CHAPTER 2


Organizational Systems

I first became exposed to the concept of organization systems design in the 1990s, when my office was seeking to undergo a fundamental change in its performance, culture, and approach. A new leader had arrived in our office, and he questioned the way we did business. He felt that, although we were doing pretty well, we could do a lot better, and, quite frankly, he wanted to modernize our approach to work.

Prior to that, I (and most of my peers) tended to both look at and manage performance in a very reactive manner; if there was a problem, I looked to see who was at fault and whom I should blame. As many other managers did, I tended to fault people for our performance problems and did not think to look more deeply at our management systems and how they interacted with each other.

At that time, I was unfamiliar with the thinking of the pioneers in the field of systems design such as W. Edwards Deming and P. R. Scholtes.

Deming believed that most problems in an organization can be attributed to a system, not to people. “In my experience, most troubles and most possibilities for improvement add up to proportions something like this: 94% belong to the system (the responsibility of management); 6% are attributable to special causes” (Deming, W. E. “The New Economics for Industry, Government, Education” [2nd edition]. Cambridge, MA: MIT Press, 1994, p. 33). Scholtes add[ed] his viewpoint on the importance of becoming knowledgeable about organizational systems and identifie(d) what is wrong with our present systems. Among a long list of current systems issues, which he call[ed] “brainshakers,” he include(d) the following:

We look to heroic efforts of outstanding individuals for our successful work. Instead we must create systems that routinely allow excellent work to result from the ordinary efforts of people. . . . Changing the system will change what people do. Changing what people do will not change the system. . . . The greatest conceit of managers is that they can motivate people . . . attempts [they make] will only make things worse . . . Behind incentive programs lies management’s patronizing and cynical set of assumptions about workers . . . Managers imply that their workers are withholding a certain amount of effort, waiting for it to be bribed out of them.’ (Scholtes, P. R. “The Leaders Handbook: A Guide to Inspiring Your People and Managing the Daily Workflow,” New York: McGraw-Hill, 1998, p. ix–x.)”¹

We brought in a consultant named Bill Snyder, who worked at the time for Paul Gustavson,² the founder of Organization Planning and Design, Inc. He immediately challenged the way that I (and others) viewed our work and prodded us to think differently.

He taught us to first develop a deeper understanding of our organization’s underlying structure, which included its strategies, systems, and processes, and to see how it influenced our employees, our culture, and, ultimately, our performance. He showed us that this was where we needed to look to truly improve our organization. In other words, people set up the systems and such, and therefore it was up to us to change them. We had the opportunity to change many of the goals, the values, the rules, the procedures, the processes, and the structure; and if we made the right choices, we could literally remake our organization.

For me, it was one of the defining moments of my career, because it forced me to question some of my long-held beliefs and made me recognize that there was another, better, more logical and sophisticated way of looking at work and the relationship of our employees’ behavior/performance to a series of key drivers. I began to see that managing people and ultimately delivering top-notch performance was more complicated than simply securing enough resources and then holding people accountable. At the same time, I also started to understand that designing, aligning, and implementing an integrated set of management systems could enable our organization to move forward in a much more focused and consistent manner than I previously thought was possible.

Virtually all government and nongovernment organizations use a series of management processes and systems to manage their operations. When these elements are properly designed to support the accomplishment of the organization’s mission, vision, and values, the organization is well positioned for success on every level. In short, the processes will promote and encourage success rather than inhibit it from happening.

The process of designing and aligning an organization’s systems is commonly referred to as organizational systems design. The basic idea behind it is that you get what you design for and that, if you want to change your organization’s results, you need to first change the design of its systems. Phrased differently, “if you always do what you have always done, then you will always get what you always got.”

This book is not about organizational systems design per se. However, as both a manager and a leader, I have found that using an organizational design model was very helpful in guiding my thinking about my organization’s present and future design and, more important, its performance. As you will see in future chapters, I will be using this concept as the framework for examining and suggesting potential areas for improvement, in terms of design, implementation, and management of the workforce.

