Effectiveness and Efficiency

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Seven Leadership Practices for Meeting the Mission Challenge in an Era of Declining Budgets

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Effectiveness and Efficiency

  1. 1. Effectiveness and EfficiencySeven Leadership Practices for Meeting the Mission Challengein an Era of Declining BudgetsByPat Peckpeck_patrick@bah.comTed Sniffinsniffin_ted@bah.comMike Ismanisman_michael@bah.comMarc Austinaustin_marc@bah.com
  2. 2. Effectiveness and EfficiencySeven Leadership Practices for Meeting the Mission Challengein an Era of Declining BudgetsExecutive Summary • Make Fact-Based Decisions. Implement aggressiveLooming cuts in federal spending will require dramatic information gathering, robust analytics, and rigorouschanges in how agencies operate, how they are performance measures to improve the quality ofstructured, and the expanse of the mission they continue decisions.to support. They will have to achieve enormous levels These seven common managerial practices areof efficiency, while increasing effectiveness, to continue the underpinning of a framework we call Enterprisedelivering mission-critical services and capabilities Effectiveness and Efficiency, which can help agenciesunder reduced levels of funding. balance the competing needs to be effective andTo assist government leaders, Booz Allen Hamilton efficient—two imperatives that are often at odds withconducted a series of studies and workshops one another.examining how agencies can make “smart cuts” that The budget crisis presents agency leaders with difficultreduce costs without impacting mission performance. choices but also an unprecedented opportunity to fixWe found that successful leaders used similar broken processes, realign organizational structures,managerial methods or practices to achieve their modernize technology, and make other improvementscost-cutting and mission-performance goals: that might be resisted in less-urgent circumstances.• Know the Agency’s Mission/Know Its Capabilities. These shared managerial practices can help agency Understanding the agency’s changing mission leaders achieve extraordinary results as they responsibilities as well its strengths and weakness implement change and create an efficient, effective enables leaders to set a clearer vision for change. government for the 21st century. This is the first in a series of papers that address the leadership, human• Reassess Stakeholders’ Needs. Seek to understand capital, and technological challenges and opportunities stakeholders’ current challenges and needs, not associated with achieving enterprise effectiveness and last year’s, as they engage in planned changes. efficiency in this resource-constrained era.• Align the Agency’s Budget—and Budget Cuts— with Its Mission. When trimming budgets, understanding what is not mission-critical is just as important as understanding what is.• Be Bold: Take High Impact Steps. Make hard choices and avoid across-the-board cuts and other strategies that minimize short-term pain but do not improve effectiveness or achieve sustainable savings.• Spend Money to Save Money. Maintaining effectiveness with fewer resources will require some increase in investments to gain efficiencies.• Institutionalize Efficiency. Institutionalize formal processes and incentives to make efficiency a systematic and aggressive activity within the agency. 1
  3. 3. Leaders Face Shrinking Budgets, Resistance letup in traditional mission duties, agencies also to Change must incorporate new mandates for energy efficiency, On January 5, 2012, President Barack Obama environmental safety, budgeting, transparency, and unveiled a new defense budget, cutting nearly $500 performance reporting, information sharing, and other billion in military spending over 10 years. Less requirements. Performing expanded missions with than two weeks later, he proposed creating a new fewer resources is the new normal. department that consolidates the trade and commerce Achieving the required efficiencies is not an easy functions of the Commerce Department, the Small task. The US federal government wasn’t designed Business Administration, the Office of the US Trade to change quickly, and federal agencies, like many Representative, the Export-Import Bank, the Overseas large organizations, are risk averse. The rewards Private Investment Corp., and the US Trade and for creativity, innovation, and change are often Development Agency, which will save an estimated overwhelmed by the negative consequences of $3 billion over 10 years. In both instances, the mistakes and failure, leading to a culture of risk administration is not simply cutting budgets but also avoidance among federal employees and their leaders. streamlining organizations and implementing reforms Bureaucratic infighting, fear of job loss, and other to achieve efficiencies and sharpen the focus on issues also present obstacles to change. With so today’s mission needs. These planned changes follow many hurdles to climb, many leaders are