recommend that you read article 114 many of my comments will be directed at Benjamin Powell’s article from the Washington Times Sunday, March 8, 2009.

The main reason touted by many economists that the 1930’s depression was so severe was that President Hoover held the belief that the government should let market forces take its course and should not get involved in trying to fix the economy. That same outmoded view seams to be held by Dr. Powell in his statement: To achieve long-term economic recovery, market forces, not political forces, need to direct capital and labor to their most productive uses.
President Hoover allowed the economy to hit rock bottom before Roosevelt was elected and implemented a massive stimulus to the economy which brought the economy back.

Dr. Powell relates that in the early 1990s the Japanese real estate values fell by 80% and the Japanese stock market the nikkei fell by 70%. The Dow at the present time seams to have stopped falling at 50%. The view of our current housing values is varied one half of the most severely depressed housing areas are in only 35 counties nation wide and one fourth of them are in only 8 counties in the entire nation. This can not account for the severe shock delivered by the sudden decrease in consumer purchasing.

But perhaps this can. Because of the very high real estate values in larger cities especially on the east and west coasts. The average American in order to live reasonably close to his employment or commute long distances spends nearly all his income on his house payment and has literally made his house his retirement nest egg. This situation coupled with American credit card debt averaging an astounding $8000 per person. Then add an extremely low savings rate 0%, it is not difficult to determine that the average American has virtually no discretionary spending funds. Now we introduce $4 Gas prices and the same average American goes in debt and can’t meet his mortgage payment and he ceases to make discretionary purchases forcing the economy to go south after only a few months. Note that it was high gas prices that really killed the sale of SUVs not the unavailability money for loans.

Dr. Powell goes on to relate that for the Japanese and American recessions,
In both cases, low interest rates helped fuel a financial bubble and inflate stock and real estate prices. The bubbles eventually burst, pummeling stock and real-estate values.
It is interesting that Dr. Powell has stated above that government should not interfere with the market. Yet this is exactly what the Bush administration did when they lowered interest rates causing the public to flee safe Bank CDs creating the stock market and other risky investment bubbles. The Fed has been adjusting interest rates for decades in order to stabilize the economy but in this case the growth in the stock market seams to have been the objective.

Dr. Powell is right about the Bush administration’s mistake in bailing out the Wall Street investment banks by $700 billion. Especially since nearly all Americans know that the money went to pay high employee bonuses and to buy up smaller more economically stable banks rather than financing their bad investments. Now the problem becomes how to shore up these banks since the function they performed has all but collapsed. The question as to whether to nationalize these banks is meaningless if it costs more than 50% of the banks net worth to shore it up it has already been nationalized.

According to Dr. Powell:
To achieve long-term economic recovery, market forces, not political forces, need to direct capital and labor to their most productive uses.
I disagree with this point of view when there are no market forces government should create them and can direct capital and labor into building infrastructure such as bridges and green industries. Private industry can not and would not do this.

As to whether President Obama is doing the right thing with the new stimulus package it appears that it may not be the best package but may prove to convince the public that it will slow the onrush of the recession. The key is in stopping the panic and getting the people to invest and make purchases.

There is one thing President Obama must do he must keep gas prices below the two dollar level. I see this as the Achilles heel to convincing the public that the severity of the recession has passed. A significant rise in gas prices instantly affects all Americans and the message is that the efforts to slow the recession has failed. High gas prices blew the economy out the window and you can bet that it will do it again. Since we control milk prices I don’t see this as a problem, this is simply a matter of making government investments or capping speculation.
Gas prices below $1.50 would surely be a stimulus to the economy.

