Obamacare Fixer Zients Brings IPO Past to Economy PostJulianna Goldman
Jeffrey Zients made tens of millions of dollars building consultancies, helped bring Major League Baseball back to Washington and salvaged Obamacare’s rollout. He also counted Nelson Mandela among his wedding guests.
Now, he has to prove he’s up to his next task: serving as President Barack Obama’s top economic adviser at a time when the U.S. recovery is showing signs of faltering.
Obama’s choice of a management consultant and investor to lead the National Economic Council -- a post usually occupied by economists, academics and corporate titans -- underscores how the White House is focusing less on pushing bold, new ideas than on making the current ones work. With Republicans blocking most initiatives in Congress, it may be the most Obama can ask for.
“What’s important is for us to implement the goals we’ve laid out,” said White House Chief of Staff Denis McDonough. “That’s a management question, a focus and discipline question, a process question. Jeff is an expert in each of those areas.”
Zients, 47, next week will replace Gene Sperling, who is regarded within the White House as an idea machine, pressing for proposals such as government-backed retirement accounts, tax cuts for lower-income Americans, and getting businesses to pledge not to discriminate against the long-term unemployed.
Some Democrats felt they had a champion in Sperling yet are less sure about Zients, said Dean Baker, co-director of the Center for Economic and Policy Research in Washington. If the U.S. were to have to stem a crisis in emerging markets, Baker said he wants Zients to promote initiatives that would benefit U.S. workers over financial institutions. He cited Sperling’s experience dating back to the Mexican peso crisis.
“Gene is a known quantity,” said Baker.
McDonough said Zients will work on implementing Obama’s Affordable Care Act as well as on issues from reducing college costs to boosting skills and training programs. He’ll also be charged with using his business background -- which included a stint at the same consultancy where Mitt Romney once worked -- to promote investment in “promise zones,” recession-hit areas that are targeted for federal aid.
Meanwhile, the economy shows signs of struggling, with home sales and retail sales falling last month, and the nation adding 113,000 jobs, less than what Bloomberg surveys projected.
“He just does stuff, he doesn’t talk about stuff,” said former Treasury Secretary Timothy Geithner. The role of NEC director is to “help generate ideas, sort the good from the bad, frame them for the president, give good choices, build consensus and make sure there’s execution.”
That’s where Zients’s record in government and business comes in, according to more than a dozen current and former administration officials, colleagues and executives interviewed for this story. They describe him as a hyper-organized manager and strategist who will use the power of the office to enlist business and interest groups to promote Obama’s agenda.
Named to head the National Economic Council in September, Zients was supposed to start in January. Then the chaotic Oct. 1 rollout of Obamacare led McDonough to ask him to run a triage unit overseeing the repair of Healthcare.gov, the website where the uninsured were struggling to sign up for coverage.
“This is fixable,” Zients told Obama on Oct. 24. The next day, he publicly vowed to have the website operational by the end of November. On Nov. 30, Zients said the site was working 90 percent of the time, allowing more than 800,000 daily consumer visits. That made Healthcare.gov a much smaller target for Republican critics.
His ability to execute was apparent to his former boss, David Bradley, during the first week that Zients, then 24, began working for him in 1990 at the Advisory Board Co.
On Zients’s first day at the management-advisory firm, Bradley handed him 24 projects they were looking at and assigned him six researchers. By the end of the week, he was in Bradley’s office with a 15-minute presentation: He wanted to purge about half the projects and cut staff. Within two years he was president of the company.
A decade later, after Bradley and Zients split the company and took one part -- the Corporate Executive Board Co. -- public, they brought 20 executives from the then-closely held Advisory Board on a retreat to St. Bart’s to discuss plans. Revenue was flat and profits were falling, and they felt they were left with the losing part of the company as ex-colleagues cashed out with new Mercedes and second homes.
When the retreat ended, Bradley, Zients and other leaders stayed in St. Bart’s for two days poring over data and determined to devise a plan to take the Advisory Board public.
Zients had a “eureka moment” and “out of that came a strategy that we came back and executed, and two years later the Advisory Board was booming and went public for $300 million,” said Bradley, now owner of Atlantic Media. “It was the most profitable time I’ve ever spent on the beach.”
It was profitable for Zients, too, whose assets are as much as $212 million after bringing the two consultancies public, financial-disclosure forms show. The White House declined to make him available for an interview.
When Zients was in his late-30s, Bradley introduced him to Republican fundraiser Fred Malek, who was trying to bring Major League Baseball to Washington. Malek led a group that included former Secretary of State Colin Powell working to convince league officials to move the Montreal Expos to the capital.
With the Baltimore Orioles just up I-95, Zients built relationships with local officials and convinced the league the area could support two teams. Ultimately, his group lost its bid to own the team that became the Washington Nationals.
As Zients heads to the NEC, one weakness is that he’s a generalist without deep experience in a specific industry, said Bradley. Former NEC Directors Robert Rubin and Stephen Friedman were finance experts, having been chairmen of Goldman Sachs.
Even so, Bradley says Zients -- a non-economist who’s the only NEC director without a post-graduate degree -- knows he needs experts. “You need somebody who’s able to do Ph.D. work in econometrics,” he said. “He won’t be that person, but that person will work for him.”
As a two-time acting budget director, Zients recognized he wasn’t an expert on the subject. During meetings, he would cut off aides when they used arcane terms, instructing them to explain what they meant.
He also understood the value of talent management. Zients took over the budget office in 2012 when the demands on his staff were rising amid a pay freeze and lower training budgets.
To maintain morale he reached into his own wallet to rent margarita machines and held six happy hours in his suite of offices over several months for the staff.
Geithner said he brings business credibility that could be helpful in enlisting corporate America to back Obama’s agenda.
“You always get the people who tell you, ‘This guy is really good’” then find something bad to say, said Carlyle Group LP co-founder David Rubenstein. “I’ve never heard anybody say anything negative about him.”
Zients, married with four children, graduated summa cum laude from Duke University and worked at Bain & Co, Romney’s former firm, where he met his wife, Mary Menell. They were married in South Africa, where Menell grew up and where her parents were friends with Mandela.
He founded an investment company, Portfolio Logic Management LLC.
His financial-disclosure forms show he’s not ignoring the Washington-area economy: He has investments in several local restaurants, including Posto, Casa Luca, and Fiola, which “Bon Appetit” named one of America’s best new restaurants in 2012.