tempted to other cost-cutting activities already underway, such make easy changes, such as implementing across-the- as a three-year freeze on non-discretionary spending, board cuts; or they delay decision-making altogether, an effort to cut the federal deficit by one-half within hoping conditions will improve and obviate the need two years, and a host of White House Executive for substantial changes. But Congress and the Orders aimed at improving efficiency, effectiveness, White House have made clear that government must transparency, and accountability. All signal the deep shrink, not grow, and so more reductions are coming. changes agencies are being called upon to make as Agencies cannot postpone action. The challenge the White House and Congress grapple with reducing facing agency leaders and managers is this: How can annual budget deficits that reached a record $1.3 I help my agency sustain, and even enhance, mission trillion in 2011. With the Congressional Budget Office effectiveness with fewer resources? projecting exceptionally high deficits for the next four years, government leaders recognize that they face Meaningful change requires that government leaders austere budgets and difficult choices—not just this and employees objectively confront assumptions about year but for many years ahead. their agencies, operations, capabilities, and mission requirements. Today’s extraordinary challenges provide However, absorbing the expected cuts is made more a catalyst and opportunity to dramatically improve difficult by government’s growing responsibilities government by initiating overdue reforms and tackling in many areas. For example, in recent years, inefficiencies that have long held it back. It’s no longer civilian agencies have been tasked with providing a question of doing more with less, or even less with new foreclosure assistance, consumer finance less. Agencies now must perform their missions well protection, clean energy support, and job assistance with less. to veterans, while defense agencies have taken on new responsibilities related to homeland defense, disaster recovery, cybersecurity, and more. With no2
  4. 4. Honing an Effective and Efficient Enterprise they serve as important drivers for both effectivenessRecognizing the challenge facing federal leaders, and efficiency:Booz Allen has launched a series of studies and • Mission Operations—­he way in which the tworkshops bringing together the best minds in organization plans, executes, measures, and paysgovernment, academia, and industry to understand for how it will accomplish its mission. This is thehow leaders can strengthen agency operations and fundamental reason the agency exists.performance while reducing overall expenditures. Mostrecently, Booz Allen and the Partnership for Public • Business Support—the core processes, back-Service have begun holding workshops to help federal office functions, and operations, including people,leaders and managers address specific challenges, processes, and technologies, which support theshare best practices, and learn from current and organization’s ability to deliver its mission.former federal leaders as they develop strategies • Change Readiness and Agility—the organization’sfor change. Drawing on these efforts, Booz Allen readiness and ability to successfully undertakeidentified seven common managerial practices used effectiveness and/or efficiency initiatives. It includesby successful leaders to improve effectiveness leaders prepared to initiate change and makeand efficiency. These common practices work best tough decisions, the data and processes necessarywhen they are understood and applied as part of an to make smart cuts, a culture of change amongEnterprise Effectiveness and Efficiency framework. employees, and the ability to pursue long-term asAs budgets constrict, agencies must find ways to well as short-term goals.sustain or even improve mission effectiveness, while To maintain the right balance between effectivenessalso creating short- and long-term efficiencies. This and efficiency, government leaders must pay attentionbalancing act between effectiveness and efficiency to all three areas, allocating resources so that eachis one of the most difficult leaders face. Doing so remains strong and in relative balance. An imbalance—requires that leaders nurture three critical components that is, if one area is weak relative to the others—of their organizations: Mission Operations, Business could prevent an agency from achieving the optimalSupport, and Change Readiness and Agility. Together, combination of savings and performance.Figure 1 | Enterprise Effectiveness and EfficiencyAgencies can achieve the right balance of EnterpriseEffectiveness and Efficiency (E3) by strengtheningin equal measure three critical organizationalcomponents: Mission Operations; Business Support;and Change Readiness and Agility. Change Readin 3
