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MANAGING FOR RESULTS

WHERE WE WERE

When the Clinton Administration came into office in 1993, USAID was a troubled organization. Some observers were calling for the agency's abolition, and there was near-universal agreement that serious management reforms were needed. USAID's staff -- some of the finest development experts in the world -- were trapped in a management system plagued by duplication, conflicting mandates and outdated information systems. Management problems were so severe that they were in danger of eclipsing the agency's fundamental mandate of promoting sustainable socioeconomic development, free markets, and democracy around the globe.

Since 1993, a series of sweeping reforms have been put into place. As a consequence, USAID has experienced one of the most dramatic turnarounds that can be found in government.

During this period, USAID also faced significant resource reductions. The agency made dramatic cuts in the number of overseas missions and personnel, both in Washington and in the field. After both program and operating funds were further cut in FY 1996, the agency was forced to resort to a reduction in force and again reassess the need for additional post closings.

WHERE WE ARE

Since 1993, USAID has:

• Focused on fewer, more attainable objectives;

• Streamlined the agency's organization and empowered its staff;

• Redesigned and simplified the ways it does business;

• Cut personnel on a percentage basis more than any agency in the federal government except one; and

• Established a worldwide information system for its core business areas.

USAID has reported in depth on these reforms in Toward the New USAID II: Three Years of Reform Progress (October, 1996), a companion document to this year's budget request. The key reforms and issues still facing USAID are highlighted here.

The USAID Strategic Framework

Since 1961, the USAID has carried out America's economic development and humanitarian assistance programs abroad. Throughout the period, U.S. foreign assistance served to further America's foreign policy interests. In the aftermath of the Cold War, USAID has focused its programs and has been able to become more results oriented. Over the past three years, continual efforts have led to a strategic planning process that includes:

• Articulated strategies for USAID's five interrelated development goals in the Strategies for Sustainable Development (March 1994);

• Issued implementation guidelines that help each operating unit to select strategic objectives and develop plans for implementing programs (March 1995); and

• Set out explicit goals and objectives, approaches, and performance indicators in an Agency Strategic Framework. This "menu" of five goals and 19 supporting objectives is being used to inform programming decisions and select indicators to monitor performance (1995).

• Virtually all USAID operating units now have strategic plans. The "terms of engagement" of these plans are being incorporated into "management contracts" that establish agreements between each operating unit and senior management. The contracts reflect a five-to-eight year plan for each mission or Washington office that manages program resources and set out the agreed-upon "results packages" and the resources needed to achieve them. This tool helps the agency focus on what it plans to achieve, holds individuals and units accountable, and informs the agency and the Congress when programs are going off-track or are being successful.

• This year, each USAID operating units submitted for the first time a Results Review and Resource Request (R-4). These documents were used by Washington central and regional bureaus to assess overall progress toward the achievement of each unit's strategic objectives. The outcome of the R-4 process was then fully incorporated into the FY 1998 submission to the Office of Management and Budget (OMB), which for the first time linked the USAID budget request to what the agency would achieve with the resources.

• Significant progress has been made in meeting the requirements of the Government Performance and Results Act (GPRA). The agency's draft strategic plan was submitted to OMB in November 1996, as a part of continuing consultations leading up to a final agency plan by September 1997. USAID is now planning consultations with its partners, including its Congressional oversight committees.

Core Values

Five core values have guided the design and implementation of every aspect of agency reforms; they include:

• Customer Focus. Both partners and customers are now more consistently and systematically included in the planning, implementation and evaluation of assistance. By learning from these parties, USAID is better able to frame strategic objectives and design effective action.

• Results Orientation. The goal of USAID programs is to promote change. Each of the new processes is centered on the requirement of producing results rather than satisfying bureaucratic, regulatory or administrative requirements.

• Empowerment and Accountability. Empowerment involves giving those who must carry out programs the authority and responsibility to make and implement decisions as close as possible to where the action takes place. It also involves providing the resources to carry out decisions and allowing sufficient flexibility to respond to changing conditions while holding them accountable for the end result.

• Teamwork. USAID has adopted teams as an effective way for individuals to work together to achieve agreed-on objectives or results.

• Diversity. USAID must ensure a workplace environment in which each employee values the richness of diversity, experience, and contributions of others.

Further challenges exist in fully embodying these values, but USAID is well on the road to making them a reality in all aspects of the agency's work.

