Learn what the Florida Department of Revenue, a large organization in the fourth most populous state, has been doing to generate business results that exceed private-sector performance expectations.
Dale F. Weeks
Competition from privatization and outsourcing constantly threatens the sustainability of the public sector. This threat is unlikely to subside, regardless of changes in political leadership.The public sector must demonstrate that it can compete one on one with any world-class organization, public or private.This is the first in a series of articles that show the public sector is transforming, yielding startling business results that exceed private-sector performance expectations. It highlights the enterprise-wide business process management journey of the Florida Department of Revenue (DOR), which has 5,300 employees and annual revenue collections of $35 billion.
Transforming the Public Sector
How does government respond to the continual threats of better, faster, and cheaper privatization and outsourcing? Does the private sector have a “corner on the market” for performance excellence? Can the not-for-profit and public sectors truly compete with Fortune 500 and other world-class companies? Regardless what the media says, the answer is a resounding “Yes!”
The process-management revolution—driven by advanced performance measurement, flatter corporate structures, process-based teams, and the use of technology and process change to reengineer work—has transformed American business in the last twenty-five years. This revolution is only beginning to change the public sector. Why is such change necessary? The public demands products and services equal to or better than those it receives from the private sector, like one-stop shopping for services at all levels. People want excellent performance; if they don't get it, they will look for an alternative supplier of choice, either public or private.
The U.S. national budget involves over $1.8 trillion in annual revenues and $2.3 trillion in annual expenditures, including a payroll of 2.7 million civilian employees. Across the fifty states, the aggregate value of all budgets indicates that government expenditures constitute almost 20 percent of the gross domestic product. Most developed countries have similar statistics.
The public is asking,“How well are these resources being managed?” and “What is the return on investment (ROI) to citizens and taxpayers?”This is a mammoth question to address for a state, country, or comparison between countries.This series of articles builds an answer by examining ROI, on a small scale, for several high-performing public-sector organizations in the United States,Canada,Australia,and other jurisdictions around the globe.They demonstrate that a transformation of the public sector is possible, underway today, and already yielding startling results.
The Series
These articles begin with a look at the achievements of DOR in its continuing quest for improvement. DOR administers most of Florida's state taxes, enforces child support, and oversees administration of property tax by local governments. DOR leaders have embraced the principles of modern business process management, guided by the Baldrige criteria.
The next article discusses agencies, provinces, and other public-sector organizations in Canada and North America that have been recognized as leaders and innovators in public-sector performance management. The provinces of Ontario, Manitoba, and Alberta and the federal government of Canada enlighten us with their accomplishments over the last several years. After that, the performance management discussion extends to case studies in Europe, Asia, and other global jurisdictions where excellent performance management is being practiced today.
The last article discusses the meaning of enterprise-wide performance and business process management at the state or country level. It covers, for instance, the full extent of the State of Florida's $50 billion-plus operating budget, which potentially affects a population of more than 16 million, along with the implications for performance comparisons with other states, ministries, and agencies and between countries on a global scale. This article explores who excels at managing (across the entire entity) performance and horizontal business processes and what all of us can learn from these examples of public-sector excellence.
Bringing Baldrige to Government
Thirty years ago, a once-vaunted U.S. economic leadership seemed to be slipping away.The pundits said American companies were too bloated, their products too shoddy, and their workers too inefficient to compete. They proclaimed that the twenty-first century belonged to Japan,Asia,and Europe. They were mistaken. Today, the American economy leads the world, and this comeback story contains practical lessons.
Imagine mining U.S. business success stories for nuggets of management expertise. Refining lessons from successful companies into a structured system for improving performance could help us cut costs, increase productivity, and improve service in all kinds of organizations—including government. There are such systems. Experts working with the Baldrige National Quality Program, a federally authorized organization, studied successful U.S. companies and identified common factors that lead to extraordinary results.
Much more than ivory-tower theories, Baldrige tools emerged from real-world experience at America's best-run corporations. Companies rated high on the Baldrige criteria consistently outperform other companies in the major stock indexes. Years of research refined these insights into a rigorous system for modern business process management—the Baldrige Criteria for Performance Excellence. Baldrige organizations have built extensive methods to guide managers, training and evaluation systems to improve leadership, strategic planning systems to guide companies to greater productivity, performance-measurement systems to cast new light on processes, and proven problem-solving tools to help teams consistently reach outstanding results.
DOR is adapting private-sector management tools to improve performance in government. Congress has just adopted legislation to allow public-sector organizations to compete for the coveted Baldrige Award. But as DOR works to adopt the Baldrige model, far more than a prize is at stake. By studying cutting-edge performance-management systems, DOR managers and employees build skills that are paying off for Florida in reduced costs, increased productivity, and improved service. The vision is to exemplify the best in public service.
