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HIGH- PERFORMANCE GOVERNMENT Structure, Leadership, Incentives EDITED BY Robert Klitgaard & Paul C. Light The RAND Corporation is a nonprofit research organization providing objective analysis and effective solutions that address the challenges facing the public and private sectors around the world. RAND’s publications do not necessarily reflect the opinions of its research clients and sponsors. R ® is a registered trademark. © Copyright 2005 RAND Corporation All rights reserved. No part of this book may be reproduced in any form by any electronic or mechanical means (including photocopying, recording, or information storage and retrieval) without permission in writing from RAND. Published 2005 by the RAND Corporation 1776 Main Street, P.O. Box 2138, Santa Monica, CA 90407-2138 1200 South Hayes Street, Arlington, VA 22202-5050 201 North Craig Street, Suite 202, Pittsburgh, PA 15213-1516 RAND URL: http://www.rand.org/ To order RAND documents or to obtain additional information, contact Distribution Services: Telephone: (310) 451-7002; Fax: (310) 451-6915; Email: order@rand.org Library of Congress Cataloging-in-Publication Data Klitgaard, Robert E. High-performance government : structure, leadership, incentives / Robert Klitgaard, Paul C. Light. p. cm. "MG-256." This volume comprises thirteen essays that address the primary problem areas identified by the Volcker Commission, along with the text of the Commission report itself. Includes bibliographical references. ISBN 0-8330-3740-4 (pbk. : alk. paper) ISBN 0-8330-3662-9 (hardcover : alk. paper) 1. Government productivity United States. 2. Political planning United States. 3. Organizational change United States. 4. Administrative agencies United States Reorganization. 5. Executive departments United States Reorganization. I. United States. National Commission on the Public Service. II. Title. JK468.P75K585 2005 352.3’67’0973 dc22 2004029557 Cover design by Pete Soriano This book was made possible by the generosity of donors to the Pardee RAND Graduate School, particularly Paul Volcker and Eugene and Maxine Rosenfeld. iii Preface Early versions of most of the chapters in this book were presented in August 2003 at the Pardee RAND Graduate School in a two-week course convened by Paul C. Light. Then, at a PRGS conference in March 2004, the authors presented their revised papers to each other and to five distinguished experts: Mark Abramson, Eugene Bardach, Steven Kelman, Barbara Nelson, and Hannah Sistare. These experts made presentations at the conference and contributed written commentaries afterwards, which assisted the editors and authors in generating the final versions assembled here. Jim Dewar, Lynn Karoly, and Jane Ryan later provided helpful comments, and Janet DeLand was the book’s speedy and efficient editor. The course, the conference, and this book were made possible by the generosity of donors to the Pardee RAND Graduate School, particularly Paul Volcker and Eugene and Maxine Rosenfeld. v Contents Preface iii CHAPTER ONE Introduction by Robert Klitgaard 1 CHAPTER TWO Urgent Business for America: Revitalizing the Federal Government for the 21st Century by the National Commission on the Public Service [the Volcker Commission] 9 PART 1. WHAT BROAD CHANGES WILL TRANSFORM GOVERNMENT IN THE FUTURE? CHAPTER THREE Governing the Market State by Gregory F. Treverton 89 CHAPTER FOUR High-Performance Government in an Uncertain World by Robert J. Lempert and Steven W. Popper 113 PART 2. VOLCKER COMMISSION RECOMMENDATION 1: REORGANIZE BY MISSION CHAPTER FIVE Organizing for Reorganizing by Susan M. Gates 139 CHAPTER SIX Four Ways to Restructure National Security in the U.S. Government by Lynn E. Davis 161 vi High-Performance Government CHAPTER SEVEN Using Public-Private Partnerships Successfully in the Federal Setting by Frank Camm 179 PART 3. VOLCKER COMMISSION RECOMMENDATION 2: ENHANCE LEADERSHIP CHAPTER EIGHT Improving Government Processes: From Velocity Management to Presidential Appointments by John Dumond and Rick Eden 217 CHAPTER NINE Developing Leadership: Emulating the Military Model by Al Robbert 255 CHAPTER TEN Broadening Public Leadership in a Globalized World by Gregory F. Treverton 281 PART 4. VOLCKER COMMISSION RECOMMENDATION 3: CREATE FLEXIBLE, PERFORMANCE-DRIVEN AGENCIES CHAPTER ELEVEN The Economic Complexities of Incentive Reforms by Beth J. Asch 309 CHAPTER TWELVE Measuring Performance by Jacob Alex Klerman 343 CHAPTER THIRTEEN Lessons from Performance Measurement in Education by Laura Hamilton 381 CHAPTER FOURTEEN Choosing and Using Performance Criteria by Robert Klitgaard, Johannes Fedderke, and Kamil Akramov 407 Bibliography 447 About the Editors and Authors 487 1 CHAPTER ONE Introduction Robert Klitgaard When we think about the performance of our government, we tend to focus on four questions: 1. Who should our political leaders be? 2. What policies should be chosen? 3. How big should the government be? 4. How can public managers do better, given the organizations they inhabit, the personnel rules they face, and their incentives for per- formance (or lack thereof)? Each of these questions is vital. But focusing only on them can lead us to ignore some deep causes of underperformance, those “givens” in the fourth question: organizations poorly aligned to their missions, malfunctioning systems for selecting leaders, and ineffective or perverse incentive systems. This book incites us and invites us to address these deep causes of underperformance. Chapter 2 is the report of the Volcker Com- mission, a devastating nonpartisan indictment of public service in America. Low-performance government provides too little service for too much money. Breakdowns and failures are a serious risk, if not already widespread. The Volcker Commission is a call to action, the most important critique of the federal government since at least the 1980s. The rest of the chapters ask us to consider new approaches to structure, leadership, and incentives. The authors are researchers at 2 High-Performance Government the RAND Corporation—most of them are also professors at the Pardee RAND Graduate School. In the past 15 years, they and other RAND