Coming to Terms With State and Local Government’s No. 1 Management Challenge

Last year, a Route Fifty survey of public sector managers and executives nationwide found that human capital and workforce issues ranked as the No. 1 challenge for state and local governments.

That echoed the findings of a recent survey conducted by the Center for State and Local Government Excellence.  

The reasons have been widely reported: the aging workforce and loss of experienced talent; damage to the “brand” of government following the budget crises; hiring freezes and pay freezes; the dissatisfaction of millennials with their work experience; the staggeringly slow hiring process; and the dispiriting impact of all of this on employee morale. If allowed to continue, the country will be the loser.

The problem is unfolding at a time when the demand for specialized talent has created labor shortages in fields where government has to compete with private employers for the better qualified graduates. 

In a year when the media is focused on political campaigns, government performance problems, national as well as local, will continue to make headlines. Those headlines both affect the public’s support for government as well as contribute to increased career uncertainty for employees. The prospect of a career in government has to be less promising today than a decade or two ago.

Government has operated with the same “people management” infrastructure for years. To use the analogy of what’s been allowed to happen to the country’s bridges and roads, cracks have widened and been patched over. Employees are managed as a cost to be controlled and minimized. Employee-related expenses are often the first to be cut. The costs of course are very real. Underfunded pensions make it very difficult for many state and local governments to invest in their workforce.

But poor morale also has a cost. A new Gallup report, State of Local and State Government Workers' Engagement, estimates the cost of workers who are not engaged and committed at $100 billion. 

This problem will only be solved when public employers find a way to provide attractive career opportunities. Endless articles have focused on millennial workers, but millennials are not unique in their desires. Every worker wants a positive work experience, to feel valued and respected. Workers want to have their contribution recognized and to be treated fairly.  People will work very hard under the right circumstances and look forward to coming to work each day. 

It’s Time to Reinvent the Way Work is Managed

It’s been largely ignored by government thought leaders but the private sector is experiencing a revolution in the way work is organized and managed. It’s been ongoing now for two decades. The intent common to the myriad changes is making better use of employee capabilities to raise performance levels. 

A key aspect is an important change in management philosophy: Leading companies manage their employees as assets, not costs. That’s reflected in the many books and articles discussing employee engagement, the “best places to work,” and high performance. In the early years of the revolution, the business media frequently reported noteworthy gains in performance. One study in the early 1990s summarized the findings from over 100 productivity studies and concluded that gains of at least 30 percent to 40 percent were possible with a new work management paradigm.

The initiatives to reinvent government and improve performance have focused on new technology and management systems. However, the performance gains have been disappointing. Looking back, the reinventing government movement failed to account for effective people management. 

The classic book on the topic, Reinventing Government: How the Entrepreneurial Spirit is Transforming Government (Addison-Wesley), was published in 1992. What today are common words and phrases like empowerment, engagement, knowledge jobs, and high performance were not then in the business management lexicon. We know now that high performance depends on employee commitment.

Twenty years of research and experience have highlighted the value of a number of changes proven to raise performance levels that are available to government. Significantly, the changes also contribute to a more positive work experience. That’s important. The transformation of work can be discomfiting to employees accustomed to traditional work settings but with time the new work environment is a win-win for employers and employees. Levels of satisfaction in leading companies confirm that. The word “energize” is often used to describe how employees react.

At the core of the revolution is a basic change in the working relationship between managers and employees. That will take time to be accepted. A key is empowering workers to make job-related decisions. Years ago Dr. W. Edwards Deming, the TQM guru, focused on the importance of front line workers and their impact on quality, productivity and customer satisfaction. Employees like autonomy and they like to be challenged. That has to start at the top of an organization and cascade down.

Many of the changes would incur little or no cost. Change, however, often triggers anxiety and resistance, especially where there is little trust. 

The best strategy is to involve managers and employees in the planning. They know better than anyone where problems undermine performance. When they are involved they can be expected to commit to the development of plans that make the workplace more productive and rewarding. As the saying goes, “This isn’t brain surgery.”  We learned from experience with reengineering that employee teams can address most work-related problems.