Organizational design will help you more clearly understand what is currently happening in your organization and will give you a good sense of the design choices that have been made to date and their impact on our performance. It also enables you to identify the choices that need to be made in order to create the type of organization required to achieve your future goals. It allows you to identify any gaps that may exist between where you are and where you want to be and to determine how to get there (through design and execution). Finally, it prompts you to look more holistically at the way your organization is being managed and forces you to question and ultimately rethink some of the ways that you are treating your employees.

The OSD Model

To help us frame our thinking even further, Bill also introduced us to the Organizational Systems Design (OSD) model, which was developed by Paul Gustavson. This model illustrates how organizations work in an open environment and the manner in which they convert inputs (claims filed, complaints made, applications filed for a license, etc.) and convert them into outputs (benefits granted, complaints adjudicated, licenses issued, etc.). Most importantly, it makes it clear that the organization’s design choices ultimately drive its outcomes.

While there are other models in the marketplace that address similar themes, I have found this one to be perfect for my needs in terms of both assessing government organizations that I have led and assisting other organizations in my capacity as a consultant. To me, it is both clear and logical, and it literally forces you to view your organization’s work in a way that you would not normally do.

Here is the OSD model:

Figure 2-1. The OSD Model

This model shows how the key elements of an organization work together to drive an organization’s outcomes. The left-hand box indicates that the external environment has a major influence on the organization and greatly affects the design choices that it makes. The middle oval reflects these key choices (its mission, core values, strategies, goals, and systems), which will ultimately drive the right side of the chart: the knowledge and culture and, ultimately, the outcomes. The model makes it clear that an organization’s performance flows from the choices that the organization makes. We are going to examine many of the choices, as well as strategies and techniques for implementing them, in the next chapters.

The beauty of the OSD model is that it helps one think about and understand the relationships that affect an organization’s performance. This is very useful to a government manager, who spends so much time reacting to events and dealing with a never-ending set of priorities that she never really has the time to look at the big picture. The OSD model, if used correctly, will help her look more deeply and systematically at the local management systems and processes, understand their impact on the organization’s culture and performance, and find new ways to improve her outcomes. Eventually, she will find that when the systems begin to work together, in lockstep, she will spend less time cracking the whip and/or putting out fires and more time actually managing her operation. She will, believe it or not, have time to actually look down the road for future improvement opportunities.

You Can Influence Design

Government managers may feel they have at best a limited impact on designing systems, and certainly that is true for national design choices. Our manager probably can’t change the national mission, goals, processes, and so forth. After all, if every local manager were to do that, there would be chaos, and the organization would not be able to move forward in a clear and cohesive manner. Still, local managers have far more discretion than they might think in terms of how their systems are designed, aligned, and implemented.

For example, they can:

Set local goals and determine how this information will be shared.

Decide what to measure (over and above any national requirements).

Look at their local work processes and make them as efficient as possible.

Design their physical plant and make it as effective, efficient, and attractive as possible.

Hire new employees and decide whom to promote, reassign, and detail.

Set up and manage their local training programs.

Establish employee performance standards.

Administer their performance appraisal system, including firing poor performers if necessary.

Develop and implement their local rewards and recognition program.

Manage leave.

Play a major role in determining the organization’s culture.

Determine how to renew their unit or section.

You are not a victim, and there are many things you can do to improve employee performance; beyond hoping that someone in Washington, D.C., or your own state or local headquarters will change one or more of the governmentwide systems or give you more resources or help to pass legislation that will make your life easier. If that happens, great; I just wouldn’t count on it. Better to concern yourself with your own sphere of control, understand what you can do to improve performance, and then go for it. That is a much more liberating way of managing in the government, because you will find that (1) you will have no illusions or false hope, and (2) you have the ability to make things better.

