How Rex Tillerson Is Remaking the State Department

The former CEO is bent on a full private-sector-style redesign even as trouble brews abroad.
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U.S. Secretary of State Rex Tillerson on Sept. 20.

Photographer: Brendan Smialowski/AFP/Getty Images

Secretary of State Rex Tillerson doesn’t know what to make of news reports that morale is low at his agency and that he’s not doing a good job running it. “I walk the halls, people smile,” he says in a recent interview in his spacious office in Washington. “If it’s as bad as it seems to be described, I’m not seeing it, I’m not getting it.”

That’s exactly the complaint many Department of State employees have about Tillerson: He’s not getting it. Early on, many career diplomats were optimistic when the former chairman and chief executive of Exxon Mobil Corp. took over the 75,000-person agency. He knew his way around the world and had decades of experience running a large, sprawling organization. He’d negotiated deals with heads of state in some of the toughest places in the world to do business, and he understood the delicate balance between using soft and hard power. Those skills would be put to the test by the array of urgent global issues awaiting him—including Iran, North Korea, and increasing tensions with China and Russia—when he arrived for his first day on the job in February.

Instead of focusing all his attention outward, though, Tillerson has indicated that some of his top priorities are more inward-looking. He wants to cut costs and reorganize the department, in part to meet a White House goal of reducing the agency’s budget by 30 percent. In the eight months since he took over, Tillerson has spent considerable time immersed in the minutiae of head counts and organizational charts while ensconced in his executive suite on the seventh floor of the Harry S Truman Building, where he sat for an interview with Bloomberg Businessweek on Oct. 19. So far he’s traveled less than half as much as John Kerry and Hillary Clinton had at this point in their terms.

In Tillerson’s view, the State Department needs a dramatic private-sector-style makeover—a “redesign,” as he calls it. An outline of his plan sent to Congress in August is written in the opaque jargon of corporate management consultants: Tillerson envisions “an evidence-based and data-driven process to enhance policy formulation and execution, as well as optimize and realign our global footprint.”

In a speech to the staff in September at the U.S. Embassy in London, Tillerson acknowledged the five-alarm fires in the world—North Korea, a soured relationship with Russia, the war in Syria, and the lasting violence of Libya’s civil war. But those problems, he said, weren’t as crucial as getting State’s house in order. “The most important thing I can do is to enable this organization to be more effective, more efficient, and for all of you to take greater satisfaction in what you do day in and day out,” he said. “Because if I accomplish that, that will go on forever, and you will create the State Department of the future.”

The comments stunned many department employees who already felt besieged by proposed budget cuts and a president whose tweets frequently contradict Tillerson’s diplomacy. Did the secretary really feel his biggest job was optimizing managerial efficiencies? “Regrettably that’s the way it got construed,” Tillerson says in the interview.

Few would argue the State Department is a model of operational excellence. Its technology is antiquated. Its priorities appear to reflect a different age—it has more consulates in France than in China. Along with old-fashioned diplomacy, it has its hands in a grab bag of issues, from humanitarian aid to democracy development to drug interdiction to protecting the oceans and managing energy resources. And its reach includes almost 300 embassies, consulates, and diplomatic missions around the world.

Tillerson’s predecessors also tried tinkering with the ever-growing agency, which has doubled in size since 1995. Colin Powell sought to overhaul the department’s aging IT system, and Clinton launched the grandly titled Quadrennial Diplomacy and Development Review, intended to modernize the department. Modest changes resulted.

But for Tillerson, applying the methods of corporate downsizing to the federal government is more than just a side job, it’s the job—one he considers essential to the nation’s ability to conduct foreign policy. “There’s a widespread American belief that if you can just bring business practices to government, it would work better. And with that, there’s a widespread belief that this is easy to do,” says Ronald Neumann, a former ambassador to Afghanistan who now runs the American Academy of Diplomacy. “I suspect that he marched in with a businessman’s ‘I know how to reorganize things and make them run better,’ and then he finds he’s walked into quicksand.”

Tillerson’s approach has put him at odds with Congress and the staff he leads. His hot and cold relationship with Trump hasn’t helped, as rumors persist that Tillerson is already plotting his exit and that United Nations Ambassador Nikki Haley is eagerly waiting in the wings. In the interview, he says his relationship with Trump is “good” and that he intends to stay in the job “as long as the president lets me.”

Tillerson joked about his predicament during a trip to Geneva on Oct. 26 when he made a brief detour on the way to the airport to stop at a park and admire a sculpture of two crouched, embracing bodies. “Some days I feel like I need to do that— curl up in a ball,” he said, cupping his hands and eliciting chuckles from his entourage.

