Small Business Administration
Workforce Transformation Plan Is Evolving Gao ID: GAO-02-931T July 16, 2002The Small Business Administration (SBA) has made organizational structure and service delivery changes during the past 10 years. However, ineffective lines of communication, confusion over the mission of district offices, complicated and overlapping organizational relationships, and a field structure not consistently matched with mission requirements all combine to impede SBA staff efforts to deliver services effectively. SBA's structural inefficiencies stem in part from realignment efforts during the mid-1990s that changed SBA's functions but left aspects of the previous structure intact, congressional influence over the location of field offices and centers, and legislative requirements such as specified reporting relationships. In response to GAO's findings and additional challenges identifies by the Office of Management and Budget and the SBA Inspector General, SBA recently announced a draft 5-year workforce transformation plan that discusses many of GAO's findings regarding the difficulties posed by its current structure. Organizational alignment is crucial if an agency is to maximize its performance and accountability. As SBA executes its workforce transformation plan, it should employ strategies common to successful transformation efforts both here and abroad. Successful efforts begin with instilling senior-level leadership, responsibility, and accountability for organizational results and transformation efforts. Organizations that have successful undertaken transformation efforts also typically use strategic planning and human capital management, alignment of activities, processes, and resources, and internal and external collaboration to underpin their efforts.
GAO-02-931T, Small Business Administration: Workforce Transformation Plan Is Evolving
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Testimony:
Before the Subcommittee on Workforce, Empowerment and Government
Programs, Committee on Small Business,
House of Representatives:
For Release on Delivery
GAO:
Expected at 2:00 p.m., EDT,
Tuesday, July 16, 2002:
GAO-02-931T
Mr. Chairman and Members of the Subcommittee:
We are here today at your request to discuss how well the Small
Business Administration‘s (SBA) organization is aligned to fulfill its
mission. By organizational alignment, we mean the integration of
organizational components, activities, core processes, and resources to
support efficient and effective achievement of outcomes. SBA‘s mission
is to maintain and strengthen the nation‘s economy by aiding,
counseling, assisting, and protecting the interests of the nation‘s
small businesses and by helping businesses and families recover from
natural disasters. SBA has a total portfolio of about $44 billion,
including $39 billion in direct and guaranteed small business loans and
other guarantees and $5 billion in disaster loans.[Footnote 1] Over
three-quarters of SBA‘s 4,075 employees[Footnote 2] are assigned to the
agency‘s 10 regional offices, 70 district offices, and other field
locations.
In the past 10 years, SBA has made changes to both its organizational
structure and service delivery. In response to budget reductions in the
1990s, SBA streamlined its field structure, downsized its 10 regional
offices, and created the Office of Field Operations to act as liaison
with the district offices, a function formerly performed by the
regional offices. Additionally, SBA restructured its loan programs by
creating centers to process and serve the majority of loans--work once
largely handled by the district offices. SBA has also gone from making
loans directly to guaranteeing loans made by commercial lenders. Most
recently, to guide organizational changes needed to improve its
delivery of services and respond to issues and challenges raised by
GAO, the Office of Management and Budget (OMB), and the SBA Inspector
General, SBA has drafted a plan for a 5-year workforce transformation.
The draft plan we obtained recognizes SBA‘s need to restructure its
workforce, privatize non-core functions, adjust incentives and goals,
and streamline its headquarters‘ operation.
Our testimony today is based primarily on the report we issued on
October 26, 2001, as well as additional GAO human capital-related work
and our review of SBA‘s draft 5-year workforce transformation
plan.[Footnote 3] Our remarks will focus on (1) SBA‘s current
organizational alignment, issues it poses in SBA‘s ability to fulfill
its mission, and SBA‘s draft workforce transformation plans; and (2)
information SBA should consider as it moves forward with its
transformation plan. In conducting our work for the October 26, 2001
report, we obtained documents on both current SBA alignment and past
reorganization efforts, reviewed laws mandating aspects of SBA‘s
organization, analyzed the restructuring efforts of other federal
agencies, and collected information on best practices in organizational
alignment. In addition, we interviewed 78 senior SBA officials in
headquarters and field offices.
