Downsizing by Donald Rumsfeld
“Five Ways to Downsize Government” By: Donald H. Rumsfeld
Published In: Heartland Perspectives Publication Date: August 4, 1995
Ref. 4. Donald H. Rumsfeld article “Five Ways to Downsize Government” Published In: Heartland Perspectives Publication August 4, 1995 Publisher: The Heartland Institute. http://heartland.org/.
“As Congress grapples with the challenge of downsizing or eliminating bureaucracies that haven’t been critically reexamined for many decades, its Members would do well to consider some of the lessons learned by the businessmen and -women who made their companies more competitive in the 1990s. I have a somewhat unusual perspective on this issue, having spent roughly twenty years in the federal government and another twenty in the corporate world. Here, based on my own experience, are five guidelines for members of Congress:
Define the “Core” Business
We must ask whether a problem is truly a federal responsibility, or can it be handled better by voluntary organizations, local governments, or state governments. For the federal government, the four basic departments–State, Defense, Justice, and Treasury–have a solid basis for existence. The others were either more narrowly based, an afterthought, or both. These latter departments should be scrutinized for elimination, downsizing, reorganization, movement to state and local governments, or privatization.
Cut Sharply and Rapidly
Cut sharply and rapidly. Don’t wait. Whatever it is you do, the odds are overwhelming that you should have done more–rather than less–and that you should have done it sooner, rather than later. There are so many pressures in Washington, D.C. to preserve the status quo that the most frequent mistake is to make too few changes or to cut too little. Do it once. Do it well. And then let people get back to work. Don’t try to cut the dog’s tail off one inch at a time, hoping it won’t hurt as much.
Eliminate Bureaucracy
Congress should move swiftly to cut management and get personnel costs under control. It is guaranteed that there are more managers and more staff in the federal government than are needed. In less than seven months, Scott Paper Company eliminated 11,200 people, one-third of its workforce. The company cut 71 percent of the headquarters staff, 50 percent of management, and 20 percent of the hourly employees. If the national government is as overstaffed as was Scott Paper, some 140,000 government managers could be cut immediately, saving taxpayers billions of dollars.
Reorder the Organizational Chart
Probably one-half to two-thirds of the non-central departments are no longer needed in their current form. For example, the Republican proposal to close the 93-year-old Department of Commerce seems reasonable to me. That department lacks a clear sense of mission, and it duplicates the work of dozens of other departments and agencies: a sign that taxpayers could do without it in its present form. The same likely could be said for other departments, such as Energy, Housing and Urban Development, Education, Transportation, and Veterans Affairs.
Sell Unessential Assets
Why is the federal government borrowing over $200 billion a year to cover its deficit when it is sitting on billions of dollars of assets that could and should be sold to the private sector? Some twenty years ago, I chaired the Property Review Board in the Nixon Administration, which supervised the evaluation of hundreds of federal real properties for movement to their highest and best use outside of government. The resistance in both the Executive and Legislative branches was enormous. That opportunity is still there and, given the current budget situation, must be seized.
As Congress goes about the business of putting meat on the bones of the balanced budget plan passed earlier this year, it will have to make tough decisions. I recognize the difficulty of that task, having once served in the House. But I’ve learned that decisions made every day in the corporate world are sometimes even more difficult because the very survival of a company can be at stake.
The choices to be made affect real people with careers, mortgages to pay, and families to raise. But Congress oversees an enterprise facing bankruptcy, and the consequences of not acting now, swiftly and firmly, will be devastating for a far greater number of people. The right decisions made now, however tough, will help restore the long-term health of the government, our economy, and our country.
Donald H. Rumsfeld has served as a member of Congress, U.S. Ambassador to NATO, chief of staff to President Ford, and, from 1975 to 1977, Secretary of Defense. Between 1977 and 1985 he was CEO of G.D. Searle, and from 1990 to 1993 he was Chairman and CEO of General Instrument Corporation.”
Comments by the Author
My readers will note that this article was written before 9-11 and the mid-east wars in Afghanistan and Iraq. Without getting into what has happened in the Bush Administration in the article Rumsfeld does give amateur advice that is typical among CEO’s in industry. His approach to determining what really needs to be done, the elimination of redundant organizations is a necessary first step and is commendable. However some may disagree with his Departmental choices for elimination. I agree with Rumsfeld that his advice to “Cut Sharply and Rapidly” and “eliminate Bureaucracy” will bring significant savings to the government but the real question becomes how much do you cut and still keep the services that you want. By the elimination of bureaucracy he is referring to cutting out levels of management and not the complete elimination of the bureaucratic organization. Apparently he was unfamiliar with Team Management as a replacement for bureaucracy.
What you have here is the typical top-down approach to downsizing but I prefer the bottom-up approach through Work Measurement. The advantage is that while you may get some efficiency in government from the top-down approach you will be able to eliminate all the inefficient activities through the bottom-up approach. A second problem is that when using the Rumsfeld approach, eliminating a portion of the bureaucracy, it is not a permanent reduction in staff and it is only a matter of time before the remaining bureaucracy has regained back its staffing level. I propose that the best way of downsizing is in using Lean Teams made up of trained government employees to study government process flows and determine the best way of doing each process in government. You should always fix the systems first. The Rumsfeld approach makes no effort to fix the organization’s systems. The Lean Team study data can then be used for determining the exact staffing required called Right-Sizing and is more precise than Rumsfeld’s downsizing which guesses at the number of employees which can be laid off before vital services are affected.
