Magazine article Government Finance Review

Turning around America's Most Unpopular Institution

Magazine article Government Finance Review

Turning around America's Most Unpopular Institution

Article excerpt

Turning Around America's Most Unpopular Institution Many Unhappy Returns: One Man's Quest to Turn Around the Most Unpopular Organization in America Published by Harvard Business School Press 2005; 336 pages, $26.95

Charles Rossotti's Many Unhappy Returns focuses on two subjects that hit close to home for most finance officers - revenue collection and the management of public bureaucracies. The book is a fascinating if sometimes self-aggrandizing story of how Rossotti brought about fundamental improvements in that bureaucracy of bureaucracies known as the Internal Revenue Service. While few, if any, state or local government finance officials can relate to the scale of either the IRS itself or the changes necessary to bring it up to date with modern business practices, the underlying management principles are relevant to anyone with an interest in making organizations more effective.

Rossotti, the former co-founder, chairman, and CEO of American Management Systems, Inc., was appointed IRS commissioner in 1997 at the height of the agency's crisis of confidence. Just months before, a congressional commission had released the results of an unprecedented study of the IRS and the Senate had held a series of hearings in which taxpayers told horror stories about how their lives were ruined by IRS abuses. As if things could get any worse, the Roper opinion research organization handed the IRS the lowest rating ever given to any public or private institution. As Rossotti puts it in the book, "The IRS had the largest number of customers and the lowest approval rating of any institution in America."

By the time Rossotti left the IRS five years later, significant problems remained, but anecdotal and quantitative measures showed marked improvement in most of the agency's activities and the IRS's approval rating in the Roper survey had jumped 15 percentage points. How did the IRS achieve these improvements? The answer to this question is the reason Rossotti wrote Many Unhappy Returns in the first place and rightfully occupies most of the book's pages. Despite some misgivings over leaving the impression that there can be cookie-cutter solutions to complex organizational problems, Rossotti provides nine principles at the end of the book that nicely summarize his approach to turning around the IRS.

Of these nine principles, the one that stands out is the fourth - that successful change depends on moving to an organizational structure, business practices, and technology that are up-to-date and aligned with the needs of customers. These issues are addressed in chapters 10 and 11. Rossotti points out that the riskiest decision he ever made at the IRS was to lead a top-to-bottom reorganization early in the modernization program. Proposed reorganizations are expensive, often engender fierce resistance from employees, and produce no immediate benefits. Still, Rossotti believed that the IRS could not move forward without changing the way it was organized.

The IRS was divided into small, semiautonomous local offices that attempted to provide everything for everyone. IRS agents were assigned based on their location, not their expertise. Each office had its own way of doing things, and there was very little accountability for performance or to taxpayers. …

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