In summary:
* SBA‘s current structure contributes to the challenges SBA faces in
delivering services to the small business community. In particular,
ineffective lines of communication; confusion over the mission of
district offices; complicated, overlapping organizational
relationships; and a field structure not consistently matched with
mission requirements combine to impede the efforts of SBA staff to
deliver services effectively. SBA‘s structural inefficiencies stem in
part from realignment efforts during the mid-1990s that changed how SBA
performed its functions but left aspects of the previous structure
intact, congressional influence over the location of field offices and
centers, and legislative requirements such as specified reporting
relationships. In response to our findings and additional challenges
identified by OMB and the SBA Inspector General, SBA recently announced
a draft 5-year workforce transformation plan that discusses many of our
findings regarding the difficulties posed by its current structure.
* Organizational alignment is crucial if an agency is to maximize its
performance and ensure its accountability.[Footnote 4] As SBA moves
forward to execute its workforce transformation plan, it should
consider employing strategies common to successful transformation
efforts both here and abroad. Successful efforts begin with instilling
senior-level leadership, responsibility, and accountability for
organizational results and transformation efforts. Organizations that
have successfully undertaken transformation efforts also typically use
strategic planning; strategic human capital management; alignment of
activities, processes, and resources; and internal and external
collaboration to underpin their efforts, among other transformation and
change management initiatives.[Footnote 5]
SBA Staff Identified Organizational Problems:
According to senior SBA officials in headquarters and the field,
several aspects of the current organizational alignment contribute to
the challenges faced by SBA management. The problem areas include
cumbersome communication links between headquarters and field units;
complex, overlapping organizational relationships; confusion about the
district offices‘ primary customer; and a field structure not
consistently matched with mission requirements. According to the agency
scorecard report for SBA,[Footnote 6] while SBA recognizes the need to
restructure, little progress has been made to date. In response to our
findings and additional challenges identified by OMB and the SBA
Inspector General, SBA drafted a 5-Year Workforce Transformation Plan.
Cumbersome Communication:
The 1990s realignment--in which the regions were downsized, but not
eliminated, and the Office of Field Operations was created, but never
fully staffed--resulted in the cumbersome communication links between
headquarters and field units according to senior SBA officials in
headquarters and the field. The Office of Field Operations had fewer
than 10 staff at the time of our review, and senior SBA officials told
us that it would be impossible for such a small office to facilitate
the flow of information between headquarters and district offices as
well as was done by the 10 regional offices when each region had its
own liaison staff. As a result, headquarters program offices sometimes
communicate with the district offices directly and they sometimes go
through the Office of Field Operations. To further complicate
communication, the regional offices are still responsible for
monitoring goals and coordinating administrative priorities to the
district locations. Officials described how these multiple lines of
communication have led to district staff being on the receiving end of
conflicting or redundant requests. While some SBA officials felt that
the regions had a positive effect on communication between headquarters
and the districts, others felt that the regions were an unnecessary
layer of management. The SBA Inspector General‘s office found similar
problems with communication within SBA when it conducted management
challenge discussion groups with almost 50 senior officials from SBA
headquarters, regional, and district offices.[Footnote 7]
SBA has recognized that as it transforms itself, it needs to make the
lines of communication between the districts, regions, and headquarters
clearer to help bring about quick, effective decision-making. SBA plans
to increase the responsibilities of the regional offices, perhaps by
adding a career deputy regional administrator to assist the Regional
Administrator in overseeing the district offices. Under SBA‘s draft
plan, the deputy would also work closely with the Office of Field
Operations to coordinate program delivery in the field.
Overlapping Organizational Responsibilities:
We also found evidence of complex, overlapping organizational
relationships, particularly among field and headquarters units. For
example, district staff working on SBA loan programs report to their
district management, while loan processing and servicing center staff
report directly to the Office of Capital Access in headquarters. Yet,
district office loan program staffs sometimes need to work with the
loan processing and servicing centers to get information or to expedite
loans for lenders in their district. Because loan processing and
servicing centers report directly to the Office of Capital Access,
requests that are directed to the centers sometimes must go from the
district through the Office of Capital Access then back to the centers.
District managers and staff said that sometimes they cannot get answers
to questions when lenders call and that they have trouble expediting
loans because they lack authority to direct the centers to take any
action. Lender association representatives said that the lines of
authority between headquarters and the field can be confusing and that
practices vary from district to district. Figure 1 depicts the variety
of organizational relationships we found between SBA headquarters and
field units.
