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Commentary By Stephen Goldsmith

How Government Can Effectively Produce Better, Faster Cheaper Results

Economics Regulatory Policy

[This is the first in a multi-part series on streamlining government services]

Partisan officials, policymakers and commentators remain transfixed by how much government should tax, spend and redistribute. President Obama argues that higher taxes will result in greater equity and Republicans say reducing deficit spending is only fair to the future generations who will foot the bill.

This debate ignores a fundamental problem on which people across the ideological spectrum should agree: regardless of tax and spending levels, government as currently organized is too cumbersome to be effective. And though it might sound like a bad joke, government could in fact be better, faster and cheaper. The assumptions of the last 100 years of progressive governance and the production model on which they are based no longer apply. Today’s technological advancements can power a digital government revolution and offer the opportunity for truly transformative changes.

Digital systems are replacing paper ones; data analytics, cloud computing and data mining can combine and examine data in disparate systems; handheld devices allow field workers to solve problems independently and collectively; and social networking allows citizens to participate in problem solving in new and dramatic ways. Technology can now renew citizen engagement, allow employees to work across their verticals, and facilitate the work of data scientists utilizing big data and analytics to prevent problems before they occur. Personalized services and targeted use of resources will in fact transform government.

We can and will see real results when four straightforward changes occur in how government engages its own workforce, regulates the marketplace, involves the private sector and incorporates the wisdom of its citizens. The essays to follow will show that where state and local officials apply these reforms, government does in fact increase its productivity and responsiveness.

1. Old Vertical Hierarchies Need to Give Way to a Horizontal World

Life happens horizontally: No one simply experiences “housing” or “job training” or “roads” or “schools.” We solve problems and experience life by managing resources and issues influenced by the multiple individuals and groups that make up our daily lives. Most innovative public officials will understand the vertical-horizontal concept, but no one understands it better than lower-income recipients of public benefits, so let’s explore the concept from their vantage point.

A single mother with two children, living in a low-income neighborhood, experiences similar concerns to other mothers, albeit it in a much more challenging way. She needs to provide education and healthcare for her children and find a job that pays enough to put food on the table. She needs to find some way to get to work, the store or doctor, all while keeping an eye on her children.

In this example, the mother most likely applies for essential benefits, such as income support payments, food stamps, temporary aid to needy families (TANF) and Medicaid, through multiple agencies that have different rules and procedures. For help finding a job that pays better or a training program to improve her skills, she goes to yet another agency that has no records from the many agencies already serving her. Her children might be enrolled in other programs or receive additional services through their schools, which creates another layer of complexity and challenges. If they find themselves under the care of juvenile or child welfare authorities, things only become more complicated.

The many winding paths of the eligibility labyrinth act as a suitable metaphor for a much worse problem rampant in our world today. Government produces hundreds of uncoordinated, activity-based programs, each aimed at mitigating individual issues, rather than weaving together resources in order to produce solutions. Over the years, government agencies have created vertical programs ill-suited to the increasingly horizontal world in which we live and work. Most government inefficiency and waste can be traced back to this fundamental problem. Each of these programs brings its own insensitivities and expensive hierarchies. We raise the issue of verticality not merely to reflect the high cost of redundancy and wasteful administration, but also to demonstrate how this structure needs to change if we are to buy effective results with the dollars spent.

People live in many communities, digital and real, with multiple influences that are not easily altered by a single government program. Hierarchies are collapsing in favor of networks, internet tools democratize access to information, and service delivery has become highly personalized. No matter how much we increase funding for public programs, large bureaucracies cannot be responsive to taxpayer needs without changing their underlying structure.

Big government’s vertical myopia finds its roots in a simpler time when the definition of professionalism applauded the development of technical skills that delivered responses to specific public problems. Today, government’s modus operandi assumes that technically proficient public employees applying prescriptive rules can find the right solutions to public problems.

However, whether working to clean our water or find needed assistance for a struggling mother, bureaucrats confront complexity well beyond the specific programs they administer. The status quo in government privileges this form of top-down decision making over the common-sense wisdom of working with, or listening to, citizens and their communities to fashion the best solution.

In the meantime, this process of elevating predetermined rules and procedures developed by aloof experts over community and individual wisdom leads to unanticipated consequences. Vertical, command and control, technocratic responses also suffocate one of the largest drivers of efficiency—the daily demand-side choices made by residents. Simply put, government will be more effective when it evidences its humility by allowing more demand-side choices and prescribing fewer supply-side “answers.”

Policies that advocate more individual decision-making in areas such as Medicare, Social Security, where a young person goes to school and neighborhood development priorities, represent a fundamentally different approach to governance. However the debate over these topics, as well as less politically charged ones like workforce assistance, is often couched in heavily ideological language rather than in terms of their actual efficacy.