By: Benjamin Powell Reprint from: The Washington Times Sunday, March 8, 2009
Those who think the $787 billion “stimulus” bill will chase the blues from the economy should look at Japan’s experience in the 1990s, where a succession of interest-rate cuts and Keynesian spending initiatives did little but prolong the downturn. The result was a decade of lost growth.
The United States is facing a financial crisis remarkably similar to the one that struck Japan. We would be wise not to repeat the same mistakes. In both cases, low interest rates helped fuel a financial bubble and inflate stock and real estate prices. The bubbles eventually burst, pummeling stock and real-estate values.
So far the magnitude of the U.S. recession pales in comparison to Japan’s. Japan’s real estate prices plummeted nearly 80 percent from 1991 to 1998. The Nikkei stock market index fell approximately 70 percent. Much of the contraction occurred in the years following the initial crisis as one government initiative after another failed to revive the economy.
Japan tried decreasing interest rates, bailing out and nationalizing banks, and enacting multiple fiscal stimulus packages. Nothing worked; and there’s nothing to indicate similar measures will work better today.
The Japanese adopted fiscal stimulus bills early in the crisis. Between 1992 and 1995 the Japanese passed six different stimulus packages totaling 65 trillion yen. The average yearly stimulus amounted to a little more than 3 percent of the total Japanese gross domestic product (GDP). The nearly $800 billion U.S. stimulus bill amounts to about 6 percent of GDP.
Yet bigger is not better. In 1998, Japan’s stimulus effort amounted to about 8.5 percent of GDP. The results were negligible.
The Japanese were a little slower to cut interest rates. By the mid-1990s, however, the official discount rate, or the rate at which financial institutions borrow from the central bank, was down to 0.5 percent. It reached zero a few years later. The U.S. Federal Reserve has been quicker to act. The federal funds rate - the rate at which banks lend to other banks - already is down to near zero percent. But the results are the same: nada.
Washington already has approved $700 billion to bail out ailing banks - and the administration is getting ready to ask for more. Large-scale bank bailouts and nationalization didn’t occur in Japan until 1998 and 1999. And when the Japanese finally did step in to bail out their banks the economy responded - with the two worst years of economic decline during the entire troubled decade.
America’s move to act swiftly and boldly misses the point. Bank bailouts and fiscal stimulus bills don’t work because they strive to maintain the status quo. But the status quo is the problem and exactly what needs to be corrected.
The U.S. housing bubble drew too many workers and too much capital into construction and related industries. So funding public works projects to keep those companies in business is the wrong solution.
Like the Japanese, President Obama is stressing the benefits of infrastructure spending in his proposed stimulus package. He recently boasted, “My plan contains the largest investment increase in our nation’s infrastructure since President Eisenhower created the national highway system half a century ago.” In response, Caterpillar Corp, a manufacturer of heavy construction equipment, promised it would eventually rehire some of the 22,000 workers it had laid off, though more short-term layoffs were possible.
To achieve long-term economic recovery, market forces, not political forces, need to direct capital and labor to their most productive uses.
“Stimulus” bills that emphasize public works and infrastructure merely prop up the overexpanded construction industries. Yet it these very same businesses and industries that most need to shed workers and contract before recovery can occur. When acts of Congress delay layoffs and restructuring they also delay recovery.
As painful as it might be in the short term, the United States economy would be better served if we allowed the recession to run its course. Unemployment would surely rise and there would be considerable short-term pain. But in the end, capital and labor would be reallocated to other industries and uses, correcting the excesses of the bubble. That would help the economy begin growing again.

Benjamin Powell is a research fellow at the Independent Institute, Oakland, Calif., and an assistant professor of economics at Suffolk University in Boston. He is co-editor of the forthcoming book, “Housing America: Building Out of a Crisis.”

After reading this article I recommend that you read Article 115. Where I disagree with many of Dr. Benjamin Powell’s points he has made in this article from the Washington Times Sunday, March 8, 2009.

One of the main reasons that government is so inefficient compared with private companies, besides their bureaucratic structure, is found in the way that funding and budgeting is done. When private companies need to fix a problem they select the Department of the company that “owns” the problem and asks them to come up with the most satisfactory solution. That is, to find the least costly solution that can be implemented quickly. Once the Department has identified the solution it is costed-out by industrial engineers or budget personnel, funded by the companies’ management and implemented.

When government encounters a problem it is usually first brought to the attention of the legislature by this time the problem is considered to be significant. There becomes an immediate political problem when each political party may or may not consider the problem worthy of consideration. A specific agency may be thought to have responsibility for the problem but they may or may not be asked to come up with a solution. One party may develop a solution to the problem and those against may come up with their own solution. Nearly all government problems are thought to require funding. Therefore there is an immediate effort to determine the funding needed for the solution even before the most satisfactory solution is known. The amount of funding is dependent on the party in power and their perception of the funding required not on the actual funding needed for the most satisfactory solution which may or may not even be known. Once the “solution” is funded it becomes a part of the budget by law. If the problem is thought to be large enough the Legislature may create a whole new agency as the solution. Otherwise the funds are passed to the most likely agency and the matter is thought solved unless the problem arises again at some later date. Note that once the funding becomes law the state’s budgeting personnel have little or no role in determining the level of funding required.