  5. 5. What Every Leader Must Do following the 9/11 attacks in 2001, many agencies So how can agencies keep these organizational and offices within agencies were given new mission components in robust, balanced health? Agency responsibilities, most notably the new Department of leaders used the common managerial practices Homeland Security. And while the overall mission of identified in our studies to strengthen the three some agencies may not have changed over the years, organizational components and keep them in balance, many have been given additional responsibilities, such thus enabling them to achieve the efficiencies needed as for cybersecurity, disaster recovery, or regulating to sustain mission performance under constrained economic activity. This reexamination of mission budgets. These practices can be readily applied by should also spur a concurrent reexamination of the government leaders at all levels to ensure increased programs and systems supporting those missions, organizational effectiveness and efficiency. and whether they are still needed, because too often, programs continue to draw upon critical funding Mission Operations even after their priority has waned or without having Know the Mission/Know Its Capabilities. demonstrated the intended mission impact or results. To set a vision and plan for moving forward, an agency However, it is not enough to know the agency’s must understand the connections between its actions mission. Leaders also must know their agency’s and mission effectiveness. This requires agency strengths and weaknesses as well. Where is the leaders to confront the most basic questions: What agency most effective in performing its mission business are we in? Are the things we do still as responsibilities? Where are improvements needed? relevant today as when we started doing them? A clear view of the agency’s mission and mission Agency leaders should be open to challenging capabilities can help leaders establish a clearer vision assumptions about their agency’s mission. After for change and what it will mean for their agency’s all, agency missions are not static. For example, departments and employees.4
  6. 6. Reassess Stakeholders’ Needs. and developing a business case for responsibleMost leaders understand the importance of engaging cost-cutting. This helps reduce the sway of emotionsstakeholders and involving them in the process of among agency leaders and employees and keepschange. This effort should also include a rigorous decision-making focused on overall mission prioritiesreassessment of stakeholders’ needs, which can and requirements. Prioritizing resources and missionchange over time. For example, citizen constituents requirements—from top to bottom—is essential tomay prefer to engage an agency through the Internet; improving effectiveness and generating efficiencies.globalization may have increased supply chain risks for Business Supporta regulated industry; or a realignment of Congressional Be Bold: Take High Impact Steps.committees may have given an agency a new set of When facing budget reductions, the first instinct ofCongressional overseers and priorities. Consumer and many leaders is to make across-the-board cuts, aindustry demands may have fundamentally changed strategy that generates the least resistance becausein light of a dramatically altered economy. As leaders of its apparent fairness in distributing the pain evenly.engage their stakeholders, they should make sure But such cuts are often “dumb” cuts because theythey are working with the right set of stakeholders and treat equally high-priority and low-priority activities. Inusing the right tools to gauge stakeholders’ changing essence, agency officials are saying, “Everything wedemands and evolving needs. are doing is right, so we’ll just do less of it.” But thisAlign the Agency’s Budget—and Budget Cuts—with approach can hurt programs that are performing well,Its Mission. while poor-performing programs stay the same. OtherMany leaders understand the importance of aligning strategies aimed at making small cuts (such as cuttingresources to mission priorities. Misalignment can cause administrative overhead, travel, training, and printingagencies to misallocate resources and spend money costs), may also garner more support, but they fail toon non-critical activities while underfunding their most address the agency’s long-term mismatch betweenpressing priorities. Over the years, agencies have budget and mission requirements. Cuts that playestablished better linkages between their strategic around the margins are unsustainable.priorities and the budgeting process. Chief Financial Of course, bold decisions are hard decisions. No leaderOfficers and, now, the newly established Chief Operating relishes cutting employees, killing programs, or closingOfficers, play a large role in mission-goal development bases. Fighting resistance and implementing change,as well as in the resource-allocation process. even when leaders are confident their decisions areWhen trimming budgets, understanding what is not the right ones, requires fortitude. And it also requiresmission-critical is just as important as understanding leaders to follow the other common managerialwhat