That is not to say that there still won’t be problems, because there certainly will be. You will still have to cope with many, if not all, of the challenges (and possibly more), that I listed in Chapter 1. However, you will now have a more logical approach to trying to prevent and/or deal with these problems, and in a way that is less overwhelming and more sustainable.

The point here is that you do not have to simply be a pawn in the bigger game of government. You can be a player and make a difference. The key is to have the best possible operation, because (1) that is what we all want to have; (2) the better your operation’s performance, the more people will leave you alone and let you do your thing; and (3) if you are good enough, they will even come to you and want to learn from you, and what manager doesn’t want to see that happen?

A Detailed Explanation of the OSD Components

Let’s look at all three sections of the OSD model in more detail to see what they are and how they relate to each other.

External Influencing Factors

The external environment constantly drives changes in government organizations. Customers, unexpected events, the media, the White House, Congress, the Inspector General, other taxpayers, stakeholders, unions, and other factors can all create demands that force governments to respond and react. If they do not, events can quickly spin out of control, and the organization will wind up with a bunker mentality, hunkering down and taking blows from every angle.

How often have we seen one story take on a life of its own? The media pick up on it; oversight hearings are held; headquarters sends in a help team; and, before you know it, the entire management team is replaced. Understanding the environment will help keep you out of trouble and enable you to plan for the future.

Part of understanding the environment is learning from it. That means finding out who is the best in class (whether inside or outside government) and benchmarking with him. It might also entail learning who is on the cutting edge, implementing a new program, process, or technology, and stealing shamelessly from her if it makes sense.

The point here is that all government managers truly work inside a fishbowl. You do not work in a safe, secure, and undisturbed environment that is immune from outside forces. On the contrary, whether you realize it or not, you are constantly being influenced by and reacting to a wide variety of external forces. The more you understand this and learn how to successfully deal with these forces, the better you will be able to manage your own destination.

Outcomes

I’m now going to focus on the right side of the model, because, since an organization’s performance to a large extent is a function of its design choices (as well as the skill of its leaders and management staff), it first needs to decide the overall results it desires before the design choices are made. This is the bottom line and what this book is all about, since my goal in writing it is to help government managers improve the performance of their organizations.

Before we move forward here, we need to be clear on some definitions. The OSD model uses the broad term “outcomes” to define four different types of results: customer, stakeholder, community, and individual, all of which can be measured by a series of one or more indicators. However, the GPRA makes a distinction between outcomes and outputs as follows:

Outcome Measure GPRA Definition: An assessment of the results of a program compared to its intended purpose.

Characteristics: Outcome measurement cannot be done until the results expected from a program or activity have been first defined. As such, an outcome is a statement of basic expectations, often grounded in a statute, directive, or other document. (In GPRA, the required strategic plan would be a primary means of defining or identifying expected outcomes.)

Outcome measurement also cannot be done until a program (of fixed duration) is completed, or until a program (which is continuing indefinitely) has reached a point of maturity or steady state operations.

Although the preferred measure, outcomes are often not susceptible to annual measurement. (For example, an outcome goal setting a target of by 2005, collecting 94 percent of all income taxes annually owed cannot be measured, as an outcome, until that year.)

Output Measure GPRA Definition: A tabulation, calculation, or recording of activity or effort that can be expressed in a quantitative or qualitative manner.

Characteristics: The GPRA definition of output measure is very broad, covering all performance measures except input, outcome, or impact measures. Thus it covers output, per se, as well as other measures.

Strictly defined, output is the goods and services produced by a program or organization and provided to the public or to other programs or organizations.

Other measures include process measures (e.g., paper flow, consultation), attribute measures (e.g., timeliness, accuracy, customer satisfaction), and measures of efficiency or effectiveness.

Output may be measured either as the total quantity of a good or service produced, or may be limited to those goods or services with certain attributes (e.g., number of timely and accurate benefit payments).

Some output measures are developed and used independent of any outcome measure.