Business Process Management
What is the key to driving an organization's performance to world-class levels? No solution, by itself, guarantees improved organizational performance. But imagine if all managers and employees in an organization did the following:
- Understood exactly how work flowed through their business processes. Managers and supervisors could see where work added the most value and where fixing process problems could yield the best business results.
- Used an accurate performance measurement system.The best systems would help managers and employees understand whether processes delivered the results required or whether corrective actions were needed.
- Assigned clear roles and expectations for senior leaders, business process owners, operational managers, supervisors, and employees—focusing on process management rather than traditional supervision—where operational managers partner with business process owners, who are accountable for improving process designs and results.
- Directly linked employees' day-to-day activities to long-term strategic goals, so all effort in the organization could be coordinated to reach the desired result.
- Identified the best-performing work units. Managers could study best practices in use in those work units and use them in teams struggling with performance problems.
- Relied on a proven, practical problem-solving guide that helped them improve results. Teams would lose less time trying to understand how to fix problems and be better equipped to find solutions that really work.
Business Process Review
Business processes start with inputs from suppliers and end with outputs that achieve outcomes for customers. In between, work flows through a series of repeatable steps, during which value is added to a product or service. Managers should understand all steps in a process and how several processes form a value chain to deliver a service or product. This simple concept acquires enormous power when managers and employees can accurately measure how steps in a process add value.
In 2004, DOR extensively reviewed all its business processes, starting with the fundamentals. The review included revising its longstanding system of performance measures, a job that required months. This effort was essential because the organization couldn't effectively manage what it didn't accurately measure.
Once an organization has valid, meaningful business process measures, the numbers tell the story. It can set performance targets, and then know when and how to improve processes if targets aren't met. It can understand where value and costs are added. It can see how competitors stack up and use these insights to correct its competitive weaknesses and exploit strengths.
Strategic Leadership System
By understanding its business processes, DOR can prioritize and develop strategies to achieve real break-throughs in performance. Sound data from well designed business processes also help DOR recommend three- to five-year goals to elected decision makers, allowing them to select those they will strive to achieve. Figure 1 summarizes these activities and tasks. (For a detailed, up-to-date figure, see www.myflorida.com/ dor/sls/sls_chart.pdf.)
Adapted from: State of Florida,Department of Revenue, Strategic Leadership System, www.myflorida.com/dor/sls/sls_chart.pdf.
Guided by elected officials' choices, DOR is creating annual operating plans by business process that break down these longer-term goals into annual increments using world-class or industry standard performance benchmarks. These annual performance targets show managers, supervisors, and employees exactly what they need to strive for over the course of a year. Each operating program's annual plan will be further divided into quarterly, monthly, or weekly performance targets.When results don't meet targets, the next step is to take corrective action. Practical training in problem-solving tools and quality management techniques enables managers to plan effective corrective actions.
A Tradition of Performance Excellence
Fortunately, DOR didn't have to invent such tools and techniques. For decades, managers have learned from business theorists such as Joseph Juran and J. Edward Deming, who pioneered early forms of quality management after World War II. In the 1990s, theorists Thomas Davenport and Michael Hammer introduced the concept of reengineering business processes— revising work and introducing technology to drive radical progress in performance.
Soon, leading companies began schooling managers in quality management techniques, including Motorola's famous “Six Sigma” training. General Electric Chief Executive Jack Welch credited Six Sigma with saving his company $2 billion over three years . Such tools helped boost U.S. productivity and push the U.S. economy into world leadership.
Studying management tools invented in the private sector and using them in public service is part of DOR's culture. In 1998, DOR won the Governor's Sterling Award, the state's leading quality-management award. Since then, it has strengthened its commitment and expanded its understanding of how to manage in a modern business process system. DOR is now training all leaders in the Knowledge Based Leadership© (KBL) problem-solving method—which the executive director, Jim Zingale, calls “Six Sigma Lite.”
KBL—Structured Problem Solving
Federal, state, and local governments have only begun to use structured problem-solving methods. To speed the spread of these tools, DOR has launched an innovative KBL training program involving more than a hundred DOR managers. Participants meet monthly over six months to learn and apply problem-solving tools. The approach provides the participants with the statistical and analytical skills to pinpoint process flaws and apply effective solutions to improve performance. A growing cadre of DOR leaders will be equipped with the skills to continue improving performance in future years.
Each participant picks a process improvement project that saves enough to pay for the $2,200-per-person cost of the program. KBL projects already are proving their value by improving DOR business processes:
- An Orlando team looked into the problem of identifying child support cases where DOR had made a collection but was having trouble processing the payment because of missing case information or because the account had been incorrectly closed. Using KBL problem-solving tools, team members methodically analyzed the business processes that were creating the unobligated collection errors.The team pinpointed the controllable root causes of this problem and then developed a plan to improve the closure process and reduce unobligated collections. Carefully monitoring progress, the team was able to produce amazing results: unobligated collections plunged more than 90 percent, from $132,467 in May 2003 to $10,153 in May 2004.