I call this government process Top-Down budgeting where little effort is put into finding the most efficient and effective solution before funding it. This is the opposite of that done in private industry which I call Bottom-Up budgeting finding the most appropriate solution before funding it. The bottom-up solution is based on Work Measurement meaning that the actual costs in labor and other expenses are known at the time of approval by private companies’ management.

Now let’s examine the same government funding problem after the government reforms I have recommended are put into place. The reforms consist of first breaking down all departments and agencies into Functions followed by implementing Total Quality Management (TQM) and Work Improvement Teams (WIT) for each Function. Later several bureaucratic levels of management are removed and replaced by a two tier organization consisting of a Steering Management team and Functional Management teams.

Problems in the new government organization will be identified first by a WIT within Functional Management which has been trained in TQM techniques for continual improvement of the function’s processes. The WIT “owning” the problem will then develop the most cost effective solution. This solution is then presented to Steering Management. If funding is required budgeting personnel from Steering Management will cost-out the solution. If no funds are available state funds are sought. And if they are not available only then is the solution with the funding required presented to the state legislature. This process provides for solution of all problems big and small and for continuous improvement in the way government operates.

As a side note, when current agencies are funded there is a tendency to assign work by labels. For example John is responsible for Pubic Safety and Harry is responsible for Public Accountability and the budget is automatically charged for two people plus those who work for John and Harry. The amount of work that is to be done in each of these functions is not known leading to over staffing. Under the reformed government, Public Safety and Public Accountability are identified as Functions each with a WIT which actually does the work of the Function. The actual work of each Function is costed-out and staffed using work Measurement resulting in a much reduced budget.

A current example:
Senate Democrats decided to pull $80 million from the war spending request — money Obama had requested to close the Guantanamo Bay detention facility by Jan. 22, 2010. Democrats say “we are not going to do anything until we get a detailed plan from the president”.

When state government is reformed using the method I have proposed: implementing Total Quality Management followed by the elimination of several levels of bureaucratic management ending with a two tier Steering and Functional Management organization, you are left with a problem. What to do with the redundant government employees?

One must recall why government work was privatized in the first place. It is common knowledge that the reason is that government employees were thought to be unmotivated and could not do the work as efficiently as a private company. With the reforms I have recommended you will find that it is not government employees that are inefficient but the bureaucratic structure of government. Government Employees can be just as efficient and effective as private employees. But using the above reforms government employees will be even more efficient than private employees.

Therefore with the above reforms all privatized contracts should be considered for return to government personnel using the reorganization process which I have recommended. This will save the state millions and the efficiencies attained cannot be matched by private companies especially when you remove the need to make a profit.

Note that in Article 13. “How Efficient Government Reform Can Save More Tax Dollars Than Privatization” I stated that you could save more tax dollars by government reforming itself than by privatization. Profits gained by the private company are lost and are not available to the state treasury. Another problem is that a private company may not implement the kind of reforms that bring continuous improvement and increased productivity that you want. Still another consideration is would the employees be better off under privatization. Would there be better job satisfaction health care and retirement benefits. An organization may be able to retain much of these benefits by self-reform. Certainly Privatization can work but it costs more to the state than if the state would make the reforms to itself. A private company’s profits may also come from reduced employee benefits.

The following is an excellent example of Total Quality Management as applied to the Classroom. It has all the key features student excitement about learning, Teachers working together with parental and community support. From the Rolla Daily News Rolla Missouri By Adam Van Hart The Rolla Daily News Mon Mar 02, 2009.

Educators use math competition for more than problem-solving.

“It just builds and builds, until there is a great pool of talent,” White said.
See also Article 69. Ideas for Child Rearing that the State can Do

States are relieved at least temporarily from the budget crisis by the federal stimulus package. There is not a lot of precedence for the strength of the current recession in this country but there is in Japan. The Japanese real estate bubble was caused by continued speculation and the need for housing the same as in this country. But it didn’t have the housing finance added problem caused by relaxed rules for creating investment bundling of home mortgages. And it didn’t have high gasoline prices to trigger the collapse of the economy. Yet it took eight stimulus packages and ten years to bring the Japanese recession to an end.