All outputs can be measured annually or more frequently. The number of output measures will generally exceed the number of outcome measures.³

For the purposes of this discussion, we will focus primarily on outputs, not outcomes, as that is what government managers, particularly those in the field, are required to achieve. These are the annual goals and targets that they struggle to meet and what this book is designed to help them achieve. The outcome goals generally fall within the responsibility of program managers at the headquarters level, and they are not usually measured on an annual basis. While the principles described in this book will also help program managers achieve their outcome goals, they are not the intended audience for this book. So, to repeat, even though the OSD model uses the term “outcomes” to describe an organization’s desired performance, in this book, we are referring primarily to a government organization’s achievement of its output goals.

Most government organizations use either a performance dashboard or a balanced scorecard to both establish and track their desired performance.⁴ Many of the measures are usually established at the headquarters level, but the local manager often has the discretion to supplement these measures if she so desires.

These are a few examples of how these measures may be shown:

Achieves a total score of 85 or higher on the balanced scorecard

Meets at least 85 percent of the goals established

Meets nine of twelve objectives, with one of the nine being the 90 percent customer satisfaction standard

The point here is that while government managers usually have some but not total say in the development of the performance measures, they need to be intimately aware of what these measures are and where they come from. After all, the local strategy and design choices that they make, along with the way that they manage their organization, will ultimately determine how successful they are at meeting their objectives.

A Manager’s Influence over Knowledge and Culture

Every government organization needs to determine the knowledge that it needs to succeed, including new ways of doing business; finding opportunities to capture this knowledge; and then sharing it with the appropriate members of its workforce. This may be accomplished by first identifying the competencies required for each key position, identifying the gaps between the ideal state and the current state of the workforce, and then putting a plan in place to bridge those gaps. The next step would be to implement the plan through a variety of techniques, including classroom training, online training, webinars, mentors.

Culture refers to the behaviors, feelings, and shared values of the organization’s workforce. It reflects the way people think (i.e., almost a shared philosophy), the way they approach work and each other, their norms of behavior, and so on. When organizations have aligned systems, plans, processes, and goals, their employees receive a consistent message and tend to work together with a shared purpose. In a sense, all of the organization’s energy is focused like a laser beam on achieving its mission and goals. This often results in many of the employees feeling that they are part of something special, something that is bigger than all of them.

In my experience, excellent government organizations have cultures that drive their performance. Their employees are “turned on,” and they want to be the best. Failure is not an option; people do not tolerate poor performance or bad attitudes; innovation is encouraged; and managers do not look over people’s shoulders and criticize them every time they make a mistake. In short, the culture is a self-fulfilling prophecy of the success that surely follows.

On the other hand, organizations with poor performance are also an outgrowth of their culture. These organizations have turned off and cynical employees whose primary motivation is to make it to the weekend and ultimately to retirement. This type of organization makes excuses for poor performance, blaming it on local circumstances or the high cost of living or decisions that were made that were beyond their control. One of the reasons why the culture is so poor is that the employees see that management tolerates poor performance and bad attitudes, so they wonder why they should work so hard. Compliance seems to be an important part of this type of culture, with managers constantly berating employees to do what they tell them. Just like an organization with an excellent culture, organizations with a poor culture ultimately become a self-fulfilling prophecy.

This particular component of the model is extremely important because the outcomes (outputs) are driven by the workforce’s knowledge and culture. In other words, a well-trained workforce that constantly strives for new and improved ways to achieve its mission, is excited about its mission, and has a performance-driven culture will inevitably deliver superior performance.

Strategy

This section of the OSD model refers to the mission, core values, strategies for influencing the external environment, and the goals and objectives of the organization.

Mission. In government, unlike the private sector, the mission is set by the appropriate legislative body. A government organization cannot change its mission or decide to sell an unproductive business line (although, under certain circumstances, it could decide to contract out some of its work).