When public sector professionals operating within programmatic lines replace consumers, innovation struggles. In addition, each government-designed and -owned program produces a variety of incumbent winners with vested interests in making sure that those who need assistance do not have real choices that might jeopardize their programs’ funding. The National Head Start Association (NHSA) protects incumbent Head Start programs, the Public Housing Authorities Directors Association (PHADA) protects public housing agencies, and the United States Department of Labor, Employment & Training Administration (DOLETA) does the same for job training agencies. Dealing with these powerful institutions, low income consumers have no voice, no clout and no choice.

The same principle applies to devolved authority: reducing top-down, vertical rule making will also encourage entrepreneurial city and state officials to innovate. Top-down decisions, cascading across state and local lines, can squeeze out yet more creative local responses and reduce citizens to passive objects of the state, depriving them of active participation in solving their own problems. This unintended arrogance is built into the very fabric of vertical public life.

2. Routine Activity Should No Longer Be Privileged Over Outcomes, Innovation and Problem-Solving

For 100 years now, we have developed civil service, oversight and procurement systems to limit corruption and abuses of power by limiting discretion itself. Narrow job descriptions, layers of outdated oversight, and hyper-technical and protracted procurement processes have produced a government that manufacturers widgets designed for a single application, while entangling their production in red tape for reasons that virtually no one can remember. Today, analytics and big data allow much better ongoing visibility into the actions of public employees—GPS chips in mobile tools tell us where employees perform work, how long it takes them, and data mining and real-time wireless signals send notices to supervisors of outliers—those employees who operate at the extremes. All of these technologies allow us to grant more discretion to workers, more flexibility to businesses with good records, and more trust to private companies partnering to deliver public services. Concurrently these approaches allow government to better concentrate its resources and attention—whether on regulating bad actors whose conduct requires thorough regulation and enforcement, helping individuals with the most intractable problems or producing public goods. For now though, the status quo encourages “safe” routine activity at the expense of innovation and solutions.

Almost inadvertently, bureaucrats remain preoccupied with tracking inputs and activities while spending too little time producing results. And if we pay for activities, as governments routinely do, we will always have more demand for those activities than we can afford and less demand for real results. For example, if we pay for visits to the doctor, that is what we will get. But if we pay for preventive services, we will be much more likely to get improved health outcomes.

These first two issues—too many government verticals and too much activity-based funding – compound each other. The vertical nature of public agencies increasingly prevents us from effectively designing solutions to public problems, since solutions demand a more horizontal response. Too little thought at the appropriation or agency level involves a true definition of public value—what outcome is important to the public. Instead, we fund and track inputs—homeless shelter beds rather than the reduction of homelessness, or visits to the doctor instead of good health. Neither those receiving services nor the taxpayers who pay for them are well-served by the expenditure of resources on activities that aren’t focused on solutions or delivering services that are too narrow, wasteful and impersonal.

In my first week as deputy mayor of New York, top fire department officials explained to me the futility of trying to inspect every building in the city, which led them to rethink their approach and goals. The new approach included analyzing data from the departments of buildings, health, and the police to identify structures and operators with a history of serious infractions that needed more urgent attention and remediation. The mission of reducing fire, not increasing the number of inspections, would reset the allocation of resources at NYFD.

Another recent New York City initiative will pay providers for keeping young adult males out of detention. The City announced it will only pay for performance, leaving it up to providers to fashion innovative solutions. Other jurisdictions pay nonprofits for inputs: how much drug counseling, therapy or the like they provide. One can easily see which model is more likely to produce results.

3. The High Price of Risk Aversion

Avoiding risk has become a defining characteristic of bureaucracies in general, whether in how they deliver services, regulate industries, or design social safety nets. To prevent every conceivable problem, we over-regulate childcare centers, making it difficult or expensive for many to operate. To ensure that a deck does not collapse in someone’s backyard, we require expensive and unnecessary engineering approvals. The more knowledge a bureaucracy gains about possible risks, the more rule-bound the entities under its supervision become. Government tries to reduce risk by narrowly defining problems and rigidly prescribing solutions to those problems. This is a policy problem. We define risk away by making government solutions immune to the complexity that comes with horizontal life. Because risk identification is never-ending in a dynamic world, trying to stamp it out becomes an endless and increasingly expensive process as well.

Risk avoidance also permeates the context in which most government employees work. Promotion depends on following rules and avoiding mistakes, not on reform. The problem here is one of incentives. We try to reduce risk by conditioning the behavior of public decision-makers to adhere to rules and procedures.