The Japanese recession was just that a Japanese recession but our current recession is world wide. That is why there is such a world wide effort to stop the side to the dreaded word “depression”. No, I don’t think we are headed for a depression precisely because in the thirties absolutely nothing was done in the way of a stimulus until the economy hit rock bottom. But I will say that this recession is going to impact some countries in an uneven manor. For example in Germany only 10% of its citizenry invest in the stock market and therefore the bulk of their population was not affected by the down turn in the stock markets. In the US there was a disaster in 401ks that were invested in the stock market that lost as much as 50% of their value. This in turn has caused the public to curtail spending at least for the time being. There is what I think is a short breather here caused by a stunned public before the stock market starts to rise again as investors gain confidence.

This recession will also impact states unevenly. States that primarily have an agriculture economy will recover sooner simply because people need food even in the worst economies. States that promote green economies allowing new industries to be developed like wind turbines will recover sooner.

But states that have dieing industries like the manufacture of the internal combustion engine may take years to recover. The internal combustion engine has succumbed to high gasoline prices and pollution. It will be replaced by electric cars with batteries not by the much touted fuel cell. The fuel cell engine does not have an infrastructure to support it and was a last ditch effort by automotive manufactures to prevent electric cars from taking over the market. The internal combustion engine however will be with us for a long time to come simply because gas prices will again be low enough to make it competitive but it will no longer dominate the market. The reason that electric cars are not wanted by auto manufactures is that the service facilities found in every dealership in the nation will no longer be needed. Tires and brakes and fender benders can be repaired in general repair shops and at Ky-mart. This is a disaster for small town America these dealerships also sell new cars, provide skilled jobs and the sales taxes run the local governments.

The Chinese are poised to sell millions of electric cars in the US. In India they are manufacturing an electric smart car knockoff that sells for less than $3,000. With the improvement in quality of these cars their sales will also increase in the US. If you don’t think this can happen consider that the second largest battery manufacturer in the world is in China and that company is now making electric cars. Warren Buffett’s Berkshire Hathaway has invested in the company which makes the BYD F6e electric car. You don’t need a lot of sales offices for these cars they can be ordered off the internet.

So what does all this mean? I don’t see any real recovery for possibly three years in most states. Some states will recover sooner but some could take years to recover. States like Michigan are going to have to consider a long term recovery. If General Motors and Chrysler survive they will be only a shell of their former selves. Detroit could become another rust belt just like when we lost the steel industry to Asia.

In the short term all states are going to get pounded by unemployment insurance and high Medicaid costs at a time of reduced revenues. So why not consider the government reform proposal I have made to reduce bureaucrats and save state education. You are going to need educational facilities for massive retraining for new jobs in green industries, health care and other areas.

Apparently Homeland Security has not been able to solve its Katrina bureaucratic problems after four years. A recounting of the latest problems are given followed by my recommendations for FEMA disaster management.

From a CBS News Investigation and report:
“Within hours of her arrival, the acting head of FEMA, Nancy Ward, took action: Stopping short of firing or suspending embattled Chief of Staff Doug Whitmer, Ward instead temporarily reassigned him to a FEMA office in Texas, CBS News chief investigative correspondent Armen Keteyian reports.”

”While millions of Gulf Coast residents somehow manage to hold on - waiting for this sideshow to end, and the floodgates of recovery to fully open.”

