Reengineering Experiments in
Three Federal Organizations
Jay Chatzkel, National Academy of Public Administration, and Paul
R. Popick, IBM Federal Systems Co.
A combination of strategic planning, process improvement and
reengineering-key elements of today's successful quality initiatives -
spearhead the efforts to redesign government at three federal agencies.
There are many reasons why business process reengineering (BPR) has become the hoc
topic in federal agencies and departments. For starters, there is a new administration in
Washington, agency budgets are in crisis. the public is increasingly vocal in its
dissatisfaction with government's performance, and a number of private sector
organizations, shaken by changing global competitiveness-have seen BPR as essential to
keeping their ships afloat in stormy seas. At the same time, a number of public managers
have an intense desire to turn their agencies into outstanding public service organizations
and see BPR as a critical vehicle for accomplishing needed changes. Yet, there is only
limited information about the reengineering practices that are taking a place in federal
The "Assessing Quality Initiatives in the Context of Redesigning Government" project of
the National Academy of Public Administration (NAPA) and IBM's Federal Systems
Company Management Consulting Group have explored current uses of reengineering in
three departments. The cases present a snap shot of reengineering efforts at these
federal organizations. The exploration identifies key building blocks of the reengineering
projects. A year-long project on business process reengineering, is also beginning at the
Academy's Center for Information Management, and will involve rigorous research on
government reengineering practices.
Three site-specific explorations of reengineering - at the Internal Revenue Service (IRS),
the Department of Defense (DoD), and Department of Veterans Affairs (VA)-indicate the
diversity of federal reengineering projects. These projects range from the IRS effort to
transform its entire organization. to Defense projects involving specific core business
processes and VA projects with a limited process span.
These investigations into reengineering practices in the federal environment are described
in the following three case studies. The key building blocks of the reengineering projects
are highlighted at the end of each case. The explorations are intended to generate or
suggest key issues needing in-depth systematic examination and research that will be
conducted at the Center for Information Management.
How can business process reengineering make a difference ?
According to Michael Hammer (Reengineering the Corporation: A Manifesto For Business
Revolution), "Reengineering is about changing, business practices, envisioning new ways
of working, selling that vision to the organization, and getting the organization to
change." Business process reengineering is considered a radical, dramatic process that
discards the practices of the past and uses a blank sheet of paper to create the new
process to replace them.
Why business process reengineering now?
Reengineering has appeal because it provides the possibility of great gains in productivity
and effectiveness. While agencies and departments have been struggling to get a 5
percent to 10 percent increase in effectiveness, BPR may allow for a leap of 50 percent or
more in quality, quantity produced, time saved, and cost reduction. According to Joe
Movizzo. vice president of IBM Consulting Group, "organizational and cultural change,
when taken in conjunction with business process and information technology change,
create a multiplier effect resulting in orders of magnitude improvements."
INTERNAL REVENUE SERVICE
The Internal Revenue Service is an organization of 118,000 people. It is the chief supplier
of income for the federal government. At a time when reducing the deficit is a central
issue, the IRS is faced with growing pressures to improve tax compliance and general
effectiveness of operations while, at the same time, maintaining a customer focus.
The IRS is the only large federal organization attempting to reengineer all of its major
operating systems as parts of one overall, structured, and simultaneous process.
Sometimes it can take a near-death experience for a person or an organiza6on to make
radical change. The IRS experienced a near crash of its computer systems in 1985 during
a failed computer system transition, from which it took several years to recover. The
silver lining was that the IRS began to seriously rethink what was necessary for a
successful IRS. One element of that rethinking was its joint IRS/National Treasury
Employees Union Quality Improvement initiative, started in 198 5. Another major element
was the 12-year information systems upgrade that started in 19S7 and, in turn, fostered
the development of a third major element, the Tax Systems Modernization (TSM)
program, which began in 1990.