is. This is no more difficult a task than practices, such as building supporting constituenciesdetermining mission-critical activities, but the among stakeholders and prioritizing programs. But bold,associated outcome is much more painful and difficult high-impact decisions carry several major advantagesfor an organization to contemplate, and so the process that make the effort worthwhile. They position theof identifying low-priority programs and activities agency to meet its mission requirements not just todayis often resisted. If low-priority (and perhaps poor but also in the future. They also can help leaders avoidperforming) programs are allowed to limp along when a continuing cycle of small cuts that may weaken anfunds are scarce, leaders may be forced to cut funds agency while prolonging the pain. And bold decisionsfor high-priority and high-performing programs, precisely typically garner senior-level attention, stakeholderthe programs that should be nurtured to maximize and buy-in, and a rigorous analysis that small cuts rarelypreserve essential capabilities. To overcome resistance get. Thus, the process involved in making a bold cutto reductions in low-priority programs, leaders should impels a commitment to adhere to the decision andintroduce a process for providing objective analysis positions the agency for long-term sustainability. 5
  7. 7. Spend Money to Save Money. Change Readiness and Agility Leaders must accept that as budgets decline, their Make Fact-Based Decisions. agencies will have to spend more in certain areas. Executives need information and facts in order to Technology, of course, offers significant opportunities make objective, clear-eyed decisions about how to best for increasing workplace productivity while lowering allocate resources. But agencies typically don’t make costs through virtualization, cloud computing, mobile good use of the information they have; and often the computing, shared services, social media, collaboration quality of the information is limited. Similarly, agencies tools, and other innovations. However, IT investments may have a lot of information, but not necessarily are not the only ones that leaders should consider. For information that can help them with decision-making. example, consolidating facilities or infrastructure may Thus, the challenge isn’t just collecting data quickly, call for an agency to build new facilities or renovate but also collecting the right information. To make existing facilities, which require up-front investment, effective, fact-based decisions in a time of crisis, but provide a solid downstream return in savings and leaders must target data collection and analyses performance. The same holds true for consolidating, toward the parts of the business that matter most. In centralizing, or training human capital, moving to a fact, decision making becomes fundamentally faster shared-services model, expanding telework, and a when there is less, not more, information. Too much host of other activities that improve effectiveness and information can paralyze an organization and be efficiency. The important point is that agencies need significantly more costly in the end. to think about saving for the long-term, not just cutting activities to meet a current budget target. This may With the right information, agencies can carefully require spending money to save money. evaluate all of the options for improving effectiveness and efficiency. They can build robust performance management systems using analytics to critically analyze data and measure whether they are achieving the expected performance and savings results. The feedback enables them to refine their streamlining efforts as needed. Moreover, the Government Performance and Results Modernization Act, signed by President Obama in 2011, emphasizes the importance of performance measures, including high- quality performance information, to improve outcomes and help agencies work smarter, better, and more efficiently. Successful leaders ensure that for every dollar spent, the data delivered produces meaningful returns in terms of the speed and effectiveness of decisions. Institutionalize Efficiency. Most agencies launch efficiency initiatives in response to outside pressures, such as White House mandates or budget cuts. However, a few agencies have established formal processes that encourage aggressive efficiency efforts on a permanent basis. To institutionalize efficiency, agencies must create organizational, process, and cultural mechanisms that support efficiency on an ongoing basis. Among6