ACCOMPLISHMENT	DATE
Announced USAID's new organization structure	October 1993
Issued Agency "Strategies for Sustainable Development"	March 1994
Completed "rightsizing" of USAID organizational units	March 1994
Implemented procurement reforms	August 1994
Initiated pilot project in performance planning and measurement under GPRA	August 1994
Issued Agency Customer Service Plan	September 1994
Closed five field missions	FY 1994
Issued Agency Strategic Implementation Guidelines	March 1995
Implemented new Personnel Performance Evaluation System	July 1995
Issued Agency Strategic Framework and Indicators for FY 1995 and FY 1996	September 1995
Closed 10 field missions	FY 1995
Implemented new program operations procedures/managing for results	October 1995
Implemented Agency Automated Directives System	October 1995
Began testing and training on New Management System	October 1995
Issued Agency Annual Performance Report for FY 1995	February 1996
Began limited implementation of entire New Management System	July 1996
Closed 11 field missions	FY 1996
Began using New Management System worldwide	October 1996
Submitted draft strategic plan required by GPRA to OMB	November 1996

The National Performance Review: the Agency as an Experimental Laboratory

USAID was one of only two instances (the other being the Federal Emergency Management Agency) in which the entire agency was designated a "reinvention laboratory." During the summer of 1993, a National Performance Review (NPR) team studied the agency, and developed seven major recommendations and 37 proposed actions. Most other departments and major agencies were covered in a parallel fashion. There were a number of cross-cutting studies on such topics as human resources, procurement reform, and information management. USAID implemented all NPR recommendations which were feasible (some being impossible to carry out because of Congressional or OMB inaction or opposition). The General Accounting Office (GAO) concluded, in early 1996, that USAID's reporting on the status of NPR implementation had been honest and complete.

Reorganization, Rightsizing and Realignment

The USAID Administrator announced the agency's reorganization plan on October 1, 1993. It reflected the basic principles presented in the NPR, including a focus on streamlining the structure and procedures, cutting unnecessary layering, broadening the span of control, and eliminating duplicative processes. The reorganization:

• Abolished one high-level management layer between the administrator and the bureaus and independent offices;

• Reduced the number of major organizational units by five; and

• Realigned certain functional areas and geographic regions to facilitate cooperation among all bureaus, offices, missions and personnel.

With the structural reorganization complete, USAID launched an internal rightsizing analysis for each of the new organizational entities. Rightsizing was accomplished overseas through the closure of selected overseas missions and programs, and in Washington through a review of each bureau and independent office.

Post Closings and Overseas Restructuring

On November 19, 1993, the Administrator announced the closing of 21 USAID field missions to be accomplished by the end of FY 1996. This action was a vital part of efforts to better achieve results by focusing the shrinking resources on those countries where real development results could be expected. Thus, while a few of the post closings were because countries had "graduated" from USAID assistance, a larger number were closed because of the poor quality of the partnership with host countries.

In 1995, the Vice President charged the foreign affairs agencies to again examine the question of post closings. USAID announced its intention to close five additional posts. Twenty-six posts were closed by the end of FY 1996.

In the face of dramatic budget cuts in FY 1996, USAID once again returned to the question of post closings. However, this time the exercise was based on a set of explicit factors and was driven not only by the budget imperative but by the desire to focus on the time horizons for country graduations. USAID used four criteria to make the difficult decisions on which country programs to reduce, close, or graduate.

• Country Need and Level of Development. This assessment was based on an index that considered such socioeconomic indicators as per capita income as measured in purchasing power terms and by infant mortality and fertility rates.

• Impact on Global Problems. Consideration was given to the importance of each country to addressing problems of rapid population growth, the spread of AIDS, climate change, protecting biodiversity, and promoting democracy.

• Quality of Partnership, Commitment and Performance. This criterion involved a judgment about whether countries were making their best efforts to help themselves.

• Foreign Policy. This criterion sometimes became an over-arching one in cases where, for example, relative need was lower than other candidates for closure.

In the summer of 1996, USAID completed NSDD-38 consultations with the State Department and received the Department's support to establish closings and down-sizing plans over a ten-year period. As a result, USAID now has established internal planning guidance that establishes dates for additional closings, down-sizing or graduation in 25 countries.

To enhance senior management's direction of overseas program activities, all USAID missions were placed in administrative categories according to the size and complexity of their programs. In 1996, policy guidance on the number and type of staff in each of these missions for all occupational categories was developed and disseminated as part of a management study, Overseas Workforce Restructuring Analysis.

While there will certainly be new countries where a USAID presence will be needed to respond to changing international events, the current plan is that USAID, by the year 2000, will have fully staffed missions in about 30 countries and more limited programs in another 20. In addition, USAID will maintain the institutional capacity to mount programs for ten additional countries where USAID might be called upon to deliver "transitional" assistance. Program resources for such assistance would be needed, but USAID will retain the core staff that can be redeployed for high priority needs.