In 1987, Commissioner Fred Goldberg, recognizing, that the IRS needed to deal with its
issues systematically, started the IRS effort to develop a business vision and strategy for
the organization. Since then, the IRS has striven to transform its processes so that it can
"dramatically reduce the burden on taxpayers, generate substantial additional revenue
through improved voluntary compliance, and achieve significant quality-driven productivity
gains throughout the IRS."
The IRS is the only large federal organization attempting to
reengineer all its major operating systems as parts of one overall,
structured and simultaneous process.
Although the IRS established an overall business vision in 1987, the different parts of the
organization worked diligently, but separately at achieving their individual goals. IRS has a
huge complex of information systems, one of the biggest in the world. One fundamental
difficulty in transforming those systems was getting the functional managers to participate
in determining their own departmental information requirements. By 1990, the
information technology and quality efforts were still separate efforts. At this time Tax
Systems Modernization began. TSM started as a fully integrated effort to modernize IRS's
systems framework and by 1992 developed a series of three studies (at national, district,
and service center levels) which provided a growing awareness of how the IRS actually
operated. The studies presented the organization with major opportunities for
restructuring its business processes and organizational structure so that the IRS can
increase effectiveness and responsiveness, reduce the burden to the public, and reduce
The quality and information technology efforts, which started as separate entities during
the 1980s, began to be reworked in 1990. The new overall effort, called Core Business
Systems, began to integrate the five IRS business strategies:
• Tax Systems Modernization,
• Total Quality Organization,
• Compliance 2000,
• Ethics, and
Core Business Systems tries to address all these areas and use them to measure business
reengineering need and effectiveness.
The IRS information technology staff identified powerful
possibilities for change that provided motivation for the
organization to look at itself.
Early in TSM, a key issue emerged in accomplishing the IRS business vision. That
problem, according to Hank Philcox, IRS chief information officer, was that while
technology and information systems improved plans called for business processes to stay
the same. Some change began when IRS Deputy Commissioner Michael Dolan engaged
the University of Tennessee to train IRS staff in the "core business process" approach.
Core business systems were named, each having a system owner. While this was a great
advance, the emphasis in the core systems continued to focus on incremental
improvement, and the incremental change approach did not effectively integrate
information technology capabilities. At the same time, IRS analysis showed that the
technology effort would only accomplish 50-60 percent of the potential for needed change
in the organization. The IRS information technology staff had identified powerful
possibilities for change that provided motivation for the organization to look at itself. One
result was a recognition of the need to mesh the IRS human resource development plan
with the information technology and business operations plans. Al of these changes were
necessary to optimize the potential for improvement.
Currently, a huge amount of tax related information still has not been captured by IRS
computers. That information is warehoused in files and then must be retrieved in
individual pieces for review of returns. IRS knows that it has to develop the ability to
acquire that information so that it can reduce the time and effort required to process and
investigate tax returns. The important thing is to develop a common data repository. If
that is not done, said Philcox, different IRS business units working with incompatible data
base will compute taxes "each in their own way."
Larry Westfall, the TSM executive, is responsible for cutting across all lines to coordinate
and oversee the integration of IRS core business systems activity. The IRS is completing a
full business plan to prioritize the TSM budget and align it with the IRS business strategy.
IRS will then be able to implement the business process redesign.
