May 19 (Bloomberg) -- Jeffrey Zients, who made as much as $210 million while building two consultancies, is focusing his business skills on a much larger task these days: overhauling the “1960s-style” organization of U.S. federal agencies.
The clock is ticking for the 44-year-old runner. The last time he wasn’t prepared for a race, Oprah Winfrey passed him in a marathon.
President Barack Obama has instructed Zients, deputy director for management at the Office of Management and Budget, to complete, by June 9, a review of 12 agencies involved in exports. It’s the first step in a government reorganization that may result in a scaled-back Commerce Department and eventually extend to the entire federal bureaucracy in Washington.
“I am big believer in deadlines,” Zients said. “They are great forcing functions.”
The reorganization is central to Obama’s goal of doubling U.S. exports by 2015 to spur job creation and curb a trade deficit that surged 43 percent last year, even as exports grew the most in two decades.
For Zients, who has also been leading an effort to sell unneeded federal properties to save as much as $15 billion over three years, the government reorganization amounts to a third job, along with his White House budget office duties.
“There may be five or six interesting jobs in this town that most people don’t even know,” and Zients has one of them, said Tom Donohue, the president of the U.S. Chamber of Commerce. He’s the “truth-teller” in the federal government and “tells people that this is the way it’s going to be.”
Days before a potential government shutdown in April, it was Zients who sent a memo to federal agencies, ordering them to prepare their workforces for furloughs.
Like an IPO
Zients compares the government-reorganization process with a company’s initial public offering. “When you decide you are going to take a company public, you put a stake in the ground, and there’s a whole calendar,” he said. “Same thing here.”
He has interviewed more than 100 chief executive officers from large and small businesses, including Brian Roberts of Comcast Corp. and Ellen Kullman of E.I. du Pont de Nemours & Co., to try to find corporate solutions for a government problem: How to make federal export agencies function more like the companies they are supposed to serve.
“Learning from that group can be very, very valuable,” he said. “In essence, it’s intellectual arbitrage.”
Defeated by Oprah
Zients, who runs 15 to 20 miles a week, also learned something from one of his early failures. His training regimen for the Marine Corps Marathon in 1994 suffered because of a busy work schedule. When Winfrey passed him at mile 17, Zients decided to drop out of the race.
“You clearly have to train hard,” he said.
Raised in the Washington suburbs, Zients attended St. Albans School, a private school for boys in the city, before graduating summa cum laude from Duke University in Durham, North Carolina. In his early 20s, he worked at Bain & Co., a Boston-based consulting firm, where he met his wife, Mary. They have four children.
Zients is drawing on his experience at the Advisory Board Co. and the Corporate Executive Board Co., the two consultancies he helped take public. While working at the Advisory Board, which studies best practices in the health-care industry, he helped found the Corporate Executive Board to provide more general research on corporate practices. They took the spinoff company public first in 1999 and followed with the Advisory Board in 2001.
‘Richest Under 40’
By 2004, Zients had landed on Fortune magazine’s “40 Richest Under 40” list. He has since estimated his net worth as high as $210 million, according to financial-disclosure reports. He invested in Timbuk2, a privately held San Francisco-based messenger bag company, and still owns a 50 percent share, according to disclosure reports. He founded an company, Portfolio Logic LLC, to manage his investments and is required to recuse himself from any involvement in businesses whose shares he owns.
“Jeff has a practice of just always rising to the top,” said David Bradley, who founded the Advisory Board and, with Zients, built the Corporate Executive Board.
“He was the 23-year-old research director for me, and within two years he’s president,” said Bradley, who owns Atlantic Media Co.
The challenge for Zients in his latest task is to import his low-key approach to a political environment where sharp elbows are often more effective than a smooth PowerPoint presentation, say his associates.
No Sucking Air
“He wouldn’t come in a room and suck all the air out,” Donohue said. “But when he gets finished with the room, he generally has people supporting what he’s trying to do.”
His effort for Obama may eventually grow into a broader reorganization of the federal government, including the elimination of some Cabinet-level departments.
For now, he is likely to recommend to the president that the Department of Commerce become a pared-down agency, stripping it of the National Oceanic and Atmospheric Administration, according to a person familiar with the matter. And in addition to negotiating export agreements, the office of the United States Trade Representative is likely to receive power to litigate trade disputes as well.
Even if Obama embraces his plan, there is no guarantee that Congress will act.
“The problem is not so much opposition in Congress, but apathy,” said David Osborne, who advised then-Vice President Al Gore on the Clinton administration’s plan to reinvent government, which worked to root out waste in federal spending.
Paring the Workforce
While the government reduced its workforce by 324,580 people from 1993 to 2001, cutting the federal civilian payroll to its lowest level since 1950, most of the reductions came from the Defense Department after the Cold War ended, according to a 2001 Office of Management and Budget report.
Zients’s plan may have a better chance for success than previous efforts because he is taking a piecemeal approach.
“You don’t want to bite off too much,” said Osborne, now a partner at Public Strategies Group, a consulting firm for public organizations. “In 1993, when we did the national performance review, we bit off the whole federal government.”
Zients is “biting off one policy arena at a time,” Osborne said. “That makes sense.”
One problem with the government’s trade architecture is that it doesn’t serve its customers, Zients said. Small businesses, for example, have difficulty navigating federal programs that could help them promote their goods abroad.
Conglomerates Don’t Work
Gathering different agencies “into a sort of 1960s-style conglomerate is not the right answer,” Zients said. He cited the Department of Homeland Security, which combined 22 agencies, including the Customs Service and the Coast Guard, when it was created in 2002, and the 38,000-employee Commerce Department as two organizations that weren’t well-designed.
“If you are going to bring things together, you need to integrate in order to take advantage of potential efficiencies,” he said.
Zients’s background in business has won him praise from some of the president’s critics, including the finance chairman for the presidential campaign of Senator John McCain, the Arizona Republican whom Obama defeated in 2008.
“He’s not ‘maybe one of the few’ who has experience in the private sector, he’s the only one of the few,” said Frederic Malek, chairman of Thayer Lodging Group, an Annapolis, Maryland-based hotel investment group.
“It gives him an advantage of understanding organization and of understanding how to get things done,” said Malek, who worked with Zients and other investors to bring baseball back to Washington. “He’s accustomed by being measured by results.”
Zients agreed that the lack of performance standards in government is a recurring problem.
“In the private sector there’s one clear bottom line, and that’s your profitability,” he said. “In the public sector we have many metrics, probably too many. But there’s no single bottom line.”
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