When state governments get into trouble the news stories start talking about balancing the state budget. It usually gets reduced to simple math of cutting personnel and services to be better in line with revenue coming into the state. Sounds simple! Unfortunately cuts are generally done from the top down. Word goes out to the managers, two or three levels down in the organization, to cut their staff. They look at the core functions of the organization and generally put them in the safe pile. Then they look at the support staff and start making cuts. Consultants, administration, HR, and marketing tend to be the logical places to cut with this approach. Unfortunately, it’s exactly the opposite of what should happen.
Support your administrative professionals
There is a logic in firing administrative staff that the people they support will just have to get by on there own. This might apply in a wilderness survival situation, but in business this is generally not the case. It’s also expensive. Several years ago when IBM was losing money, they got rid of a lot of their administrative staff only to lose more money. Solution – bring back more administrative personnel because they make the organization more efficient. This resulted in IBM doing a 180 from negative to positive in just over a year. If you’ve even been to the DMV in any state you’ve probably prayed for more administrative staff. Government agencies are generally not viewed as models of efficiency. Maybe it is because they don’t have enough administration. In government it is generally the people on the lowest level of the totem pole that make the whole thing work. Unfortunately they are usually the first to go when times get tough.
How long do babies take to be born?
This might seem like a stupid question for anyone over 8 years of age. Most people think that it’s because it takes 9 months for them to develop. While partially true, this is not the only factor at play. In theory, if the womb maintained the same conditions from the first two trimesters, babies would actually just keep growing right where they are – indefinitely. In reality the womb actually becomes toxic in the final days of pregnancy. There’s a lot of waste and not much space, and that combination forces the baby into the real world. This is a natural process that is played out throughout the world. In most modern businesses, employees grow to the point where you can’t grow anymore and then it’s time to leave. This is where governments often break the rules. Workers are regularly rewarded for 30 and 40 years of service, often in the same job for decades. If a woman were to carry a child that just grew and grow they would eventually die. Organizations suffer similar problems when workers stay too long. If you look at the years of service of many government agencies, you will see that upwards of 60% are within 5 years of retirement – or above.
What you end up with is an organization that has a fairly wide base of entry level workers at the bottom. Then at between 5 and 7 years it narrows because people start realizing that the people above them aren’t moving. There is nowhere to move within the organization. So you get attrition at this level, which creates an artificial perception among those that remain that there are less people to compete for the next level. As time goes on many organizations end up creating new positions for senior workers since they are being paid so much they naturally should have more responsibility. What you end up with is an organization that is actually shaped like a brandy snifter instead of a pyramid. And it’s expensive.
Pareto Principal Anyone?
If you aren’t familiar with the concept it’s also known as the 80/20 principle. 80% of your (Insert topic here) will come from 20% of your customers. It’s not an absolute. It might be closer to 70/30, but the concept tends to remain intake for most option. So take a workforce that gets progressively more expensive simply based on how long they have been employed. The top 20% account for 80% of the organizational costs. If you take the traditional approach to downsizing government, you are targeting the group that has the smallest contribution to the overall cost of the organization. Targeting the same number of people with the longest service will typically yield 4-5X the impact.
Changing the rules
Specifically targeting workers who may already have their AARP cards can be painful if not discriminatory. The military solved this problem by requiring people to be at certain levels to continue. Governments should have similar policies. This ensures a more hierarchical organization where workers know their opportunities for advancement. If these polices don’t already exist it needs to be phased in to be fair. The problem is by the time a government is in trouble, they probably can’t wait for this type of progressive change to take place.
The only way to speed up the process is try to convince workers with 20 plus years of service it’s ok to be born and go out into the world. Not that we want to make their environment toxic, but most workers with lots of experience in the same job don’t know what options are available outside the organization. It’s warm and comfortable right where they are. They typically have a well decorated cubicle that is just the way they like it. This can involve quite a bit of coaching and planning to help workers make the choice to transition. It goes against what they have seen growing up in the company. Unfortunately most government systems are ultimately unsustainable. This is where you start seeing newspaper headlines about balancing the budget. At that point the only way to balance the budget is to actually balance the organization. If you fix your budget without fixing your organization, you will just be creating new problems to be addressed at a later date.