Governing by Network: CIOs and the New Public Sector

The hierarchical form of government is in decline. Today, it's government by network, and in the middle of it all are public-sector CIOs.

by , / November 10, 2004
By Stephen Goldsmith, Daniel Paul professor of government and faculty director, Innovations in American Government program at Harvard University, and William D. Eggers, adapted from their new book Governing by Network: The New Shape of Government (Brookings Press, 2004).

In the 20th century, hierarchical government bureaucracy was the predominant organizational model used to deliver public services and fulfill public-policy goals. Public managers won acclaim by ordering those under them to accomplish highly routine -- albeit professional -- tasks with uniformity but without discretion. Today, increasingly complex societies force public officials to develop new governance models.

In many ways, 21st-century challenges and the methods of addressing them are more numerous and complex than ever. Problems have become both more global and more local as power disperses and boundaries (when they exist at all) become more fluid. One-size-fits-all solutions have given way to customized approaches as the complicated problems of diverse and mobile populations increasingly defy simplistic solutions.

The traditional, hierarchical government model simply does not meet this complex, rapidly changing age's demands. Rigid bureaucratic systems with command-and-control procedures, narrow work restrictions, and inward-looking cultures and operational models are particularly ill-suited to addressing problems that often transcend organizational boundaries.

Consider homeland security. Acting alone, neither the FBI nor the CIA can effectively stop terrorists. These agencies need a law enforcement network that crosses agencies and levels of government. They need communications systems to capture, analyze, transform and act upon information across public and private organizations at a speed, cost and level that were previously impossible.

For this and countless other reasons, the hierarchical model of government is in decline. The government model is being pushed by governments' appetites to solve ever more complicated problems and pulled by new tools that allow innovators to fashion creative responses. This push and pull is gradually producing a new government model, in which executives' core responsibilities no longer center on managing people and programs but on organizing resources -- often belonging to others -- to produce public value. We call this trend "governing by network."

Complex public-private, network-to-network collaboration models now operate, with varying degrees of success, in nearly every area of government. The building of NASA's James Webb Space Telescope, for example, involves multiple governments (Germany is supplying many instruments; France, the launch vehicle), multiple contractors (Northrop Grumman is the prime contractor), and several universities. NASA is also using in-house capabilities (the agency is doing the testing itself).

Medicaid is a federal-state program in which health-care services are delivered by private and nonprofit organizations, while a third party processes claims. Likewise, most job training programs, funded at least partially by federal and state governments, are administered by local work force boards and delivered by private and nonprofit provider networks.

At the state level, Wisconsin's welfare delivery model engages multiple levels of government, multiple state agencies, a handful of nonprofit and for-profit administrators, and dozens of community-based subcontractors.

As outsourcing, partnerships and network models multiply, scores of public agencies have become de facto contract management agencies. NASA and the U.S. Department of Energy spend more than 80 percent of their respective budgets on contracts. Contractors at the Department of Energy (DOE) outnumber employees by more than 130,000 people. For a growing number of agencies at all levels of government -- including NASA, the DOE and Wisconsin's Department of Workforce Development -- the skill with which agencies manage networks contributes as much to their successes and failures as the skill with which they manage their own employees.

Public CIOs are in the vortex of this change, both enabling it and affected by it. The trend toward governing by network changes the CIO's role in two fundamental ways. First, CIOs increasingly are expected to provide technical infrastructure and knowledge management capabilities needed to tie together disparate public and private organizations involved in these networks. Networks can still operate by fax, phone and meetings, but without the sophisticated electronic links to public and private partners that CIOs provide, government management of the network is unlikely to succeed.

Second, as more core IT services are outsourced and governments rely more on public-private partnerships to do everything from operating their portals to hosting e-government transactions, successful CIOs must become highly skilled at network management.

In short, talented CIOs have become critical agents for government reform and no longer merely support staff for the status quo.

The CIO as Network Integrator
Technology is the central nervous system of governing by network, connecting partners to each other and the public sector. Web-based technologies, for example, allow third-party providers to check client eligibility for job training, social services agencies to share real-time information with nonprofit partners about abandoned children, or contractors delivering motor vehicle services on behalf of states to verify instantly identities of driver's license renewal applicants. With technology a key enabler of networked government, CIOs more frequently are being asked to play a central role in facilitating partnerships and networks in five ways.

Coordinate Activities
Networked approaches typically require a high level of coordination. Consider a network that provides services for single, low-income mothers. It might involve coordinating agencies and providers involved in everything from delivering food stamps and providing job training to arranging for daycare.

Portals, middleware and collaboration software have helped private-sector companies make huge strides in coordinating complex production tasks in their supply chains. Companies like Dell, Cisco Systems, General Motors, Ford Motor Co. and Herman Miller invest significant resources and executive-level attention in building electronic pipelines to suppliers, alliance partners, customers and employees.

Free market competition taught the private sector that time is indeed money. Using technology to speed and improve product or service delivery enables employees of each network organization to save money by doing more in less time.