Lawrence Rosier FEMA Recommendations: If you have read my other articles on the Katrina bureaucratic disaster the problem is the “Bureaucratic structured” form of government. The best way to fix the problem is to change the structure to Steering Management Teams which head rescue, recovery, damage assessment and rebuilding. Here are my recommendations for FEMA disaster management.
1. Setup a Command Support Center just out side of the disaster area and safely away from the disaster zone. In the case of a hurricane this can be done as soon as the strike location of the hurricane is known. During the Katrina hurricane a Command Control Center was set up at Baton Rouge. From there all activities related to Katrina were directed. I am recommending that this should be only a support center and not a command center.
2. Immediately after the disaster has occurred a Mobile Command Center is setup at the disaster site. The site is managed by a high level Rescue Steering Team of stake holders. In the case of Katrina Vice-Admiral Thad Allen of the US Coast Guard, Mayor Ray Nagin and Governor Kathleen Blanco eventually became this Steering Team. Mayor Nagin and Governor Blanco delegated their authority over fire police and National Guard to Vice-Admiral Thad Allen but were on call 24 -7. This team has a rescue function which lasts several weeks until the recovery phase begins.
3. The Recovery Steering Team has responsibility for the recovery of bodies and providing shelter and supplies for victims. This team will begin support for victims immediately after the Rescue Steering Team has begun operations and will continue operations until all victims are sheltered.
4. Damage Assessment and Rebuilding Team. This team has the engineering and insurance skills needed to bring back the disaster area to serve the public’s needs.

Note that the Steering Management Teams head normal fire, police and National Guard organizations except for the Damage Assessment and Rebuilding Team. This team should steer the activities of Work Improvement Teams who are a part of the normal day to day functions of the FEMA organization.

See Article 36. Thousand Die due to Bureaucratic Bungling,
Article 37. Restructuring Government for Quick Response
Article 94. Reforming FEMA and Homeland Security and Reader Question 13. Comments on Changes Recommended in FEMA Organization.

Total Quality Management is known mostly as the Japanese management method that enabled Honda and Toyota to take market share from American auto manufacturers using superior quality. State education because of its many facets and problems is an even better application of TQM than the automotive industry. Many state educators would ague that they are already doing TQM. That is probably true as a stated goal but TQM puts massive focus on education including: parents as teachers, community and business involvement with extra focus on the classroom where it counts.

Begin by forming a variation of the Work Improvement Team (WIT). I would call it by a more relevant name such as Classroom Quality Team (CQT). Each curriculum area English, history life Sciences and others would have their own CQT. The CQT would meet as required more often at the start of the semester and maybe once a month later. The CQTs are qualified to determine their own curriculum eliminating the need for a curriculum coordinator. While we are doing this we may as well eliminate the paperwork that the coordinators do. We should keep the measures used for student progress they determine success and failure not only of the student but of the entire system. A Key element for maintaining teaching quality is the support given to inexperienced teachers through the CQT. Experienced teachers should submit their best lesson plans to the CQT for review and documentation as a standard set of lesson plans to be shared with new teachers. This solves a critical problem for new teachers who don’t have the time or the experience to develop their own lesson plans. The CQT would continually evaluate and improve their teaching methods in relation to student achievement.

Now let’s talk about parental involvement first I am not talking about parents who support school sports. This is good thing but most parents don’t get involved until they can be entertained. High school is too late even grade school is not soon enough. We know that learning starts at birth and maybe even before. We also know that the fastest learning for a child is in his brain development years from birth to two or three years old. This is the age where the parents critically affect the education of the child. If we are going to address TQM of education this is where we should begin. A Parents As Teachers organization is the minimum that should be done. This program and other early efforts is a critical part of TQM and must not be ignored. This all occurs before kindergarten. After students start grade school is the time to get tough on parents. Get them to pledge to shut off the TV for a couple of hours each evening and sit down with their kids for study time. There is no way that this activity should be avoided it will soon become a daily routine to be followed through high school.

The next critical area is in class sizes especially in the first two years of elementary school where students are learning to read. Individual attention to each student is vital to learning to read therefore there should not be more than a dozen students in each class.

The next area of effort should be in the teaching of students to write. The only way for students learn to write is to write. The problem is that an English teacher needs to read, correct mistakes and evaluate each paper a job not possible when it should occur on a daily basis. Reduced class size would help but a teacher’s aid may be of more help.

Open the school’s libraries and gyms on Saturdays and staff it with community volunteers. Open the school at night for Parent’s As Teachers meetings and Adult Education classes. Make the school the center of the community involvement in public education. Have the parents pledge to shut off the TV set for two hours of study time each night before school.

I am convinced that if we concentrate our education efforts in the above areas many of the later problems in high school will be solved.

For more information see the following:
Article 69. Ideas for Child Rearing that the State can Do
Article 107. Saving the Cost of Foreign Speaking Child Education
Article 111. Example of Total Quality Management in the Classroom