Reengineering USAID Business Processes

Much of the work of developing the "new USAID" was carried out through a series of related studies and evaluations of the agency's core business areas: program operations, accounting, procurement, budget, human resources, and property management. Each of these business area analyses (BAA) represented a major reform effort; collectively, they provide the potential for a radically new and improved way of doing business. Following the completion of each BAA, business system design work was undertaken to develop a suite of integrated automated data systems which are collectively referred to as the USAID new management systems (NMS).

The major systems that were examined in the BAAs and then reengineered were:

• Program Operations developed new, more coherent processes. Thereengineered operations system establishes the agency's new program procedures and processes for planning, implementing, monitoring and evaluating the foreign assistance programs.

• Accountingwhich had over the years grown to be an overlay of multiple systems that contained incomplete, inaccurate and duplicative information. One of the most ambitious efforts has been to replace 11 disparate financial management systems with a single integrated worldwide financial and information management system. The new AID Worldwide Accounting Control System (AWACS) will allow all financial transactions to be entered when and where they take place; reduce the creation and flow of paper; and generate information which is both current and accurate.

• Procurementreforms were needed to establish systems to award and administer public resources responsibly and effectively. Eighteen target areas for reform were identified in early 1994, including one that would establish a policy preferring performance-based contracting. As a result, in FY 1995, performance-based agreements totaled approximately $240 million. A second major effort was development and installation of acquisition and assistance (A&A) software which complements and is integrated with the other modules of the NMS.

• Budget reforms were needed to make information available more quickly and in forms that enabled decision-making on resource allocation, to streamline the control and distribution of funds, and to find simpler ways of preparing budgets. The major innovation was the development of the budget module in the NMS. This part of the overall system is the key link between the AWACS (accounting) and A&A (procurement) components. It allows staff to track the flow of funds through the system from planning to final payment of bills.

• Human Resources management needed more efficient supporting systems and policies. Of over 100 specific recommendations, about 80% pertained to changes in policy and procedures and the remaining 20% to information technology. The single most important change was the institution of a new employee performance evaluation system (EEP) in 1996. Performance standards are established in relation to unit goals and performance is rated based on feedback from a full circle (360 degrees) of peers, supervisors and partners.

Information Technology

The new management system (NMS) uses an integrated computer-based management information system which encompasses the agency's core business practices. The system will correct longstanding management problems. Four components of the NMS are operational: program operations, acquisition and assistance, budget and AID Worldwide Accounting and Control (AWACS).

The NMS also will include subsystems for human resources management and property management. The business system design is currently under way for human resources, and the planning and evaluation phase of the property management business area analysis is nearly completed.

System refinements and improvements are being introduced as problems emerge -- the problems inherent in the development of such a large and sophisticated system. Among the accomplishments over the past three years in establishing NMS are the following:

• Designed, developed and installed communications equipment throughout the world;

• Purchased hardware and deployed it worldwide;

• Distributed a practice version of the NMS in the first quarter of FY 1996;

• Began to use the system in Washington offices in January 1996 to develop strategic objectives, activities and other information related to program operations;

• Issued guidance on and created NMS access and user roles;

• Established an extensive help network to assist operating units with problems and questions;

• Migrated over 5,600 records from the old procurement system, the Contract Information Management System (CIMS), into NMS and began to make corrections and add missing data;

• On July 15, 1996, began processing Washington-funded travel and some new awards;

• Released worldwide on October 1, 1996 an update of the NMS and activated the system worldwide, addressing telecommunications and technical problems as they arise; and

• Began using the system on October 1, 1996 to issue budget allowances for program and operating expense funds, to accomplish new procurement actions, and to make payments.

The agency has now moved into the most challenging and exciting phase of making the system fully operational. The following is currently under way:

• Migrating data from the old financial system into the AWACS module;

• Reconciling data with information in the budget and A&A components as the migration occurs;

• Recording of FY 1997 obligations as funds become available;

• Posting payments which were accomplished outside NMS at the beginning of FY 1997 when the data migration and correction was being accomplished; and

• Training and other efforts to speed up operations in the system.

Country Experimental Laboratories

In October 1994, the country experimental laboratories (CELs) program was established whereby "learning labs" were challenged to work out the kinks in the newly designed processes before full implementation throughout the agency was to begin one year later. From the missions that volunteered to participate, ten were selected to test the new business practices: Dominican Republic, Guatemala, Jamaica, Madagascar, Mali, Bangladesh, Niger, the Philippines, Poland, and Senegal. The one-year laboratories provided an experimental period for learning and testing the new systems and approaches.

Customer Service Planning

An executive order of September 1993 required that all federal agencies develop and implement customer service plans to measure customer satisfaction and improve program responsiveness and performance. USAID customers are the beneficiaries of its overseas programs. Customer service officers were appointed and trained to help missions and Washington offices develop plans and surveys. These efforts were followed by on-the-ground testing and experiences that were then shared widely throughout the agency.

