A Passion for Leadership (23 page)

T
he fight for money is a distinguishing feature of bureaucracies, both in business and at every level of government.

In a big business, different components or divisions seek more resources from the corporate leadership for product development, marketing, modernizing manufacturing facilities, research, cyber security, and myriad other purposes. The elbows inside the organization can be very sharp. The CEO must decide how to allocate the company's available resources based on her judgment of what will best advance her strategy and benefit the company and its shareholders. As a corporate director, I have observed multiple business chiefs do just that, and I have seen the behind-the-scenes competition among the heads of company components to get a bigger share of the pie. The CEO's advantage over the public sector leader is that her decisions are final—unless the board chooses to fire her.

The resources available to the leader of a public bureaucracy, in contrast, depend on the whims of elected councils, legislatures, mayors, governors, and presidents. They are subject to a broad array of pressure groups and stakeholders described earlier. Spending decisions by public sector leaders can be reversed by politicians, and those leaders also face great uncertainty about future funding, all of which makes long-term planning and reform that much more difficult.

A bureaucracy has infinite capacity to spend money—no matter how much it is given. The appetite is insatiable. Undisciplined spending habits proliferate during flush times, making the transition to hard times all the more challenging. I once observed that notwithstanding a defense budget of over $700 billion (including war funding), the “needs” identified by our military leaders could not be fully satisfied with $1 trillion. A bureaucracy—public or private—will always have a wish list of unmet needs, ranging from the “urgent” to the “nice to have.”

Flush times in public bureaucracies are rare and usually associated with some sort of crisis or domestic emergency. Whether the occasion is the terrorist attacks of September 11, 2001, Hurricane Katrina or Sandy, the Veterans Affairs scandal, or a multitude of other disasters, the public demand for a quick and massive response brings a flood of dollars to departments and agencies ill-equipped to spend them efficiently. And the demand that a bureaucracy react speedily is a sure guarantee of massive waste. As we used to say in the CIA when a policy maker wanted quick results, “You want it bad, you get it bad.”

The money spigot for the U.S. military and intelligence agencies subsequent to 9/11 remained wide open for nearly a decade. An entire generation of managers and leaders accustomed to an open checkbook assumed senior positions, only to be told by the president and Congress in 2010 that the bank was out of money. The national security bureaucracy suddenly had to begin to adjust itself to the kind of bare-bones diet that federal domestic departments and most state and local bureaucracies had long experienced.

The struggle for resources is a central part of every bureaucratic leader's job. I was at the CIA in the early to mid-1970s when the flow of money associated with the war in Vietnam was shut off. I became DCI at the end of the Cold War, when the flow of dollars to both Defense and the CIA began to be severely reduced—another “peace” dividend. Public universities across the country have been seeing the level of state support diminish for a couple of decades now, and Texas A&M was no different. And midway through my four and a half years as secretary of defense, the effects of the U.S. financial crisis, the Great Recession, and huge budget deficits collectively began to bring the hammer down on military spending.

Periods of budget stringency are unparalleled opportunities for reform leaders to implement changes in the bureaucracy, to make structural and cultural reforms, to increase efficiency, and to reallocate resources to new priorities.

The cold-shower reality of fewer dollars to spend is the perfect time to strike boldly against the bureaucratic status quo. It is a fact of life that because bureaucracies are so tough to change, they don't. And over time they get fat, sloppy, lazy, and set in their ways. Tight or reduced budgets afford the reformer an important weapon for forcing change. If no additional resources are available or if budgets are cut, then higher priorities, new initiatives, and new requirements must be funded by changing the way business is done or by eliminating less important programs.

I first experienced budget cutting as a new second lieutenant in the air force in 1967, when the costs of the Vietnam War were forcing severe spending cutbacks in all parts of the military not directly engaged in the war. There were significant cutbacks in travel, nonessential activities, and all manner of amenities at the Strategic Air Command base where I was stationed in Missouri. The small Plans and Intelligence office where I worked even had to give up our subscription to
The New York Times
(which meant the captain I worked for had to find some other way to occupy his mornings). At the CIA in the early 1970s, I saw the perversity of bureaucratic budgeting. We would have to cope with a scarcity of money for eleven months, and then the green eyeshade guys would decide at the last minute that the agency was going to have money left over at the end of the fiscal year—a cardinal sin—and so managers would literally walk around trying to find projects at which to throw the excess dollars.

But at no point in my career did I see bureaucratic leaders use periods of stringency as an opportunity to make important structural or operational changes. Significant cuts in national security spending in the mid- and late 1970s and the early 1990s resulted in canceled programs and constraints on noncritical spending (such as travel and conferences) but had no discernible effect on the way bureaucracies were organized or went about their business.

The bureaucratic status quo was my target in all three big institutions I led. When I was DCI, more than half of the two dozen task forces I established in one way or another addressed how the fifteen intelligence agencies I oversaw could better integrate and restructure their efforts to accommodate budget reductions at the end of the Cold War. In particular, the creation of the Community Management Staff was intended to give me a stronger, more effective way to manage the agencies' budgets than had previously existed. A presidential directive to all the relevant cabinet and agency heads to reexamine the priorities for intelligence collection was also an effort to cope with reduced resources.

At A&M, as mentioned earlier, two of my top priorities for change were adding some 450 new faculty and greatly expanding our recruitment of minority students. Both required money—a lot of it. The new faculty salaries alone would add some $10 million each of four successive years to our overall budget of just under $500 million—not to mention the cost of space to accommodate those faculty. I planned to set aside another $20 million for diversity initiatives.

