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APPENDIX B The Taxpayer as Customer Mary Batcher, Statistics of Income Division Paulette Sewell, Taxpayer Service Division Internal Revenue Service Many federal agencies have turned to total quality management as a means to improve the quality of their products and services and to make better use of their resources. The identification of customers and develop- ment of service standards for customer interactions are key components of total quality management. Unfortunately, the notion of having accountabil- ity to customers is somewhat novel in government. Funding is appropriated for agency activities as part of the overall governmental budget process, and there is little direct link to the customers each agency serves. Hence, with rare exceptions, there has historically been very little market pressure to build a customer focus into governmental operations. However, as agencies come under tighter fiscal constraints and closer scrutiny by Congress and the media, there is increasing interest in the quality movement (with its potential productivity gains) and, as a corollary, increased attention to the identification of customers and their needs. The question of how to develop a sense of the taxpayer as customer should be preceded by some assessment of who the customers are. A1- though in some sense taxpayers are the customers of all federal agencies, in reality the number of agencies that provide a direct service to taxpayers is probably limited. Some exploration of who the primary and secondary customers are would certainly be beneficial. The needs of the primary customers must be met, and taxpayers may enter the loop only indirectly through one of the primary customers, such as Congress. While the public is always there as a consideration, in some cases a primary focus on taxpay- ers may not improve service at all. 194

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APPENDIX B 195 For those cases in which the taxpayer is a direct customer, the experi- ence of the Taxpayer Service Division of the Internal Revenue Service (IRS) may be of interest. Within the IRS, the Taxpayer Service Division was created with the sole purpose of providing customer service to the taxpayer. It is the unit of the IRS that is responsible for answering taxpayers' ques- tions about filing their income tax returns and their account and payment status, providing assistance in filling out tax returns, distributing tax forms, operating outreach programs to the taxpayer, and so on. For most taxpay- ers, Taxpayer Service is the point of first contact with the IRS. The organization of taxpayer services into a separate division contributes to building a sense of the taxpayer as customer into the culture. The message that customer service merits its own separate structure is not lost on employ- ees of the Taxpayer Service Division. This message is first imparted during the personnel selection process, and it is reinforced through training, the performance review system, and the reward and recognition system. Employees who will have contact with customers are selected with customer interaction skills in mind. Not everyone is able to perform well in a customer-service role and selection factors reflect that. The training that customer assistance staff receive includes a heavy emphasis on the impor- tance of the taxpayer as the customer and customer-contact standards and skills, in addition to basic training in tax law, as needed. Customer-contact standards are considered a critical element in effective job performance, and employees are monitored against the standards by managers as part of per- formance assessments and by quality reviewers to identify areas where ad- ditional training or job aids may be needed. If training and managerial intervention fail, employees who cannot provide courteous and effective service are removed from customer-contact positions. By contrast, employ- ees who provide exceptional customer service are recognized in a variety of ways, ranging from cash awards to small items of recognition, like certifi- cates for correctly responding to a test question. The above are areas of strength for the Taxpayer Service Division that might well be emulated in other environments. Additional steps can be taken, as well, to strengthen the sense of customer focus and the quality of customer service. They include the following: . Develop a market segmentation approach whereby the various cus- tomers, internal and external, are identified, their needs are assessed, and strategies for addressing those needs are developed. . Create a career path for customer-contact staff. In most governmen- tal applications, customer-contact personnel are relatively low graded and must move into other areas to advance. Involve customer-contact personnel in the development and commu- nication of standards for customer contacts. These standards should be

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96 QUALITY IN STUDENT FINANCIAL AID PROGRAMS continuously revised as the quality of service increases. Customer-contact staff should play a role in the revision of standards and should be as aware of the importance of the standards to the agency as are the top executives. All of the above are factors that contribute to the development of a culture that values the taxpayer as a customer. The related question we were asked to address in this paper is: How can an awareness of the taxpayer as customer be managed statistically? Before anything can be managed statistically, it must be managed operationally. This means that customer-contact standards must be developed and commu- nicated to the employees, and managers must do their job of observing behaviors and coaching. Given effective operational management practices, statistical manage- ment becomes a matter of measuring the system's performance. However, there are measurements that are designed to provide feedback at the work- unit level and measurements for the broader resource allocation and policy levels. At the work-unit level, measurement should be frequent, timely, specific, and detailed, and perhaps, it should only address key areas. Esti- mation procedures should be simple enough that staff in the work unit or local support staff can perform the calculations. There should be enough flexibility in the measurement system to allow the emphasis to change quickly based on operational needs or information from other indicators. To be most useful at the policy level, measurement should be frequent enough to assess trends and should sample across the universe, rather than addressing only key areas. Measurement at this level requires more strin- gent confidence and precision in the estimates. There is also greater toler- ance for statistical elegance in the estimation procedures. The test-call program for measuring the accuracy of the IRS telephone assistance service is an example of a measurement system designed to meet upper management's need for data to inform resource allocation and large- scale system management. Data are generated weekly at a level of detail adequate to provide overall accuracy rates by call site and by area of tax law nationally. Results are available to IRS executives by Wednesday morning for the immediately preceding week. This allows monitoring of overall accuracy and an assessment of call-site accuracy trends, but it does not provide the kind of detailed information that is useful in local management practices and deci- sions or that can be used to address a downward trend. That kind of detail is provided by local test-call and call-monitoring programs. Local call-site man- agers are held accountable for achieving a specified accuracy rate. They, therefore, support these local measurement efforts and use the results to guide improvement efforts. The merit of improvement efforts is determined by the national accuracy rates. Taken together, this combination of measurements, one at the national level and the other locally controlled, has proven to be an effective statistical management tool for the telephone assistance service.