Coming off 11 years as the unquestioned boss of America’s biggest oil company, Tillerson was always going to have to change to fit his new role. The question was whether he could. “I think Rex’s background has led him to keep an arm’s length, and I think it’s hurt him,” says John Hamre, the head of the Center for Strategic & International Studies, who’s known Tillerson for more than a decade.

Usually cautious and taciturn, Tillerson gets excited discussing his reorg plan. “When you do organizational redesign, it has a number of elements to it. There’s the organization chart itself, the boxes, and who reports to whom, but the most important aspect is always the process by which the work gets done,” he says. A successful structure is one where people are “interfacing with others” without obstacles. Tillerson’s redesign is expected to cut spending by $5 billion to $10 billion and slash about 8 percent of career staff. The department has studied closing some consulates and embassies around the world, including in Basra, Iraq, and Alexandria, Egypt, a controversial notion considering the U.S. is trying to exert its influence in the Middle East.

Tillerson’s belief in the power of a good reorg stems from his time at Exxon, where he oversaw two major reshuffles. “We had very long-standing disciplined processes and decision-making. I mean highly structured, that allows you to accomplish a lot,” he told reporters aboard his official plane in July. “Those are not the characteristics of the United States government.”

His effort to gain acceptance for his redesign stumbled from the start. In March, Trump mandated massive cuts at all agencies, with the State Department set for the biggest hit, more than 35 percent. Tillerson opposed the size of those cuts but eventually acquiesced on the condition they not be so drastic and that he would get to choose how to carry them out. That led to a “listening tour” conducted by consulting firm Insigniam Performance LP at a price of $1 million. That struck many staffers as egregious, since the department was being asked to cut costs. Particularly galling was that while the consultants flew business class to visit embassies, State staff traveling with them flew coach.

Tillerson has identified several strategies—such as putting IT infrastructure into the cloud, overhauling procurement, and possibly extending staff rotations overseas. He’s also cut the expanding ranks of special envoys. Some of those moves, however, irked members of Congress, including Republicans, who were skeptical of Trump’s proposed cuts and moved to assert their authority over the State Department’s spending. Draft legislation for State highlighted concerns that “the administration has a predetermined outcome for the reorganization or redesign.” In an interview with Bloomberg News in May, Senate Majority Leader Mitch McConnell called deep cuts to State “highly unlikely” and defended its budget with the kind of language Tillerson would appreciate: “I think the diplomacy part of what we do overseas is a lot cheaper than the use of the military and frequently has a pretty good return on investment.”

Tillerson’s critics also say that the departure of senior diplomats, coupled with a hiring freeze, has hamstrung the agency. According to Neumann, that’s led to a slowdown in visa-processing times and made it impossible for spouses of diplomats—normally a pool the State Department has tapped for critical jobs—to fill posts. Tillerson has also seemed to contradict his public statements. He says his top priority is security, yet the assistant secretary for diplomatic security and his acting replacement were let go. The position has yet to be filled. Tillerson also hasn’t filled out the top ranks of his agency, including officials in charge of Southeast Asia and arms control.

Despite the shortages, the department’s director general (essentially the head of personnel) was dismissed. Tillerson has further angered staff by focusing on nondiplomatic priorities. A recent email to staff said he would boost hiring to clear a backlog of Freedom of Information Act requests, while thinned-out bureaus would be expected to help. At the same time, foreign counterparts are being frozen out. This summer, for example, the foreign minister of a top European ally canceled a visit to the U.S. because Tillerson, after weeks of failing to respond to messages, offered only a 20-minute meeting.

Tillerson has also missed a chance to cultivate allies at State, especially career staffers who agreed it needs an overhaul. “To a person, we felt the department was in need of reform—there was initially a kind of buzz of excitement, that we finally had a secretary who was willing to look at how the organization functions,” says Linda Thomas-Greenfield, a former assistant secretary of state for African affairs who retired in September after 35 years. “We came later to understand that it was not to improve the organization but to deconstruct it.” Thomas-Greenfield says she confronted Tillerson about staff reductions in March, assuring him that people in senior positions were nonpartisan and “ready to mold ourselves” to help him. Tillerson thanked her for her service, she says, and she never heard from him again.

And it’s in that department that he admits he’s fallen short. “That’s the one thing I wish, if I could do it different, would be to do a better job communicating back out to the organization what this redesign effort is,” he says. “As a leader, that’s my responsibility.”

(Updates with comments from Tillerson during trip to Geneva.)

    BOTTOM LINE - Secretary of State Rex Tillerson is inwardly focused on overhauling the State Department, despite a proliferation of foreign policy dilemmas around the world.
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