Between 2003 and 2006, we eliminated more than four hundred staff positions with annual recurring savings of $12 million. In 2006 alone, we implemented actions resulting in another $9 million of annual cost savings, including reducing our utility costs by 25 percent. We outsourced a variety of services and aggressively reorganized and restructured administrative functions. Much of this work was initiated and implemented by a new senior vice president for finance, Sue Redman, whom I had hired away from a pharmaceutical company. I believed her private sector business acumen and perspective would identify significant areas in which we could reform the way the university did business, and I was not disappointed. The executive vice president/provost and vice-provost also played central roles. (I must give credit as well to the Texas legislature, which gave us a special appropriation of $20 million to help fund the faculty expansion.)

These cost-cutting measures did not reduce the university budget, but through administrative reforms and efficiencies we were able to free significant dollars to fund major improvements in the university. I directed the effort, but it was a team project that, because it included broad representation from the university community, was carried out with minimal anxiety and disruption. The endeavor also demonstrated how critical to reform are like-minded, tough-minded lieutenants.

At Defense, in 2009, I cut or capped nearly three dozen major acquisition programs that, had they been built to completion, would have cost taxpayers about $330 billion. My motive in doing this was, above all, to make decisions that should have been made in most cases long before to eliminate overcost, overdue, or no longer needed programs. A secondary motive was to demonstrate to Congress and to the public that the department could clean up its own house—always a good idea for any institution—and thereby perhaps be somewhat shielded from the obviously approaching budgetary train wreck (an embarrassingly naive idea). I admit that changing the way the bureaucracy did business was not an integral part of my decisions in 2009.

However, in 2010, I undertook another major budget initiative, this time with the sole purpose of forcing the bureaucracy to reform and change. I directed the military services to cut $100 billion in overhead costs over a five-year period. The only way to achieve that goal was to cut administrative and staff costs, consolidate or eliminate functions, shutter headquarters, and change the current way of doing business. As incentive, I promised that for every dollar of successful cuts in overhead, I would consider equivalent dollar requests for purchasing new or additional military capability—a direct swap of “tail” for “tooth.” The services found the $100 billion. I also directed the other parts of the Pentagon to find another nearly $80 billion in overhead savings, most of which we would return to the Treasury. In both years, the effort produced results in large measure because of the involvement of leaders from all over the department—and intensive pressure from me and my office.

Regardless of the nature of the institution, the public or private sector boss must have a mechanism to ensure that elements of the bureaucracy are, in fact, implementing the budgetary cuts and changes they originally agreed to. It's one thing to sign up when the trumpet sounds “charge”; it's another to stay the course until the battle is finished. This is where accountability must be an essential part of the leader's playbook. He must ensure the actions he directed are being taken in full.

Cutting jobs and firing people are almost always unfortunate consequences of reduced budgets. How they are done matters.

One significant area of difference between business and the public sector is that the former routinely reduces the workforce when revenues are down or a company is changing strategies or merges with another. Employees in many industries—automobile manufacturing, banking and finance, and retailing, to mention only a few—are familiar with this reality, and leaders usually have considerable experience in managing such reductions. Seniority often plays an important role, and the magnitude of personnel reductions will often vary from one part of a company to another. The leader will make these decisions based almost entirely on business considerations. Layoffs and reductions in force are obviously painful for the individuals involved, but the relative lack of job security is a fact of life in the private sector.

In contrast, one of the principal attractions of employment in a public sector bureaucracy is job security. Because personnel reductions are so infrequent, when they do occur the impact is significant and traumatic for an organization. While under ordinary circumstances public employees have some job protections, many discover to their dismay that those protections are pretty limited if there is a budget crunch. In these circumstances, the challenges facing the leader, his manner of decision making, and the implementation of employee reductions are quite different from in the business arena. How the leader handles such reductions will affect future morale as well as perceptions of him by those who remain in the institution.

When Admiral Stansfield Turner was head of the CIA in the latter half of the 1970s, he fired hundreds of clandestine service officers. As I understood the situation at the time, he wanted the letters of separation to include expressions of appreciation for service rendered to the country and their contributions to U.S. security. The agency lawyers apparently persuaded him that such niceties—courtesies—might give a fired officer some grounds for a lawsuit to get his job back, and so those let go received a terse, even callous, dismissal letter. The result was deep animosity toward Turner not just by those fired but by most of those who remained at the agency. As long as a leader is operating within the laws and regulations pertaining to such matters, he shouldn't let advisers deter him from—make him afraid of—treating people being let go courteously and with compassion.

When lists of people to be dismissed are assembled, a good leader will look closely at eligibility for retirement. If he has any flexibility at all, he should let those near retirement finish out their service. If they have put in a lifetime of service, they deserve consideration. Again, the rest of the employees will be watching whether a leader deals with such cases sympathetically and humanely.

A leader in either business or government needs to be cautious about offering broad-based programs for early retirement as a means of encouraging people to leave voluntarily. He will find, as often as not, that the people he most wants to stay take advantage of the chance to leave and those he most wants to go decide how much they love the place and want to stay. When that happens, the boss is left standing there looking like Wile E. Coyote who just set off a bomb under himself.

Several mechanisms are available to a leader for managing “head count” and reducing the number of employees in an organization. If the objective is simply to prevent further growth, freezing the number of positions in a component—imposing a personnel ceiling or force cap—will allow the manager flexibility to move people around, hire, and fire as long as he stays under the overall limit. A force cap also allows the leader to manage the normal ebb and flow of personnel.