researchers have produced more than a thousand studies of public management across an array of government agencies. In this book, the authors step back from specific research findings to address the Volcker Commission’s deep questions. How might structural re- forms be successfully undertaken? What practical steps would result in better leaders? How can we create performance-driven, flexible public agencies? Chapters 3 and 4 show how the challenges facing government are compounded by a changing role of the state and by increasing un- certainty. Gregory Treverton argues that ten years from now, the lines between state and market will be even more blurred than they are today. In areas from health care to anti-poverty programs, from homeland security to military procurement, government must work in tandem with the private sector and civil society. In these partner- ships, government faces new challenges of structure, leadership, and incentives that transcend the borders of the public sector. In Chapter 4, Robert Lempert and Steven Popper speak of the “deep uncertainty” in issues ranging from counterterrorism to global warming. Our government organizations and our analytical tools are ill equipped to deal with such problems. Fortunately, the informa- tion revolution may offer relief. Lempert and Popper describe new computer-based tools for handling complex problems that involve deep uncertainty and many interested parties. These tools enable more-effective collaboration across offices and agencies. In the future, they may allow a kind of “virtual restructuring”—reorganization without the need to shuffle organizational boxes. Better Structures Government structures should follow missions, as form follows func- tion—at least, so both the Volcker Commission and common sense [...]... diminished coherent policy direction The federal government today is a layered jumble of organizations with muddled public missions A government that has not evolved to meet the demands of the early 21st century risks being overwhelmed by the even greater demands that lie ahead Capacity and performance in government do 16 High-Performance Government HOW THE WORK OF GOVERNMENT HAS CHANGED As the current director... functioning of the federal government: problems of organization and of human capital have combined to produce results far short of what is needed 18 High-Performance Government Our recommendations deal with seven key areas of concern, beginning with the overriding importance of the relationship between the American people and their government Citizen Disaffection and Distrust of Government Too many American... leadership and meeting domestic challenges—has eroded Government s responsiveness, its efficiency, and too often its honesty are broadly challenged as we enter a new century The bonds between our citizens and our public servants, essential to democratic government, are frayed even as the responsibilities of government at home and abroad have increased Government work ought to be a respected source of pride... commitment to excellence in government They came together in the wake of 9/11/01 with a common desire to help our government meet the critical challenges of this new century Most of all, the support of a concerned public for bold change is critical Only then will we be able to rebuild trust in government It is our belief that these are matters of consequence to all who are interested in government and its performance... greater pressure than ever before on government human services programs Across the full range of government activities, new demands are accelerating, and the pace of change is quickening At the same time, the federal government has had difficulty in adapting to the knowledge-based economy and taking advantage of the significant advances in technology The federal government is neither organized nor staffed... found it necessary last year to propose the most sweeping change in the organization of the federal government in decades by creating the new Department of Homeland Security But that imperfect reorganization covers only part of the government With every passing day, the gap between ex- 14 High-Performance Government pectations and responsive capacity is growing If we do not make the necessary changes... of government and the extent to which government can aid its citizens with services and burden them with taxes And overlaying all this are the now constant challenges to our national security and to our role and responsibilities in shaping a peaceful and prosperous world Americans expect more of their government than ever before, not necessarily in size but in responsiveness, and, inevitably, good government. .. American people must trust and respect their government, but that will only occur if the quality of government performance improves No one should expect a 21st century population confronting 21st century problems to be satisfied with a government hamstrung by organizations and personnel systems developed decades ago The organizational structure of the federal government was last reviewed in a comprehensive... how might the U.S government reorganize? She presents four quite different scenarios and considers their pros and cons, including political controversies and ease of implementation Her method—and what might be called her spirit, the calm examination of rather wild alternatives—is also in the 4 High-Performance Government RAND style, and it should be transferable to other areas of government as well... Revitalizing the Federal Government for the 21st Century, Report of the National Commission on the Public Service, Washington, DC: Brookings Institution, January 2003 The preface was written by Paul A Volcker, Chairman of the National Commission on the Public Service 9 10 High-Performance Government Something less tangible, but alarming, has also happened over the last 50 years Trust in government strong . WILL TRANSFORM GOVERNMENT IN THE FUTURE? CHAPTER THREE Governing the Market State by Gregory F. Treverton 89 CHAPTER FOUR High-Performance Government in. Ways to Restructure National Security in the U.S. Government by Lynn E. Davis 161 vi High-Performance Government CHAPTER SEVEN Using Public-Private Partnerships