What's Hobbling the IRS

When workers have ironclad job security, managers have few means to motivate
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If you were its commissioner, what one thing would you do to improve the efficiency and effectiveness of my workplace, the IRS? - Ned Nazzaro, Washington D.C.

Simple: We'd differentiate between employees. And we believe that, within five years, radical change in its management system would catapult the IRS to a new, supercharged level of productivity and results. Agents would be energized to work faster and smarter, and ideas for improvements would flow across the organization. More than 100 million customers—every adult taxpaying U.S. citizen—would feel the positive impact.

Too bad it's impossible. And not because the IRS is a special case. It's like every other government agency, from the Post Office to public schools (as disheartening as that is to think about). Because of their staff's lifetime job security, managers have few mechanisms to reward great performance, so employees have little reason to be more effective or efficient. All they need to do is show up and, well, not screw up.

Now, with its 115,000 employees, the IRS undoubtedly has thousands of self-motivated, change-hungry civil servants in its ranks. You, for one, care passionately enough about its future to ask your question. But the prevalence of organized labor thwarts public agencies from making change, except around the edges. An IRS commissioner might lobby for new technology to streamline online filing. Or he might work around union rules to encourage his achievers with customer-service awards.

But beyond such modest suggestions, we can't answer your question. Our approach to management, with differentiation at its base, is like the approach used to field the best team in sports. It can't work unless managers can reward the best players so they're motivated to stick around and "play" even harder, coach the middle ones to improve, and move out the underperformers.

Sure, some pieces of our approach can translate into the IRS setting. The agency could, for example, develop a clear mission and link it to gritty, actionable values. It could also adopt our principle of candor in all communications and ensure that all employees have their voices heard with respect.

But none of our principles can transform an organization without differentiation as an "enforcement" device. Say, for instance, that the IRS intended to make taxation a faster and less painful experience. What values (and therefore behaviors) would it seek from its employees? We can only guess, but rapid response and courtesy would probably be on the list.

Great, but then what? If managers can't reward courteous, fast employees or move out the surly and slow, mission and values are like laws in a country without police.

The same goes for candor. Without a reward for it, why would anybody in the IRS, or elsewhere, muster up the courage to speak frankly? Without differentiation, in other words, our whole system is pretty useless. (You can read about our management philosophy on our Web site: welchway.com.)

Sorry to offer you such a frustrating response, but we're frustrated ourselves. A week doesn't go by when we aren't asked a question like yours, about improving performance or creating change in a government setting. Usually we write a personal note of apology—not our area—and leave it at that. But the IRS touches so many people. And its inability to change due to lack of differentiation may soon become a much wider problem.

Why? The answer is the Employee Free Choice Act, proposed legislation that aims to remove the secret ballot from organized labor elections, which could foster union-building. In 2007, the last time this legislation was politically alive, it passed the House but stalled in the Senate. Come January, there may be a new configuration on Capitol Hill, and the stall would likely shift into "full steam ahead." If so, companies large and small might face a wave of unionization efforts. And in short order, they might also be faced with the same limitations that constrain your employer. The IRS's hobbling lack of differentiation would no longer be the exception; it could be the rule.

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