IRS now has a systems focus and can use business process reengineering to ask how it
can restructure the organization. The original quality and core business systems work-
and business process reengineering have turned out to be complementary. The massive
technological upgrade is proceeding and a revised Tax Systems Modernization process is
integrating all the requirements that flow out of the six core business IRS systems. This
work has deepened the IRS's capabilities to carry out the strategic plan that began in
1987. IRS is putting together teams now to implement the business process reengineering
IRS discovered that its issues were similar to those of other organizations, both larger and
smaller, and benchmarked to learn how to make quantum leaps in performance. For
example, IRS benchmarked the Xerox Corporation and discovered Xerox was engaged in a
dual effort of quality and reengineering in order to make quantum leaps in productivity to
meet foreign competition. Xerox integrated reengineering with information technology and
connected those radical changes with its already existing quality program. Xerox also
aligned line management with its core systems, increasing line managers' responsibility
for the overall effectiveness and customer responsiveness of core processes. IRS is
working with the lessons teamed from Xerox to fit all of its processes together to draw out
and recombine the best of both its quality and reengineering initiatives for maximum
One of the most striking things about the IRS effort is that it has developed a human
resources (HR) master plan that is closely tied into the overall business process redesign
effort. The IRS is redesigning its organization as a triangle in which the success of the
business plan, located at the top, is supported by technology and human resources
development at the base of the triangle. According to David Mader, HR chief at IRS, not
only is the HR component trying to redesign IRS's human resource capability to support
the business vision, it is also seeking to reengineer its own processes so that current HR
staff time requirements are reduced by 25 percent in the short term.
The relationship with the National Treasury Employees Union has
been a key part of the quality and business process reengineering
efforts from the beginning.
Effective labor-management relations are important to the IRS redesign. The relationship
with the National Treasury Employees Union (NTEU) has been a key part of the quality
and business process reengineering efforts from the beginning. NTEU National President
Robert Tobias sits in on senior staff meetings and has full knowledge and participation in
reshaping IRS processes.
Mader says that the IRS is reorganizing- to become a learning organization. To best
accomplish its redesigned approach to tax administration, the Service recognizes that as it
redesigns its work. The roles of managers and employees will change and new
knowledge, skills, and abilities will be required. Consistent with that view, IRS sees that
effective communications are critical and has started an off-ice of internal communications
to foster accurate, immediate flow of necessary information throughout the IRS system.
The IRS realizes it must determine the new kinds of equipment and employee education
necessary to enable its workforce to meet its organizational. business goals. To determine
how well the Service is achieving its 2oals, IRS is establishing new performance measures.
The IRS will be relating differently to its external customers, the taxpayers, as well. To
best accomplish its mission of effective, voluntary compliance it intends to rely on
continuing education and assistance.
The scale and scope of the IRS effort is enormous, and the experience of getting it
underway is helping IRS staff to increasingly grasp the nature of their task. Mader, HR
chief at IRS, says that the planning stages of the business process improvement already
have been wrenching, leading him to wonder what the experience of actually
implementing the proposed reengineering will be like.
Key building blocks of IRS reengineering:
• Recognizing core business processes.
• Aligning BPR with the organizational quality initiative.
• Building an alliance between the human resources and technology efforts in support of
the business plan.
• Benchmarking best practices.
• Redesigning for a common data repository.
• Developing a teaming organization.
• Enhancing, communications through continuing education and assistance.
• Using information technology as an enabler of the reengineering process.
• Using the system integrator to work with the business client in the final formulation of
• Developing performance measures to determine effectiveness.
DEPARTMENT OF DEFENSE
Today DoD faces new missions, it needs to maintain technological superiority, and it
needs to do more with less. To accomplish these ends requires that DoD change its
One indicator of the DoD interest in BPR is its Corporate Information Management (CIM)
component. A CIM credo is that "Improvement requires a total commitment to reinventing
policies, organizations, people, culture, processes, resources and systems. Isolated
changes to one or another element of the enterprise inevitably Call to achieve overal
The CIM project is changing from an initial focus of building open information systems to
one of integrating CIM goals into leadership, policy, plans, organization, cultures, resource
management. and measures of performance. The CIM project is creating the policy,
principles, processes, training and infrastructure to achieve these changes.
Mike Yoemans of the DoD's CIM office says the problem is "we are left with business
processes that we did not engineer, that are enormously expensive, and that are out of
control." Although some changes to agencies and departments may require legislative
change. Most requirements coming out of BPR require changes to the internal regulations
which have become institutionalized over time," Yoemans adds.
