This problem could cut off federal paychecks as surely as a shutdown

Hundreds of thousands of federal employees get their paychecks issued by the National Finance Center, which is operated out of New Orleans by the Agriculture Department. The whole place is in danger of meltdown because of staffing, budget, technology and even storm damage problems. That is according to detailed study, under the auspices of the National Academy of Public Administration. To learn more about the study, Federal Drive with Tom Temin spoke with Margie Graves, the former Deputy Federal Chief Information Officer, who is now with IBM.

Interview Transcript: 

Tom Temin And just before we get into the details, just maybe outline exactly how this study came to be. It looks like the National Finance Center itself was reaching out for some badly needed help.

Margie Graves That is correct. The USDA and the National Finance Center in particular reached out to NAPA. As you know, NAPA is chartered under Congress to be able to work with federal agencies on their most pressing issues and to bring the expertise of former federal executives that are NAPA fellows to the table and be able to help the agencies with those issues and perhaps give them the opportunity to draw upon that expertise and to develop a plan for moving forward.

Tom Temin And we should probably also review exactly for the uninitiated, exactly what the National Finance Center does. Paychecks is a big part of it, but it’s not the only thing they do there.

Margie Graves No, the National Finance Center is part of the HR LOB structure that was put in place as part of the shared services approach that was instituted in the federal government and reinstituted and reconstituted with a memo out of OMB, which was done under my tenure and that of Suzette Kent to reemphasize the importance of being able to take some of these back office functions and to automate them and deliver them in a manner that allows the entirety of the federal government to benefit. It results in reduction of cost. It results in the ability to have one center of gravity for some of these functions. That is very important and and helps us in that execution.

Tom Temin And you cite in that report the fact that they recovered and kept going through Hurricane Katrina, an event I remember. We had interviews on that very topic at that time. And so they have shown themselves to be resilient and effective over the decades. Fair to say?

Margie Graves That is correct. And not only effective, but I would say close to heroic in the way that the employees stepped up have actually addressed their primary mission in moments of crisis, regardless of what was literally swirling around them. And and being able to to execute. So that is is very much a hallmark of how NSC has operated.

Tom Temin What’s happened then?

Margie Graves Well, I think that whenever you have a shared service, it has to be invested in and maintained over time or else, of course, there is technical debt that accumulates. There are people who leave the fold and sometimes they are replaced in a rapid manner. So there are always opportunities for investment and improvement, and it needs to be done on a consistent basis or else you get to a point where you are are kind of over the line in terms of the ability to deal with your customer, to deliver the service in effective manner that occurs slowly over time. It’s not something that occurs overnight. And unfortunately, I think a lot of these back office capabilities are are kind of short shrifted in lieu of probably more mission oriented or more crisis oriented investments that have to be made by an agency and also more favored by Congress because of the immediacy of the need. And sometimes these shared services don’t get the kind of attention that they need.

Tom Temin So the NFC has become, in some ways, the redheaded stepchild of the Agriculture Department.

Margie Graves Well, it’s not the Agriculture’s primary mission, obviously, but they have been the steward of this capability for some period of time. And they service a good portion of the federal government in a very important way. Nothing is more personal than getting your paycheck and getting your paycheck correctly and on time. And that is a very critical function within the federal government. There are other entities that provide those same kinds of service, DFAS, etc. And of course, they have their own challenges because I don’t think this is a an issue that is simply USDA oriented. It is an issue that is ubiquitous across the federal government in shared services in general. And I think GSA is well aware of that as they try to manage the shared services ecosystem.

Tom Temin We’re speaking with Margie Graves. She’s now with IBM. She’s former deputy federal chief information officer and one of the coauthors of the NAPA Study on the National Finance Center. And one statement early on in the report says, relationships that is with Congress, with overseers, with funders, with other partners in the federal government, with leadership at USDA, have been allowed to deteriorate. Well, somebody’s allowed them to deteriorate. It sounds like intervening leadership between the good years and now have let the place kind of go to seed.