  8. 8. these are the common managerial practices, such as Using an approach developed by Booz Allen calledfact-based decision making, budget processes that Design for Affordability (DFA), the Navy aggressivelyalign spending with mission priorities, and strong gathered data from suppliers, customers, and Navyperformance management to ensure that efficiencies staff regarding the strengths and weaknesses ofare actually achieved. The goal is to change cultures the program, specifically focusing on areas thatfrom reactively looking for efficiency when budget could create savings. They generated cost and laborpressure arises, to a culture of efficiency hunters baselines for 12 major SSN-774 subsystems, andwhere both formal and informal identification of examined cost data for operations and maintenanceefficient ways of doing the business of government are as well as for manufacturing. A distinctive elementrecognized, rewarded, and reflected in the accolades of the Navy’s approach was the targeted collectionof senior leadership. An agency must literally define and analysis of data, which focused on areas wherea formal process for identifying opportunities to changes could make the largest impact on reducingimprove efficiency and effectiveness; and it can costs. Consequently, Navy executives were able toestablish an Efficiency Office that is responsible—and make quick and effective decisions on the basis of aaccountable—for efficiency efforts. The agency can short five-page analysis, and within 10 months, theyalso offer incentives to reward employees who provide charted a course that fundamentally transformed theideas for saving money and improving effectiveness. entire submarine acquisition process, from design toIn this way, an agency can build institutional support sea trials.for a permanent, efficiency-focused organization. The Navy incorporated all seven managerial practicesLeaders who are successful in this effort will be aided in the DFA initiative. Navy and industry leadersby change management practices to engage staff in developed a shared understanding of the Virginia-classjoint solution identification; communications practices submarine’s capabilities and mission requirements.to address the “me” questions that arise among staff The effort not only engaged stakeholders but ensuredduring any major change; training to ensure leaders that their responsibilities and needs were welland staff have the retooled knowledge, skills, and understood and communicated throughout. Cost-abilities to operate effectively in the changed efficiency- cutting decisions were tied to mission priorities andfocused model; and strong messaging to external requirements. Navy leaders identified high-impactstakeholders to explain the nature of the change and steps to cut major program costs. Efficienciesthe impact it has on the services they rely on. were generated through a variety of initiatives and investments, and not just through new uses ofMeeting Today’s Imperative—Leading technology. In fact, the stakeholder teams created overHigh-Impact Results 40 broad initiatives, including more than 250 ideasMany government agencies have already adopted for improving design, scheduling, production, testing,these managerial practices to strengthen and balance and other areas. The data-driven, targeted, and fact-their Mission Operations, Business Support, and based decision-making process enabled the Navy toChange Readiness and Agility, thus enabling them make bold cuts while still maintaining the submarine’sto offset budget cuts with improved effectiveness required capabilities and mission effectiveness. Equallyand efficiency. The US Navy’s SSN-774 Virginia-class significant, the DFA processes and initiatives that weresubmarine program provides an example of how these implemented in the Virginia-class submarine programpractices can produce significant savings while also are now being used in other shipbuilding and weaponspreserving critical mission capabilities. programs to build efficiency practices and processesAfter the first SSN-774 Virginia-class submarine was into these programs.built at a cost of $3.2 billion, the Chief of Naval Bottom line: As a result of their decisions, the per-unitOperations called for the Navy to reduce the cost acquisition cost for the Virginia-class submarine wasto just $2 billion (2005 dollars) per boat in order to reduced to $2 billion per boat, saving $3.8 billion overincrease production to two attack submarines per year. the life of the program. 7
  9. 9. Conclusion In particular, these practices help leaders and their employees confront assumptions about their The current budget crisis requires leaders who organizations, stakeholders, capabilities, and mission can make the necessary cost-cutting changes in requirements, while also providing the processes and organization and operations while keeping a firm eye tools for gathering and analyzing data to make effective on their agency’s mission objectives. This is easy decisions. These practices also enable leaders to to say but hard to do. Government does not change prioritize resources and capabilities in service of the swiftly, and resistance to change may be strong. mission operations, which is essential to making smart Moreover, finding the right path forward can be as cuts that preserve and even enhance effectiveness. difficult as implementing it. Nevertheless, the budget And these practices help build a foundation for crisis offers government leaders an opportunity to institutionalizing efficiency in the delivery of