Figure 1: Organizational Relationships Between SBA
Headquarters and Regions, Districts, and Other Field Units:
[See PDF for image]
Note: This chart refers to the following SBA offices: Office of Field
Operations (OFO), Office of Government Contracting/Business
Development (GC/BD), Office of the General Counsel (OGC), and
Government Contracting Area Offices (GC Areas). This chart also uses
the term ’storefronts“ to characterize Small Business Development
Centers, Business Information Centers, Women‘s Business Centers, and
other such locations where the public accesses SBA programs.
Source: GAO analysis of SBA organization.
[End of figure]
SBA plans to eliminate the current complicated overlapping
organizational relationships between field organizations and
headquarters organizations by consolidating functions and establishing
specific lines of authority. SBA‘s draft transformation plan states
that this effort will reduce management layers and provide a more
efficient management structure. Specifically, SBA plans to further
centralize loan processing, servicing, oversight, and liquidation
functions; eliminate area offices for surety bonds and procurements by
making regional or district offices responsible; and move oversight for
entrepreneurial development programs to district offices.
Disagreement Regarding the District Office‘s Primary Customer:
We found disagreement within SBA over the primary customer of the
district offices. Headquarters executives said that the district
offices primarily serve small businesses, while district office
officials told us that their primary clients are lenders. The
headquarters officials said that the role of the district office was in
transition and that, because many lending activities had been
centralized, the new role for the district offices was to work with
small businesses. However, the district office managers said that their
performance ratings were weighted heavily on aspects of loan activity.
Moreover, there is only one program--8(a) business development--through
which district offices typically work directly with small businesses,
further reinforcing the perception of the district managers that
lenders rather than small businesses are their primary customers.
According to SBA‘s transformation plan, the mission of its districts
will become one of marketing SBA‘s continuum of services, focusing on
the customer, and providing entrepreneurial development assistance. SBA
stated that over the next 5 years, it is fully committed to making
fundamental changes at the district level, changes that have been
discussed for years, but have never been fully implemented. To begin
this change, SBA plans to test specific strategies for focusing
district offices‘ goals and efforts on outreach and marketing of SBA
services to small businesses and on lender oversight in three offices
during fiscal year 2002. SBA plans to implement the results in 10-20
districts in fiscal year 2003. As part of this change, SBA will need to
carefully consider how the new mission of its district offices will
affect the knowledge, skills, and abilities--competencies--district
staff will need to be successful in their new roles. If competency gaps
are identified, SBA will need to develop recruitment, training,
development, and performance management programs to address those gaps.
Field Structure Not Consistently Matched with Mission Requirements:
SBA managers said that, in some cases, the current field structure does
not consistently match mission requirements. For example, the creation
of loan processing and servicing centers moved some, but not all, loan-
related workload out of the district offices. District offices retained
responsibility for the more difficult loans and loans made by
infrequent lenders. Similarly, the regional offices were downsized, but
not eliminated during the 1990s. In addition, they said that some
offices and centers are not located to best accomplish the agency‘s
mission. For example, Iowa has two district offices located less than
130 miles apart, and neither manages a very large share of SBA‘s
lending program or other workload. SBA also has a loan-related center
located in New York City, a very high-cost area where it has trouble
attracting and retaining staff. Figure 2 shows the locations of SBA
offices around the country.
Figure 2: SBA Offices and Field Locations in the United
States:
[See PDF for image]
Source: SBA.
[End of figure]
SBA officials also stressed that congressional direction has played a
part in SBA‘s current structure. SBA officials pointed out that
Congress has created many new offices, programs, aspects of existing
programs, and pilot projects and has prescribed reporting relationship,
grade, and/or type of appointment for several senior SBA officials. We
found 78 offices, programs, or program changes that were created by
laws since 1961, with most of the changes occurring in the 1980s and
1990s. Eleven SBA staff positions and specific reporting relationships
were also required by law.
In its transformation plan, SBA discusses its difficulty with matching
its field structure with mission requirements and states that in order
for the field structure to reflect the new mission and customer focus,
consolidation of functions and the elimination or reduction of
redundant offices may be necessary. The result of consolidations will
be a streamlined organization with reduced management layers and an
increased span of control for the field organizations that remain. For
example, over the course of the 5-year plan, SBA plans to consolidate
all loan processing, servicing, and liquidation into fewer centers, but
give them an expanded role for handling all the functions currently
carried out in the district offices.