Government organizations do have the opportunity to clarify their mission when they write their mission statements. By and large, they usually try to articulate their missions in clear and concise terms and in a way that expresses its overall importance to the public. For example, the U.S. Social Security Administration’s mission is to “Deliver Social Security services that meet the changing needs of the public.”⁵

The Los Angeles Police Department has a longer statement: “It is the mission of the Los Angeles Police Department to safeguard the lives and property of the people we serve, to reduce the incidence and fear of crime, and to enhance public safety while working with the diverse communities to improve their quality of life. Our mandate is to do so with honor and integrity, while at all times conducting ourselves with the highest ethical standards to maintain public confidence.”⁶

Here is the statement of the Detroit Public Schools: “The Mission of Detroit Public Schools is to develop a customer and data-driven, student-centered learning environment in which students are motivated to become productive citizens and lifelong learners, equipped with skills to meet the needs of their next customer, higher education, in the world of work.”

Your job as a manager is to help the organization meet its mission. If it will help bring clarity to your local organization, you can even develop your mission statement, as long as it is consistent with the national statement.

Values. The core values reflect the organization’s simple beliefs, or rules about what it represents and how it goes about its business. In other words, they express what the organization is all about. All employees should be aware of the organization’s values, and managers should try to manage and behave in such a manner as to ensure that the employees are on the same page.

For example, at the U.S. Environmental Protection Agency (EPA), Administrator Jackson recently sent a clear message that the agency is back on the job. The administrator’s first 100 days were shaped by three core values, which are designed to inform and guide EPA’s work in the months and years ahead: “First, science must be the backbone for EPA programs. Second, EPA always must adhere to the rule of law. Finally, as President Obama has emphasized, EPA’s actions must be transparent. Public trust demands that the public’s business be conducted openly.”⁷

As you can see, these values are more than just written words. They are intended to drive the way that EPA goes about its business.

I encourage local managers to develop their own core values, which will help shape their own organization. I certainly did that when I was the leader of a large government office. However, if you choose to create your own core values, make sure that you also incorporate your headquarter’s values as well, since you are still part of the larger team and need to go in the same direction.

Strategies. The strategies to influence the environment involve attempting to meet the needs of the external environment and developing relationships with the key players in order to facilitate achieving the organization’s goals. That is why government leaders must learn how to both understand and influence the environment. They need to control the “sound bite” whenever possible so that they do not get caught up in a chain of events that lead to disaster.

In my experience, every government manager needs to do at least three things to address this issue: (1) they should stay abreast of the key events that are happening in the area that they manage (both internal and external to their organization) so that they can anticipate potential problems before they happen; (2) they should develop good relations and perhaps even partnerships with their stakeholders, suppliers, and regulators; and (3) they should deliver the best performance possible, since having good performance is the best way to stay out of trouble.

Where possible, government managers should even try to shape the perceptions of the people who have an interest in their organization. After all, it’s one thing to deliver good performance but quite another thing for the outside world to believe it.

For example, as the director of VA’s Regional Office in Los Angeles, I redesigned that office using a concept I call visual management.⁸ Working with many dedicated employees, we transformed the physical plant from a stodgy, dark, and dreary environment into one that was a loving tribute to veterans. We did this by adding history displays, memorabilia, a helicopter, a U-2 cockpit, a Willys jeep, models of a tank and submarine, a bunker, a field hospital, and patriotic music. This initiative changed our culture and reconnected our employees to the mission. However, it also shaped the outside world’s view of our office so that every time a stakeholder, such as the media, visited our office, that stakeholder always viewed us in the best possible light and tended to treat us better than would have been the case had our environment remained unchanged.

Goals. The goals and objectives are discrete measures that are used to determine whether the organization is achieving its desired outcomes/outputs. These are relatively narrow performance indicators, compared to the outcomes section, which is more about overall program performance. The goals and objectives that the organization decides on are crucial to its overall success. If it selects numbers that are too easy to attain, it can be accused of setting its sights too low. On the other hand, if the numbers are almost impossible to achieve (which they often feel like they are), then the organization will demoralize its employees and set itself up for failure.