Margie Graves Well, I think that they are challenged by some of the things that I talked about early on. Number one, when when personnel leave and they’re not replaced, there are either leadership gaps or there are actually gaps in execution. And when those things happen, and couple that with the lack of investment in the IT infrastructure over time, that results in a deterioration of the actual service to the customer and that customer becomes unhappy. And the interaction between the service delivery provider and the customer also needs to be, I guess, nurtured along the way. And that is one of the things that we emphasize in the report, is that the the conversation and the transparency with the customer people are generally at least somewhat forgiving if they know exactly where you are in terms of your ability to address the issues that they are bringing up and the ability to be able to create that. One of the primary recommendations we make, and I think it should probably go to the first one out of the box, is that the customer experience, both for the customer of the payroll system and also the the internal employees that have to deliver the payroll is going to be enhanced by becoming a data driven organization. And to to that end, you are conducting surveys and constant conversation and interaction with both in order to game the landscape, the the lay of the land, and then to make a plan to take specific action against those complaints. And when people see you actually doing that, as I said at the very beginning, they become more forgiving and they become more of your partner.

Tom Temin Sure.

Margie Graves In this journey as opposed to adversarial.

Tom Temin Now you can’t make good music if your violin is cracked and the strings are broken. So the I.T. infrastructure that needs to be updated, that seems to be central to all of the other things happening, because if you don’t have the infrastructure to deliver, then intentions won’t get you very far.

Margie Graves Tom, that’s correct. USDA and NFC is not the only shared service where these issues exist. What we need to be cognizant of is that it’s sort of like not painting your house until the wood rots and then unfortunately, you have to replace the wood and paint the house. So this has occurred over time. As I say, there are there are reasons why investments don’t get made. And there may be priorities that land in front of the investment in these back office capabilities that occur. That said, we’re at a point where we have got to make at least the stabilization investment in the I.T infrastructure, i.e. bringing up some modern capabilities into the equation, doing some automation, getting the most current versions of the types of software systems that are in their ecosystem. And getting to a point where we when I use the word stabilized that we are on an even keel with our customer and our employees, the employees feel good about being able to deliver, the customers feel good about being able to receive an effective service. In that first phase, you’re still planning for the longer term because of course, you have to invest in a larger way in actual modernization. And modernization initiatives are not cheap. They have to occur over time and they have to be supported by Congress. So the whole time that you are stabilizing and developing these plans and getting the right personnel in place, you are delivering small increments of capability. You’re improving your relationship with your customer and your employees. And most importantly, you are proving to your congressional leadership and to your agency leadership that the delivery is improving. And generally, when that occurs, you start to develop a trust level that allows people to have an open conversation about gaining more investment.

Tom Temin And the report says that there will be serious consequences if nothing is done immediately. So it sounds like this is pretty dire.

Margie Graves Well, yes. I mean, if you think about it, you’re serving over 600,000 employees in terms of delivering their paychecks. And it’s not like there is some place to migrate or that there’s anything immediately available where you could offload or or transition or anything of this nature. Anything that would be developed over time will take multiple years. So it’s not as if there is a an off ramp, an easy off ramp in any way, shape or form, because as I stated, a lot of the other service providers have their own issues that they’re dealing with. And also, I do believe that if we do this right and if we follow the develop the plan, the vision and follow the plan, the vision and create that trust as we go along, that there there is a little bit of runway, not much, but a little bit of runway for improvement. And each step along that journey, you’re building that coalition.

Tom Temin Because you state that the NFC current staff does have a plan. They’re aware of the issues and they have a plan to, as you say, get CX and EX better to stabilize their infrastructure and to invest in the long term. So would it be fair to say the recommendations of NAPA are act on that plan and Congress makes sure they have the funding and the backing they need?

Margie Graves Yes, I think there are actions that are have been taken within USDA over a period of time. This did not, as I say, occur overnight. And they have been aware of the challenges that we outlined in the report. The problem is, is that you have to have alignment among multiple entities and stakeholders in order to move forward and address it. So their ability to be able to lay out the plan to state the business case to obtain the funding from multiple sources, including internally, from their own leadership, from their customers. With that trust that they’re building. And then ultimately longer term, from Congress itself, it’s a multifaceted approach that needs to be executed with some precision. There’s not a whole lot of time to waste, but we need to to have that conversation and discuss that business case and get everybody aligned in order for us to execute effectively.

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