The changes Yoemans envisions involve changing DoD's processes, culture, and
technology. Strong upper level management commitment sustains the impetus for
change, while retraining and personnel incentives are key to establishing the changes. To
date, 150 process improvement projects have been undertaken; many have reached the
A centerpiece for the CIM effort is the methodology, or template, for change. CIM is
continuously integrating leading-edge approaches as the building blocks for its overall
methodology. Quality management along with the enterprise model, Activity Based
Costing, and functional economic analysis are important co-partners in its business
process reengineering approach. Yoemans makes a major point that CINI is trying to use
off the shelf software and specific consultants where they will be of particular advantage
to "Provide the fresh perspectives necessary to rethink the way things are done."
Most requirements coming out of BPR require changes to internal regulations that have
become institutionalized over time.
The following three narratives describe applications of CIM-developed BPR methodology:
US Army Integrated Facilities System
Leo Oswalt of the Integrated Facilities System of the US Army is using CIM materials for a
series of proof of concept" tests at Ft. Eustis, VA, Ft. Bragg, NC, and Rock Island, IL, to
determine real costs of doing business at these Army bases. Previously, the true costs of
activities were buried in various, apparently unrelated, budgets. The bases now are
getting to know the actual costs of operation. The bases' differences of size and diversity
of mission have demanded a template model that tolerates a diversity of operations. but
the basic tenets of the CIM template have held. By examining base activities at the grass
roots, with a relatively simple but systematic approach, significant areas of opportunity for
improvement have clearly shown themselves. While efforts are geared to discover areas
of opportunity for improvement, the project teams have begun to get base personnel to
see that their organizations do have "business activities" and those activities form core
The project goal is to let the template to be as universally applicable and simple to use as
possible, allowing the department to bring down the costs of application considerably.
Finance Systems at Degree-Granting Institutions
Another CIM initiative involves redesigning the budget and finance systems at the 20 DoD
degree-granting institutions. Sandy Rogers, who heads the project for CIM feels, that "the
principal problems facing the academies are that their organizational models are academic
institutions dating back to the 17th century, and that is the key stumbling block to
change." The project started with the United States Military Academy (USNL,\), the Naval
Academy and the Air Force Academy. Project drivers have been:
• lack of cost data or comparative cost data,
• downsized budgets, and
• the need to comply with the chief financial officer legislation, and Office of
Management and Budget planning requirements.
The project's goals are to eliminate duplication and save resources. For the goals to be
accomplished, CINI sees that it is necessary for the services to begin to understand that
they are operating business processes and that they develop a viewpoint that the data
base is owned by the whole organization.
The CIM effort organizes and manages the process. It brings in consultants to facilitate
how functional managers analyze "as-is" processes and to work with staff to develop the
"to-be" phase of process. Through process mapping, the USMA team found that it took
209 steps to buy a PC. That process was redesigned down to 14 steps. Further, the
crosscutting team mapped 31 stove-piped systems at the Military Academy which are now
open to review. CINI will stay with the academy teams through the implementation stage
to develop a new business process and the systems integration necessary to implement
Although the initial focus of the project was budget and finance, other relevant areas,
including installation management and community services, began to come under the
umbrella of exploration since they are naturally affected by the budgeting system. At the
Military Academy alone, the teams may be able to save $1 million of a $5 million budget
annually. Rogers says the teams estimate that 75 percent of the changes proposed could
be done without requiring any outside approvals or legislation. Key to success for Rogers,
"is that there has been buy-in from senior staff."
While the project has made significant headway, it is still a work- in progress. One team
participant mentioned a problem of not knowing enough about existing best practices.
CIM has made strenuous efforts to benchmark, but at this early stage it is not always easy
to find working alternatives, leaving a danger of spending excessive time on reinventing,
wheels that already exist.
Defense Investigative Services
The Defense lnvestigative Services (DIS) has nearly completed its starter reengineering
project to convert paper personnel security questionnaires to electronic records. CIM
worked with DIS to develop the business case, conduct the Activity Based Costing
workshops, and define new processes. A cross-functional team of functional mana2ers
and information technology (IT) managers drew up the departmental requirements and
oversee project implementation.