A significant difference also occurs when reducing staff during budget cuts. The top down method tends to lay-off those at the bottom usually the most recently employed. The Lean Team Right-Sizing reform method keeps in tact those employees that are actually doing the work eliminating those that are redundant including a significant number of management staff. In all cases I recommend using the Lean Team method.
Downsizing the Federal Government Cato Institute
A book by Chris
Edwards gives his opinion of what federal programs to downsize and is
sponsored by the Cato Institute. Ref. 7.Chris Edwards, Director of Tax
Policy Studies, Cato article: Downsizing the Federal Government.
My
website is dedicated to a “method” of Right-Sizing to get the highest
efficiency with the most effectiveness possible through my Reform Models
and leaves what programs to cut to government leaders and authors such
as Chris Edwards. I recommend that programs to be cut be selected before
implementing my Government Reform Models in the remaining portions of
government.
The Consolidation Model provides the best means for
consolidation of various agencies that have duplicated responsibility
for some government function. Using Enterprise Lean trained personnel
representing each agency a team is formed to find the “best way” to
consolidate the agencies. The objective is provide for a smooth
transition by using Work Measurement to know what the proper staffing
should be and by changing the new organization into a Team Managed
From Downsizing the Federal Government
By Chris Edwards, Director of Tax Policy Studies, Cato Institute
The
federal government is running massive budget deficits, spending too
much, and heading toward a financial crisis. Without a change of
direction in Washington, average working families will be faced with
huge tax increases and a lower standard of living. In Downsizing the
Federal Government, Cato Institute budget expert Chris Edwards provides
policymakers with solutions to the growing federal budget mess. Edwards
identifies more than 100 federal programs that should be terminated,
transferred to the states, or privatized in order to balance the budget
and save hundreds of billions of dollars. Edwards proposes a balanced
reform package of cuts to entitlements, domestic programs, and excess
defense spending. He argues that these cuts would not only eliminate the
deficit, but also strengthen the economy, enlarge personal freedom, and
leave a positive fiscal legacy for the next generation.
Professional Downsizing
Alexander Proudfoot Management Consultant Implementation
Example of an Alexander Proudfoot Management Consultant Implementation. This is the leading Consulting firm doing downsizing in industry. The firm gets a level of level efficiency by using Consultants to do Work Measurement using time-study resulting in downsizing the companies work force. Their approach uses Short-Interval-Scheduling to control the work done by the remaining employees. They also do consolidation of functions and implementation of IT systems.
My Reform Models in contrast trains company personnel in Enterprise Lean and uses the Enterprise Lean study data from fixing the companies systems to Right-Size the company. This gets the highest efficiency possible while improving the effectiveness of company operations and empowers employees to make continuous improvements to the company’s operations. The Models also train management to use Six Sigma to manage the company’s processes. The method reforms the company’s systems while improving employee morale all at one tenth the cost of the Alexander Proudfoot approach.
The Alexander Proudfoot approach downsizes the company improving the efficiency of the company’s current processes and uses a tool called Short Interval Scheduling to rigidly control the companies employees to make sure processes are done on time. Note that the Proudfoot approach does not fix the company’s systems before right-Sizing, preventing the company from achieving the highest productivity possible. The Proudfoot approach benefits mainly the owners and its investors while ignoring employee potential for innovation.
Because of the high cost of bringing in as many as fifty Management Consultants most governments cannot afford the Proudfoot approach to downsizing. My method uses government employees as a part of Lean teams to do Work Measurement with Lean training being provided by the governments own training staff. See also the Alexander Proudfoot Versus Lawrence Rosier Approach to Downsizing.
Example of an Alexander Proudfoot Implementation
Ohio Casualty hired the consulting firm Alexander Proudfoot to develop a “process re-engineering” program to cut costs, consolidate functions, improve productivity and invest in technology. Ohio Casualty posted profit of $19.2 million during the quarter 2004, compared with $19.9 million in all of 2003.
Ohio Casualty Corp. laid off 322 workers in the first quarter and another 62 in April 2004. When the layoffs are complete, 400 positions will have been eliminated, or up to 19 percent of Ohio Casualty’s work force on Dec. 31. The staff reductions will lower the company’s 2004 operating costs by $5.5 million. The company projects savings of $19.7 million in 2005.
Ref. The Alexander Proudfoot implementation at Ohio Casualty Job cuts boost Ohio Casualty By James McNair and Mike Boyer The Cincinnati Enquirer Wednesday, May 5, 2004Alexander Proudfoot Versus Lawrence Rosier Approach to Downsizing
Alexander Proudfoot is the leading consulting firm in the US and in Europe doing downsizing or as they call it “reengineering and consolidation”. Alexander Proudfoot was founded on the following two maxims:
Sell a unique, proprietary product that would produce tangible results with benefits far exceeding the cost
And only accept assignments for which the client made Alexander Proudfoot responsible for installing the program.