business eliminate inefficiencies, reform outdated processes, support while creating a sustainable organization that and reorient their organizations to focus even more can adapt as needed to changing budgets and mission sharply on their mission requirement. Agencies responsibilities. have no alternatives but to improve efficiency and effectiveness, given the likelihood of continued budget Leaders are defined more by what they do than by who shortfalls for the foreseeable future. they are. It is the actions they take that determine success. By following proven methodologies, agency There are no guarantees for success, but the seven leaders can become extraordinary agents of change in common managerial practices offer a solid platform helping their agencies meet their 21st-century mission for helping leaders put their agencies on a long-term challenges. path for improved efficiency and mission performance.8
  10. 10. About the AuthorsPat Peck Mr. Peck is an Executive Vice President Michael Isman Mr. Isman is a Booz Allen Hamiltonwith Booz Allen Hamilton, and leads the firm’s efforts Vice President who leads the firm’s businessin Government Restructuring and Efficiency. Most supporting the Central Agencies of Government. Theserecently, he led the firm’s US Commercial Business, include the General Services Administration, Officewhich provides consulting services to financial services, of Personnel Management, Executive Office of thehealth, and energy and utilities clients. He also President, Congress, and the National Archives andpreviously led the firm’s Technology Capability team. Records Administration. He is a senior leader in the firm’s Technology business and Strategic TechnologyTed Sniffin As a Senior Vice President with Booz and Innovation Center of Excellence. He presents theAllen Hamilton, Mr. Sniffin leads the delivery of full suite of the firm’s service offerings to clients withthe firm’s Strategy and Organization capabilities to particular focus on IT strategy and strategic planning.US Department of Defense (DoD) clients. He is arecognized functional expert in enterprise efficiency Marc Austin Dr. Austin is a Senior Associate at Boozand effectiveness, large-scale organizational change, Allen Hamilton. He is a specialist in strategic planningstrategic planning, business process reengineering, and performance management. He currently supportsand change management. He has contributed his the Executive Office of the President, specificallyexperience and insights to numerous Booz Allen the OMB, and leads Booz Allen’s Mission Informedengagements, including high-profile government, Decision Making (MissionID) offering.military, and corporate executives.Contact InformationPat Peck Ted Sniffin Mike Isman Marc AustinExecutive Vice President Senior Vice President Vice President Senior Associatepeck_patrick@bah.com sniffin_ted@bah.com isman_michael@bah.com austin_marc@bah.com703-984-1111 703-902-5203 202-508-6505 202-346-9011 9
  11. 11. About Booz AllenBooz Allen Hamilton has been at the forefront of resources, and deliver enduring results. By combiningstrategy and technology consulting for nearly a a consultant’s problem-solving orientation with deepcentury. Today, Booz Allen is a leading provider of technical knowledge and strong execution, Booz Allenmanagement and technology consulting services to helps clients achieve success in their most criticalthe US government in defense, intelligence, and civil missions—as evidenced by the firm’s many clientmarkets, and to major corporations, institutions, relationships that span decades. Booz Allen helpsand not-for-profit organizations. In the commercial shape thinking and prepare for future developments insector, the firm focuses on leveraging its existing areas of national importance, including cybersecurity,expertise for clients in the financial services, homeland security, healthcare, and informationhealthcare, and energy markets, and to international technology.clients in the Middle East. Booz Allen offers clients Booz Allen is headquartered in McLean, Virginia,deep functional knowledge spanning strategy and employs more than 25,000 people, and had revenueorganization, engineering and operations, technology, of $5.59 billion for the 12 months ended March 31,and analytics—which it combines with specialized 2011. Fortune has named Booz Allen one of itsexpertise in clients’ mission and domain areas to “100 Best Companies to Work For” for sevenhelp solve their toughest problems. consecutive years. Working Mother has ranked theThe firm’s management consulting heritage is firm among its “100 Best Companies for Workingthe basis for its unique collaborative culture and Mothers” annually since 1999. More information isoperating model, enabling Booz Allen to anticipate available at www.boozallen.com. (NYSE: BAH)needs and opportunities, rapidly deploy talent andTo learn more about the firm and to download digital versions of this article and other Booz Allen Hamiltonpublications, visit www.boozallen.com. 10

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