Organizational Alignment is Crucial to Maximizing Performance and
Ensuring Accountability:
Integrating personnel, programs, processes, and resources to support
the most efficient and effective delivery of services--organizational
alignment--is key to maximizing an agency‘s performance and ensuring
its accountability. The often difficult choices that go into
transforming an organization to support its strategic and programmatic
goals have enormous implications for future decisions. Our work has
shown that the major elements that underpin a successful
transformation--and that SBA should consider employing--include
strategic planning; strategic human capital management; senior
leadership and accountability; alignment of activities, processes, and
resources to support mission achievement; and internal and external
collaboration.[Footnote 8]
Strategic Planning:
Proactive organizations employ strategic planning to determine and
reach agreement on the fundamental results the organization seeks to
achieve, the goals and measures it will set to assess programs, and the
resources and strategies it will need to achieve its goals. Strategic
planning is used to drive programmatic decision-making and day-to-day
actions and, thereby, help the organization be proactive, able to
anticipate and address emerging threats, and take advantage of
opportunities, rather than remain reactive to events and crises.
Leading organizations, therefore, understand that strategic planning is
not a static or occasional event, but a continuous, dynamic, and
inclusive process. Moreover, it can guide decision-making and day-to-
day activities.
According to the agency scorecard report, SBA has not articulated a
clear vision of what role it should fill in the marketplace. In our
review of SBA‘s fiscal year 2000 performance report and fiscal year
2002 performance plan, we reported that we had difficulty assessing
SBA‘s progress in achieving its goals because of weaknesses in its
performance measures and data.[Footnote 9] We said that SBA should more
clearly link strategies to measurable performance indicators, among
other things. SBA said it has made adjustments to its managing for
results process and now has identified specific performance parameters
that must be met. Additionally, SBA recognizes the need for its
workforce transformation plan and 5-Year Strategic Plan to complement
each other.
Strategic Human Capital Management:
People--or human capital--are an organization‘s most important asset
and define its character, affect its capacity to perform, and represent
its knowledge base. We have recently released an exposure draft of a
model of strategic human capital management that highlights the kinds
of thinking that agencies should apply and steps they can take to
manage their human capital more strategically.[Footnote 10] The model
focuses on four cornerstones for effective human capital management--
leadership; strategic human capital planning; acquiring, developing,
and retaining talent; and results-oriented organizational cultures--
and a set of associated critical success factors that SBA and other
federal agencies may find useful in helping to guide their efforts.
In its workforce transformation plan, SBA said that it recognizes that
employees are its most valuable asset. It plans to emphasize the
importance of human capital by clearly defining new agency functions
and identifying and developing the skills and competencies required to
carry out the new mission. SBA also plans, beginning in fiscal year
2002, to conduct a comprehensive skill and gap analysis for all
employees. In addition, SBA will increase its emphasis on its two
succession planning programs, the Senior Executive Service Candidate
Development Program and the District Director Development Program, to
recruit qualified individuals for future leadership roles. SBA also
said that it plans to increase the number of professional development
opportunities for employees to ensure that they can build missing
competencies.
Senior Leadership and Accountability:
The importance of senior leadership and commitment to change is
essential. Additionally, high performing organizations have recognized
that a key element of an effective performance management system is to
create a ’line of sight“ that shows how individual responsibilities and
day-to-day activities are intended to contribute to organizational
goals. In addition to creating ’lines of sight,“ a performance
management system should encourage staff to focus on performing their
duties in a manner that helps the organization achieve its objectives.
The SBA Administrator has demonstrated his commitment to transforming
SBA by tasking his Deputy Administrator and Chief Operating Officer
with coordinating the implementation of SBA‘s 5-year workforce
transformation plan. He also said that the transformation plan will
complement the agency‘s 5-Year Strategic Plan and that SBA‘s successes
will be measured by the successes of its clients. These are important
steps in aligning expectations within the agency toward agency goals.
As SBA begins to implement its transformation plan, it will also be
important to be certain that agency goals are reflected in the
performance objectives and ratings of SBA‘s senior executives and the
performance appraisal systems for lower-level employees. Sustained
senior management attention to implementation of the plan and support
from key internal and external stakeholders will be important
ingredients in the ultimate success or failure of SBA‘s transformation.
Alignment of Activities, Processes, and Resources:
An organization‘s activities, core processes, and resources must be
aligned to support its mission and help it achieve its goals. Leading
organizations start by assessing the extent to which their programs and
activities contribute to fulfilling their mission and intended results.