An announcement in the news that Proudfoot has entered into a contract with a company will cause an immediate rise in the company’s stock price on Wall Street in anticipation of increased profits. Typically after signing an agreement with a company Proudfoot while working with top management will place their consultants throughout the company. They will time-study all of the functions performed by the company on the manufacturing shop floor as well as within the company’s offices. This a very expensive operation with as many as one hundred highly paid consultants time-studying nearly every operation within the company, the entire operation taking as much as six months. The results are generally dramatic from 20% to 30% reduction in company employees. Note that downsizing is the primary objective of the Consulting firm. This must be the case to offset Proudfoot’s substantial consulting fees.
In contrast the Lawrence Rosier approach uses Enterprise Lean with Reform Models to Right-Size the company getting the highest efficiency possible while improving the effectiveness of company operations and empowers employees to make continuous improvements to the company’s operations. The Models also train management to use Six Sigma to manage the company’s processes. The method reforms the company’s systems and implements Right-Sizing while improving employee morale all at one tenth the cost.
The Proudfoot approach uses consultants to do Work Measurement of the companies processes using time-study and rigidly controls the new job assignments using Short-Interval-Scheduling a tool which guarantees that the job gets done on time.
The Rosier approach begins by following the Japanese method implementing Lean throughout the organization. The approach uses the company’s own Lean trained personnel empowered to find the “best way” to do the function (reengineering at the work place). Later the data generated by the Lean Team is used for Work Measurement which determines the correct staffing for each function. The Lean Teams also keep a daily log of all activates. The daily log provides a record of all activities and the number of times that functions are performed. This data is the input needed to make a Bottoms-up Budget for each function.
Both approaches require some consolidation due to fewer employees but here there is a difference. Proudfoot maintains the bureaucratic organization with near dictatorial power of the front line supervisor over employees a typical approach for downsizing. The Rosier method uses Enterprise Lean within a Reform Model to fix the systems first then using the Enterprise Lean Data as Work Measurement Right-Sizing is done and finally the bureaucratic organization is changed to a Team Managed organization. In the Team Management organization front line supervisors are replaced by the Team leader of each Lean Team who is elected by members of the team. The result is self managed Functional Teams.
Both approaches reduce the number layers of unnecessary management found in all bureaucratic organizations. But the Rosier approach goes further by first fixing the organization’s systems and then changing the bureaucratic organization to a Team Managed organization. Group Steering Teams provide management guidance for the front line Functional Teams. This results in a more innovative company empowering its employees to make continuous improvements to its processes. In contrast the Proudfoot approach leaves the company with disgruntled employees forced to maintain a tight schedule causing problems with union employees some times lasting for decades.
Other differences arise from Proudfoot’s reliance on the bureaucratic form of management it has failed to appreciate the benefits from using the entire organization for getting continuous improvement to the company’s processes provided by Lean. The important advantage in changing from a Bureaucratic organization to a Team Managed organization in the Rosier method is that the savings continues annually for years. But in a bureaucracy after only a few years the level of staffing could grow to where it originally was.
The Rosier approach provides the highest improvement in efficiency possible at a low cost mostly using the company’s own resources. This makes the approach affordable for small companies, state and local governments as well as the Federal Government.
The Amateur Approach to Downsizing
Donald Rumsfeld provides us with a good example of what I call the amateur top down approach. The method is a kind of knee jerk approach. You know that the organization is overstaffed and you guess at how many employees you can remove without shutting down operations. Note that this method does not provide a way of finding out where the over staffing occurs and by how many personnel. This method generally involves across the board cuts which punishes the best managed areas by cutting into their capability to provide services and has no effect on the real overstaffed areas. This is also one of the best incentives to overstaff a bureaucratic organization that exists.
Cut sharply and rapidly. Don’t wait. Whatever it is you do, the odds are overwhelming that you should have done more–rather than less–and that you should have done it sooner, rather than later. There are so many pressures in Washington, D.C. to preserve the status quo that the most frequent mistake is to make too few changes or to cut too little. Do it once. Do it well. And then let people get back to work. Don’t try to cut the dog’s tail off one inch at a time, hoping it won’t hurt as much.
Ref. 6. Donald H. Rumsfeld article “Five Ways to Downsize Government” Published In: Heartland Perspectives Publication August 4, 1995 Publisher: The Heartland Institute. http://heartland.org/ .
The Secret Approach to Downsizing
I call this the secret approach because it is used secretly by major downsizing Management Consulting firms among them a firm which I was trained by, Alexander Proudfoot of Chicago. The primary method they use besides time study is Short Interval Scheduling (This is the secret that they won’t tell you). See Alexander Proudfoot Management Consultant Implementation.
After time-studying both shop and office current functions a reporting system called Short Interval Scheduling is implemented. The Short Interval Scheduling reports made to management guarantees that production and services will not be interrupted and if there is a production problem management will know about it within a hours.
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