The Costs of Reorganization

Much of the concern involved the size of the reorganization. Two of the six secretaries interviewed for this project had been through large-scale reorganizations—Donna Shalala was secretary when the Social Security Administration (SSA) was removed from the department, while Tommy Thompson was secretary when the Department of Homeland Security absorbed several high-profile units from HHS. A third spent his first months in office rationalizing a host of programs in one “fell swoop”—Joseph Califano moved quickly to implement the most significant organizational reforms since the department was created. The rest of the secretaries had been through smaller-scale reorganizations—general tightening of authority, the statutory creation of the Office of Inspector General in 1975, streamlining of the drug approval process, and so forth.

Whether pushed from outside the department by Congress or inside by the secretary, the secretaries interviewed for this project emphasized the costs of large-scale versus smaller-scale reorganizations. First, large-scale reorganizations absorb much greater political capital even when compared to major policy reforms such as the back-to-back Social Security crises in the late Carter and early Reagan administrations. At a minimum, large-scale reorganizations create enormous turmoil within the department as pieces break off rather like icebergs from an ice shelf. “Reorganization is not a lever for changing culture,” said one former secretary. “Confidence does not improve by reorganizing chaos—greater efficiency, yes, but no effect on positive motivation to serve the customer.” Nevertheless, given greater legislative freedom and White House support, several argued that the department was due for a major overhaul—once every 50 years is not overkill.

Reorganizations also tend to create temporary, but significant, short-term declines in productivity as staffs try to untangle shared systems. Even reorganizations that involve clean breaks such as the creation of the Department of Education create significant effects as they back out of what was then the HEW hierarchy. “The last thing we should focus on is structure—too many jurisdictions to deal with in any reasonable time,” said another secretary. “It is a huge commitment of energy with much less yield than policy change or more aggressive leadership.”

Reorganization does not always involve structure. All of the secretaries interviewed for this project had been through some kind of management reform—management by objectives under President Ford; zero-base budgeting under President Carter; the war on waste, fraud, and



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