Listed here are sample goals and objectives:

Actions will be processed in an average of thirty days or less.

93 percent of actions taken will be accurate.

90 percent of decisions appealed will be sustained.

Customer satisfaction rate will be 85 percent or higher.

Has no more than one on-the-job injury per 250 employees per year.

95 percent of patients will be seen by a medical professional within fifteen days of appointment.

Arrest rate will increase by 10 percent.

The strategic decisions that government organizations make often become self-fulfilling prophecies. While local managers cannot make all of these determinations, they certainly have enough opportunities to make decisions that will position them for either success or failure. After all, for the most part, they determine their local culture, they can and should influence their environment, and they normally can choose at least some goals and objectives.

Design Choices: Where the Manager Really Makes a Difference

These are the six key management systems that every government (and private sector) organization has:

1. “The technical system deals with the organization’s business processes—the activities it routinely carries out to create and deliver value for customers. It also encompasses physical arrangements for interacting and exchanging knowledge as well as technology.

2. The structural system is the way the organization is organized.

3. The decision-making and information system deals with decision-making processes throughout the organization. What specific responsibilities are given to which roles? What are the planning processes? What are the critical decisions, and how are they made? It also includes choices about the capture, distribution, and display of information.

4. The people system deals with how people are attracted, selected, oriented, trained, certified, performance managed, and promoted. It also includes career development choices.

5. The reward system is the pay and benefits structure, but also includes incentives, celebrations, and informal rewards and recognitions.

6. Organizations must be constantly learning to stay competitive. The renewal system is the way they encourage and formalize such continuous learning. What structures or processes are in place for gathering together to learn, for sharing best practices? When a problem-solving discussion takes place in an individual or team review, how do employees put the ideas generated into practice? How do they report back on the results?”⁹

It’s one thing to have good systems and another thing to have them aligned. By this I mean having all of the systems working together so that the employees receive a consistent message, and work in the same direction, toward the same goals. Without alignment, you will tend to have a diffusion of energy because employees will receive mixed messages and therefore will work in different directions instead of in one fixed direction.

For example, if you want a team-based organization, it’s not enough to simply put a team together and announce that you value teamwork. You need to have the right structure and the proper physical plant (e.g., you don’t want everyone behind high partitions). You also need to train people on how to work together as a team. Finally, your performance standards need to credit teamwork and not simply value individual output, and your awards system needs to reward individual and group achievement.

From a manager’s perspective, it is at the design choice level where the rubber meets the road. Once managers are clear about the left- and right-side components of the model, it is the middle part, particularly the design choices they make and the way they implement them, that offers the biggest opportunities for improvement; and this is where I will now focus.

The next section is devoted to showing you how to improve performance in your organization. The approach I recommend is a holistic one; instead of simply concentrating on one area (e.g., individual employee performance) the way that most managers seem to do, you will begin to look at how all of your systems are designed and fit together, as well as the way you both implement them and manage within them. The idea here is that if all of the systems work together and you treat everyone fairly and consistently within the confines of those systems, you will have a more developed and motivated workforce, which will provide you with the performance you are seeking. By the same token, you will feel less pressure and will actually have more time to breathe because the systems will be doing much of the work that you have traditionally done by yourself.

Each of the next five chapters addresses one of six key management systems identified in the OSD model (technical, structural, decision making and information, and so on). I will walk you through each system in depth, describe areas to look at, and suggest ways to improve your systems. I will also prompt you to look at how each system relates to the others in order to ensure that you have alignment throughout. Finally, I will also discuss how to implement your systems, talk about how to manage within them, and supplement each discussion with real-world examples from government.

My intent is to show how you can build and maintain a powerful set of management systems that will work together and lead to excellent performance. It is not an easy thing to do; on the other hand, it is not as difficult as you might think.