- A Clearwater team focused on improving performance in the audit process. Despite an initial reluctance to acknowledge that their work site lagged in audit performance, Clear water team members (including audit managers) soon recognized that they had room to improve on key performance indicators. Energized by their validation of the facts, team members methodically reviewed their audit process and soon identified performance gaps—including some among managers themselves—and now are implementing solutions projected to improve performance. Jim Zingale adds, “I found this very impressive. Too often, I see teams jump too quickly from suggesting a problem to guessing at a solution. If we're not careful, we end up 'fixing' something that wasn't really broken.”
In 2004, DOR also began requiring all 600 members of Jim Zingale's leadership team to take a three-hour Web-based introductory course on problem-solving tools. Developed by DOR trainers working with the Governor's Sterling Council and other experts, the course takes a broad look at how process improvement tools work.When team members encounter these tools in the course of process improvement efforts, they'll have a head start on using them effectively.
Strategic Initiatives
Problem-solving tools are only part of a modern business process management system. Managers and teams also need accurate performance data, in-depth understanding of workflow across a value chain, and advanced technology to make solutions work.
DOR is working to meet these needs. Through its business process mapping strategic initiative, DOR has identified critical success factors, built and fine-tuned performance measures, and gained a better understanding of how business processes work together to create value (www. my florida.com/dor/report/2004/strategic_planning.html). Finally, through its SUNTAX and CAMS technology initiatives, DOR is launching some of the public sector's most advanced enterprise resource package computer systems in its General Tax Administration Program (www. myflorida.com/dor/report/2004/gta.html) and Child Support Enforcement Program (www. myflorida.com/dor/report/2004/cse.html).
Process management, performance measurement, advanced technology—all components work together in the DOR way of public service.
ROI—Business Results
General Tax Administration
A set of powerful, innovative new tools in the hands of a group of skilled artisans can effect immediate, positive results. Over months and years, the ROI will surpass the immediate outcomes, as the artisans coax better results from the new tools. That is what happened with DOR's General Tax Administration Program.
Along with business process management, DOR has reengineered up to twenty-two legacy computer systems to create a single integrated tax administration system that will soon handle virtually all of the thirty-six taxes and fees that DOR administers—a landmark for integration of tax administration systems worldwide. This initiative has generated a $321.8 million return on a $64.9 million investment over six years—an average ROI of 83 percent per year, impressive in any field. Cost savings and revenue increases continue. As DOR managers and employees work to fine-tune these new tools, positive results should increase.
Child Support Enforcement
In its child support enforcement program, the DOR conversion to process management has helped contribute to remarkable progress. Once forty-eighth of fifty-four states and territories as gauged by federal performance measures , Florida now ranks twenty-sixth — progress made even as other states also dramatically improved performance. State child support collections have virtually tripled in ten years despite a decline in the total number of child support cases administered. Imagine a private-sector analogue, in which a business's revenues tripled though the number of customers fell.
As of September 2005, Florida's child support collections set a new record of $1.16 billion, exceeding $1 billion for the second consecutive year. Collections for fiscal year 2005 set the eleventh consecutive record for child support. DOR currently administers more than 700,000 child support cases, representing approximately one million Florida children. Almost one Florida child in four is touched by a child support case administered by DOR. (One case may involve more than one child.)
According to Jim Zingale,
“We will not be satisfied until we've made every effort to increase collections on behalf of Florida's children. Governor Bush, the Cabinet and the Legislature have endorsed our goal of driving the performance of Florida's child support enforcement program into the top five states and territories nationally in the next two to four years. Thanks to the capabilities of our employees, the potential of the CAMS system, and our managers' groundbreaking work in business process management, I am confident we can reach that goal. With the support of the elected leadership and the hard work of our employees, the winners will be Florida's children.”
Why This Approach?
This competitive government approach is based on DOR's belief in itself as an organization (Figure 2).
Source: State of Florida, Department of Revenue, What We Believe, www.myflorida.com/dor/what_believe.html
DOR must compete for survival just as in the private sector. If the organization doesn't deliver quality service at the same or lower cost than its competitors , elected leaders will replace it with something else. But DOR wants more than just its own survival: it believes in the cause of public service. Floridians demand and deserve government that delivers services better, faster, and cheaper. DOR is committed to meeting that challenge.
References
State of Florida, Department of Revenue. Strategic Leadership System. www.myflorida.com/dor/sls/sls_chart.pdf.
Dale F.Weeks is the senior executive officer for the Florida Department of Revenue. He serves as the agency's chief business process and benchmarking leadership officer, with oversight responsibility for integrating programs in the context of the Baldrige management framework. He can be reached at weeksd@dor.state.fl.us.