They often find, as our work suggested, that their organizational
structures are obsolete and that levels of hierarchy or field-to-
headquarter ratios must be changed. Similarly, as priorities change,
resources must be moved and workforces redirected to meet changing
demands.
According to the President‘s Management Agenda, while SBA recognizes
the need to restructure, little progress has been made to date and SBA
has not translated the benefits of asset sales and technological
improvements into human resource efficiencies. In response, SBA drafted
a 5-Year Workforce Transformation Plan intended to adjust its programs
and delivery mechanisms to reflect new ways of doing business and the
changing needs of its clients. SBA said that it plans to continue with
asset sales, to enhance technology by using contractors, and to use
technology to move work to people--more of whom will be deployed at
smaller facilities in the future.
Internal and External Collaboration:
There is also a growing understanding that all meaningful results that
agencies hope to achieve are accomplished through networks of
governmental and nongovernmental organizations working together toward
a common purpose. Internally, leading organizations seek to provide
managers, teams, and employees at all levels the authority they need to
accomplish programmatic goals and work collaboratively to achieve
organizational outcomes. Communication flows up and down the
organization to ensure that line staffs have the ability to provide
leadership with the perspective and information that the leaders need
to make decisions. Likewise, senior leaders keep the line staff
informed of key developments and issues so that the staff can best
contribute to achieving organizational goals.
SBA has long understood the need for collaboration. In the late 1980s,
SBA shifted its core functions of direct loan making and
entrepreneurial assistance to reliance on resource partners to deliver
SBA programs directly. This shift allowed SBA to greatly increase its
loan volume and the number of clients served. However, SBA has lost
much of its direct connection with its small business owner clients.
SBA has only recently begun to develop the appropriate oversight tools
for its resource partners and the appropriate success measures for its
programs and staff.
Mr. Chairman, this concludes my prepared statement. I would be pleased
to respond to any questions that you or other Members of the
Subcommittee may have at this time.
Contact and Acknowledgments:
For further information regarding this testimony, please contact
Davi M. D‘Agostino at (202) 512-8678. Individuals making key
contributions to this testimony included Susan Campbell, Katie Harris,
and Kay Kuhlman.
FOOTNOTES
[1] As of September 30, 2001.
[2] As of February 23, 2002. This number includes 102 employees in the
Office of the Inspector General and 956 in the Office of Disaster
Assistance.
[3] U.S. General Accounting Office, Small Business Administration:
Steps Taken to Better Manage Its Human Capital, but More Needs to Be
Done, GAO/T-GGD/AIMD-00-256 (Washington, D.C.: July 20, 2000). U.S.
General Accounting Office, Small Business Administration: Current
Structure Presents Challenges for Service Delivery, GAO-02-17
(Washington, D.C.: October 26, 2001); U.S. General Accounting Office, A
Model of Strategic Human Capital Management GAO-02-373SP (Washington,
D.C.: March 15, 2002); U.S. General Accounting Office, FBI
Reorganization: Initial Steps Encouraging, but Broad Transformation
Needed, GAO-02-865T (Washington, D.C.: June 21, 2002);
[4] U.S. General Accounting Office, Human Capital: Taking Steps to Meet
Current and Emerging Human Capital Challenges, GAO-01-965T (Washington
D.C.: July 17, 2001).
[5] U.S. General Accounting Office, Management Reform: Elements of
Successful Improvement Initiatives, GAO/T-GGD-00-26 (Washington, D.C.:
Oct. 15, 1999) and U.S. General Accounting Office, Executive Guide:
Effectively Implementing the Government Performance and Results Act,
GAO/GGD-96-118 (Washington, D.C.: June 1996).
[6] The agency scorecard is a grading system used by the administration
to grade agencies‘ efforts at executing management improvements.
[7] Small Business Administration, Office of the Inspector General,
Advisory Memorandum: Report on the Results of SBA Management Challenge
Discussion Groups, #01-04-01 (Washington, D.C.: Apr. 4, 2001).
[8] GAO/T-GGD-00-26, and GAO/GGD-96-118.
[9] U.S. General Accounting Office, Small Business Administration:
Status of Achieving Key Outcomes and Addressing Major Management
Challenges, GAO-01-792 (Washington, D.C.: June 22, 2001).
[10] GAO/02-373SP.