Customer service plans have now been prepared by USAID missions and operating units that identify customers, indicate how the agency obtains their input and feedback, set service delivery principles and standards, and give specific contact points for inquiries. USAID published and disseminated the agency's customer service plan in 1994, drawing praise from the National Performance Review.

Regulations Reduction

On September 11, 1993, the President signed an executive order requiring all departments and agencies to reduce their internal management regulations by no less than 50% within three years.

The Automated Directive System (ADS) replaced the previous handbooks which were cumbersome. Information was difficult to find and often ambiguous about what was mandatory and what was optional. The ADS is two-tiered, separating core policy from essential procedures and putting eachin clear, concise statements in a readily accessed form. The ADS on CD-ROM is a portable and easy-to-use program, replacing 33 large handbooks and some 12, 000 pages of text.

After a successful pilot test, the new system was made effective on October 1, 1995, making it possible to disseminate new policy guidance quickly and uniformly. As of April 1, 1996, with the new system nearly completed, USAID has fulfilled the executive mandate to reduce the agency's internal directives and regulations by at least 50%.

Consolidated Administrative Services

USAID is implementing, with the State Department, a cooperative administrative services system. It effectively merges the overseas support functions that are truly common to all the foreign affairs agencies. The International Cooperative Administrative Support Services (ICASS) is a customer-driven foreign affairs system for managing and funding administrative support systems. ICASS was developed in response to concerns of the President's Management Council, the Vice President's National Performance Review, Congress and the GAO.

The agency is committed to making ICASS a success and has adopted it worldwide. The agency is working with counterparts in the State Department to ensure an effective system. Given the agency's unique statutory mandate and operational purpose, ICASS represents the best and most economical approach for consolidation of administrative functions.

Reduced Vulnerabilities

For FY 1996, USAID will submit to OMB for the first time a consolidated financial management statement, as required under the Chief Financial Officers Act of 1990.

USAID management is continuing to build a partnership with the Office of the Inspector General (OIG) to maintain a strong and effective audit program. Important improvements have been made.

• A single agency audit information and tracking system was developed and became operational on April 1, 1996.

• USAID management and the OIG jointly conducted pilot training in the Europe and New Independent States (ENI) region for USAID personnel, grantees, and audit firms on the recipient-contracted audit program and recent changes in audit management.

• Agency management has adopted more stringent criteria for the final action of audit recommendations.

WHERE WE ARE GOING

USAID is now completing one of the most sweeping management improvement initiatives in the federal government, involving dramatic changes in almost every business operation. The organization is positioned to become one of the most efficient agencies in the federal government. It must now capitalize on its initial gains and move aggressively to make these changes a permanent feature. This means further institutional and cultural changes will be needed. And, it means that there are still ways to make the agency more efficient, more responsive and less costly.

Over the next two years, USAID will:

• Ensure that the resources and commitment are there to make major initiatives such as the NMS and ICASS work efficiently and effectively.

• Fully meet the requirements of GPRA. USAID will finalize the strategic plan this year and submit the first annual performance plan to OMB in the Fall and to Congress in the next budget cycle. USAID has been preparing annual performance reports since 1993. While the GPRA requirement for such a plan does not formally fall due until 1999, USAID is well ahead of this requirement. The first such plan will be linked to the FY 1999 budget request.

• Continue to implement post closings, down-sizing and graduations, including the three planned in FY 1997 and another three in FY 1998.

• The Office of Management Planning and Innovation and others in the agency are working to ensure that reforms are institutionalized in a systematic way. Late last year, the office together with the human resource staff embarked on a major effort to reform guidance and procedures for organizational structures, personnel position management and classification, and improving incentives.

• USAID will continue to look for ways to streamline operations, structures and systems to find ways that work better and cost less, especially given the opportunities presented by co-locating all staff in the Ronald Reagan Federal Building.

• It will intensify the training needed to reorient the culture of USAID to instill the core values and to use the new information and operations systems. Training is being carried out at all levels but is vitally important for senior managers to help them replace traditional hierarchical relationships with coaching and leadership.

• USAID has become a "learning organization," an agency which is continually transforming and improving. The agency's quality council and other mechanisms will be used to assess and recommend further changes in systems and policies to support the emphasis on results.

Ultimately, USAID's success must be measured by whether its work contributes to building a more peaceful world where all people have the opportunity to make better lives for themselves and their children. This is the real goal of USAID's reinvention and reforms. The agency has made tremendous progress in revitalizing the institution and its management systems so that it can make its contribution to this goal.

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