John Donnelly, the director of the project at DIS, notes that "the functional managers are
identifying the process improvements and the IT people love it. Before, IT staff never got
specific project requirements but still had to come up with a workable IT system
regardless." Now work related to the questionnaire processing is proceeding at an
accelerated pace. Begun in March 1992, it is expected to be deployed in the first quarter
of 1994. The management team has begun to resolve organizational problems in a new
Team building, work process simplification, benchmarking, firm leadership commitment
and the development of a working strategic plan were fundamental parts of the success.
Trent Bowen of DIS notes, "Now management takes a different view when they run into a
problem. They organize workshops to analyze the process." DIS is getting to the point
where it has institutionalized a set of skills, methods and a common language that allows
this new orientation to work. This approach counters the tendency for moving toward the
quick Fix that does not get to fundamental causes. While DIS did not have an existing
quality management program, the CIM process proved remarkably similar to many quality
programs. Team building, work process simplification, benchmarking, firm leadership
commitment, and the development of a working strategic plan were fundamental parts of
the success that DIS is having.
Key building blocks of DoD/CIM reengineering
Employing a common skill set, overall methodology, and language.
• Recognizing the functional manager as key to the change process, with information
technology as support.
• Making a business case for change.
• Identifying and improving core business processes, using process modeling, data
modeling and simulation tools.
• Developing strategic planning to determine priorities for reengineering.
According to Bob Woods. deputy assistant secretary for information resources
management (IRM) at the Department of Veterans Affairs, a year from now the VA will be
reengineering its organization with a customer service orientation, dealing more with
outcomes and performances. Woods thinks a major hurdle for change in VA is that the
federal government is not organized for customer service, but for control and regulation.
One limiting factor in the transformation process is that authorization for any major
change at VA must come from many constituencies, both governmental and non-
governmental. Even with necessary legislative and oversight approvals. The task of
carving out significant change in a lame and diverse federal agency is still enormous.
While Woods is in charge of the IRM component of this S35 billion department, he feels
the core solution to the problems at the VA is attitude change, moving to a "service to the
citizen" orientation, and becoming more competitive. Pursuant to that, Woods is
establishing, four or five major priorities and consistent themes of cutting cycle time and
Woods' vision is to focus on improving the VA as a customer-oriented organization that is
the catalyst in using, information technology to change the way VA does its business. The
goal is to enable more effective and efficient delivery of high quality, timely service and
for VA to serve as a model for the public and private sectors. Woods has ongoing
initiatives directed at improving customer service. One is an Outreach Kiosk Pilot Project
which has placed VA information kiosks (booths) in places readily accessible to veterans,
such as shopping centers and military bases. Private sector companies provided the kiosks
to VA at no cost and the sites donated the space. The kiosk project illustrates how VA is
moving to partner with private sector organizations to improve access and make a
difference in the lives of veterans.
Woods plans to use an array of strategies to bring about desired changes at the VA.
Continuous improvement through the existing quality management effort will be used to
upgrade existing processes, with reengineering employed for specific business processes
that are determined to be fundamentally flawed.
Woods acknowledges that the VA cannot do business process reengineering, without a
strategic plan that encourages the VA to operate as a system of business processes. This
means that eventually the VA might reshape its organization into a system of related
Continuous improvement through the existing quality management effort will be used to
upgrade existing processes, with reengineering employed for business processes that are
determined to be fundamentally flawed.
Some beginning efforts are under way involving acquisition processes and have produced
significant changes. Using a business process reengineering principle that different
aspects of processes do not necessarily have the same requirements, the VA targeted the
time period involved in purchasing computer hardware. Donald Neilson, director of IRM
planning, acquisitions and security service, states "Several improvements in the IRM
acquisition process have taken place as we continue our efforts to become a value-added,
more service-oriented organization." The first step taken was improving business by
streamlining the original procurement process from 120 days to 14 days, depending on