Empowering employees may be controversial but in a number of successful reform initiatives employees have played prominent roles. They want their organization to be successful and take pride in their contribution. They “own” the changes and help to sell them to co-workers. 

Revolutions Need Leaders

One of the barriers is that too few government leaders have experience with workforce management in large organizations. That’s often true for appointees as well. They were attracted to government by public policy issues. They need to understand that reforming the way work is structured and managed will pay off in improved performance.  

Realistically, the expertise needed is found in the field of human capital management. HR executives, however, have not been seen as change agents in the private or public sector. If anything, they’ve received criticism. The article that has received the most attention has to be the caustic 2005 cover story in Fast Company, “Why We Hate HR,” which began:

“After close to 20 years of rhetoric about becoming 'strategic partners' with a 'seat at the table' . . . most human-resources professionals aren’t nearly there. They have no seat, and the table is locked inside a conference room to which they have no key. HR people are, for most practical purposes, neither strategic nor leaders.”

However, in the private sector the tide is turning. Front and center is a 2015 Harvard Business Review article, “People Before Strategy: A New Role for the CHRO,” by Ram Charan, a highly regarded consultant; Dominic Barton, the global managing director of the consulting firm McKinsey & Company; and Dennis Carey, vice chairman of the executive search firm Korn Ferry. In the community of business advisors, it would be difficult to assemble a more prominent trio.

They argued, “It’s time for HR to make the same leap that the finance function has made in recent decades and become a true partner to the CEO . . . Managing human capital must be accorded the same priority that managing financial capital came to have in the 1980s.” In their words, HR should have the lead in “building and assigning talent, especially key people, and working to unleash the organization’s energy.”

In larger companies a sure sign of the emerging importance of CHROs is their place on the pecking order. Many are now paid more than marketing and information systems executives, and only slightly less than chief financial officers. A recent report from a search firm refers to CHROs as the Chief Change Officer.

Describing CHROs as leaders of change efforts is a very different role from their traditional responsibility for administering HR policies and programs and monitoring compliance with laws and regulations. That’s reflected in the metrics widely used to track HR performance. The focus is on speed, efficiency and cost minimization (e.g., HR cost per employee). The metrics rarely are designed to measure if the HR function actually benefits the organization.

An expanded role for HR needs to address human capital problems—such as the widely shared retirement bubble—and will require the approval and support of government leaders. Those leaders need to understand HR’s expanded role and what any new initiatives are expected to achieve along with needed resources. Soliciting their views, addressing their priorities and convincing them to remove roadblocks requires regular interaction.

Firms like Deloitte and McKinsey have for several years now released reports documenting the emerging importance of the HR function. There is a wealth of published data on what’s unfolding in the private sector.

Government of course has different dynamics. HR has had no day-to-day involvement in employee performance, but in the new role HR will be working as an advisor to managers. The goal is to energize work teams and reinforce their focus on outcomes. That will depend on working relationships, which in some jurisdictions do not exist today. 

With HR working as partners, agencies should expect improvement on metrics like the following:

• Employee engagement. Given the linkage of engagement and performance, it’s a reason for HR to work with managers to improve scores.
• Productivity/outcome measures. For metrics that really matter, they should be a priority.  Raising engagement scores will help.
• Employer brand. This is central to recruiting. HR is not solely responsible for the brand, but HR is the logical focus for efforts to improve the brand.
• Employee turnover and grievances. Both are costly, especially when the better performers are involved. The loss of recent hires can be very costly.

The list of metrics focused more narrowly on HR’s effectiveness is much longer. A good starting point would be asking executives and managers to rate specific HR functions on their contribution to a unit’s performance. Additional metrics should reflect what top management expects from HR.

The point in using metrics is to track performance on key issues and use the information to plan for corrective action. They can also track progress on initiatives.

Government’s workforce problems will get worse without leadership. Too often workforce management does not have a champion. HR should fill the void.