Programs designed to help struggling Americans eventually become counterproductive, too expensive, and operate too much for the purpose of shielding those they intend to help from the risk of bad outcomes. The complexity of modern life and its many layers of interconnectedness make it impossible for program design or implementation to adequately evaluate the tradeoffs that result from interventions. Equally likely, this approach causes programs to invest so much in each person who qualifies that it retains less capacity and fewer resources to assist those who could lift themselves up with less help. Support systems need to recognize that personal reward comes from overcoming some risks.

4. Resetting the Relationship of the Sectors

At almost every level of government operations, the relationship among various sectors needs to be fundamentally reset. Government regulates, permits and inspects with a slow-moving sledgehammer that extracts enormous costs from good actors while still too often allowing the bad ones to break the rules. Private companies with long-term government contracts become part of the entrenched status quo and resist change. Public officials, fearing labor backlash, mistake critical private-sector partnerships as some sort of confession of inadequacy. The social sector, increasingly dependent on government contracts, loses its zest for disruptive innovation, sometimes creating an iron triangle of government, philanthropy and nonprofits incapable of producing dramatically better results.

The debate over “privatization,” founded on outdated assumptions, distracts us from the real goal: to produce public value by integrating the best of the government, for-profit and nonprofit sectors. Few public goods are entirely produced by one sector. Arguing to protect a monopolistic, bureaucratic delivery system doesn’t make much sense, but neither does assuming that the private sector will always perform better. The current practice of requesting proposals through highly prescriptive bid documents protects incumbents and narrows bidding to expensive activities rather than creative solutions. Bidding needs to be a mechanism to purchase innovation from the private sector rather than just transferring funds and responsibility away from the government.

When President George W. Bush took office, he established targets for private sector participation in government. When President Obama first took office, he established goals for in-sourcing work from the private sector to government. Neither of these efforts establishes the right relationship between public and private. Companies need better avenues to suggest new approaches. Request for Proposals (RFPs) that overly prescribe the conditions and response requested simply impose the status quo on a proposed vendor. Complicated procurement rules amount to an annuity for the incumbent, not value for the taxpayer. Private companies that are incumbents in providing services need to be pressed to innovate and neither they nor their governmental program managers should be allowed to maintain positions without the competitive challenges that produce innovation.

Effectiveness requires government to be clear about its role and what it needs to control—protecting equity, fairness and service quality. Control does not necessarily mean employing the person who does the work or even mandating how his or her work is performed. This procurement issue extends to nonprofits as well from whom too often government restricts creativity, often requiring the nonprofit to essentially emulate government in order to get the work.

The cumbersome and outdated relationship among the sectors also permeates how government regulates the marketplace – serving neither the consumers it claims to protect nor the businesses it wants to help grow. Realizing that government permitting was delaying new businesses from opening and creating a drag on economic development, New York City set up a special SWAT team to help small businesses—restaurants in particular—navigate the complexities of getting the necessary approvals to open. The enormously popular effort helped business owners weave their way through approvals from over a dozen offices and get their businesses open more quickly. This effort helped overcome the existing maze of varying standards, separate application forms, and long lag times that could at times drain a small entrepreneur’s capital before he or she even opened. Red tape earned its reputation as a powerful obstacle in the chase for the American dream.

Today we cannot afford nor do we need to set up parallel systems to compensate for government’s assumed inefficiency. Red tape needs to literally go away; i.e. government no longer needs to pass a folder from office to office, accept a piece of paper or spend time hunting for a record. The way government licenses reflects reflects a callous disregard for the value of other people’s money as those people await permission to invest. Even worse, it diverts capital that could be used for job creation into compliance. Digital systems can remake this approach.

Demonstrated Success: Time to Think Anew

In this series of essays, we will focus on state and local successes at delivering better, faster cheaper services. The examples contained within suggest a transition to a new foundation for government: one based on performance and the centrality of citizens. Government’s revised role will be to set broad policy, transparently provide open data, ensure fairness and implement mechanisms to allow informed choice, all while protecting health and safety and supporting those in need. Its new horizontal structure discards Washington’s distrust of local and individual decision-making and current policies that have increased the economically damaging rent-seeking behavior we see today. With increased data and predictive capacity, governments can reconfigure resources to make their employees more efficient, allow them to adapt more quickly to changing environments, and determine more quickly if resources could be better deployed elsewhere or in another way.

These essays will highlight ways to make government more effective and responsive. We will show that leaders throughout the country can make a difference when they combine personal commitment, new technologies, citizen involvement, private sector innovation, competitive sourcing and new structures to unlock value. When all of these efforts are connected to true outcomes and real performance, taxpayers can receive the results they deserve.

Stephen Goldsmith, Daniel Paul Professor of the Practice of Government and Director of the Innovations in American Government Program at Harvard's Kennedy School of Government, is a two-term former Mayor of Indianapolis and former Deputy Mayor of New York City