NASA's Jet Propulsion Laboratory (JPL) in Pasadena, Calif., for example, slashed the typical rocket- and shuttle-component design cycle to two to three weeks, from eight to 12 months, by using simulation-based design and acquisition tools to collaborate with contractors. Instead of issuing multiple RFPs and going back and forth with contractors for months on each piece of the design, JPL created an integrated mission design center packed with computers that allow NASA partners to present their initial designs and requirements to NASA engineers. The engineers can then test the design -- and any modifications -- in real time to find out how they would hold up against multiple scenarios. NASA partners, contractors and engineers are all linked to the sessions by video conference. Not only has this innovation radically accelerated the design process, but it also greatly enhanced the quality of initial contractor submissions. "If you don't have any clothes on, we'll notice real fast," explained NASA Deputy Chief Engineer Liam Sarsfield.

Unfortunately the sophisticated electronic collaboration tools NASA employs with its partners are exceedingly rare in government. Most agencies still interact with partners through manual processes, creating a host of inefficiencies, from slow responsiveness and poor reliability to uncoordinated service delivery. This must change.

Synchronize Response
Coordinating capabilities are critical for building effective public-private networks in a post-Sept. 11 world. Take a city facing a terrorist threat to its water system. Individuals charged with responding to such a threat might include representatives from the Federal Emergency Management Agency, state environment officials, local hospitals, environmental groups, public utility executives, local law enforcement and building inspectors. An electronic coordination mechanism that allows disparate groups to share information in real time and synchronize their responses would be a basic requirement for such a network.

A promising model is Pennsylvania's National Electronic Disease Surveillance System (PA-NEDSS). In February 2002, Pennsylvania became the first state to introduce a fully integrated disease surveillance system that lets participants share information quickly so they can identify, track, predict and contain the spread of disease. More than 130 hospitals, 120 labs, 450 public-health staff and 475 physicians are connected to PA-NEDSS. Public-health officials can distribute alerts and advisories immediately, and collect case data on an ongoing basis over a secure system. More than 100,000 cases representing dozens of diseases in 67 counties have been reported over PA-NEDSS.

Previously local health departments in Pennsylvania received reports from doctors, hospitals and community health officials by mail and fax, then forwarded them to the state the same way -- a cumbersome and slow process. It could take weeks to identify an outbreak. By then, dozens of people could have died. "The problem was the length of time it took to get something in the mail and get it to the right place for the right investigator to review and act on it," explained Joel Hersh, director of the state's Bureau of Epidemiology. "We'd get a report a week after the lab generated it. The report would then have to be sorted and sent to one of our investigators in the state, so it would have to be faxed or remailed. It could be a couple of weeks before investigators could start checking out a situation."

PA-NEDSS changed all that. Thanks to enhanced coordination and information-sharing capabilities, the reporting cycle for each case in Pennsylvania dropped from three weeks to fewer than 24 hours, enabling more rapid and effective response. The system's quick detection abilities, for example, helped the York City Bureau of Health contain an outbreak of shigellosis.

A Single Client View
Network partners also must share relevant customer information to coordinate activities. When a customer purchases a computer on Dell's Web site or changes the order, all information about his or her order is transmitted immediately throughout Dell's supply chain. Dell's just-in-time model would not succeed if each production partner possessed a different view of the customer. Production and delivery would take much longer.

Achieving a single view of the customer is no less important for networked government. Using Wisconsin's welfare eligibility IT system, Client Assistance for Re-employment and Economic Support, state employees and private contractors see the same information on their computers about each individual in the state's W-2 welfare-to-work program. Contractor employees also have instant access to all the government information they need, including educational assessment history, state wage records and Social Security records. "It allows us to work hand-in-glove with the state and county on individual cases," said Gerald Hanoski, executive director of Workforce Connections, a welfare-to-work contractor. "It's the backbone of the network. We couldn't do our work without it."

Share Knowledge
Hierarchical systems, stimulated by various motives, instill data control as part of the old governance. Professionalism often produces an arrogance that causes officials to limit what others can see without the official's help. In the late 1980s, for example, when pressure began building from employers and gun dealers to access criminal history records held by state police departments and the FBI, the agencies resisted, arguing that data quality issues made access untenable for the untrained eye.

Governing by network, however, cannot succeed without robust knowledge sharing. Cross-sector knowledge sharing can help develop new knowledge, flesh out solutions to daily problems, enhance learning across the network, and build trust and aid in learning from each other's successes -- and mistakes. These capabilities, in turn, can help government better integrate and align its own strategic objectives with those of its partners.

In today's digital age, sustained knowledge sharing across organizations requires a sophisticated technical infrastructure. Virtual communities -- using technologies such as extranets, Web-based seminars, electronic rooms and bulletin boards -- let people share information and knowledge across geographic and organizational boundaries.

The biggest benefits from such "collaborative knowledge networks" come from creating interactive media -- electronic spaces in which government agencies can communicate, collaborate and share knowledge with partners.

Few organizations have as many interdependent moving parts as the Federal Aviation Administration (FAA). Its employees, customers and contractors face extraordinary difficulties in coordinating projects, daily decisions and rule-making. The FAA created an electronic knowledge service network to capture knowledge across 20 business units or nodes, involving 100 work teams and 3,000 users. The IT platform, which supports document storage, virtual conferences, scheduling, threaded discussions and e-mail, encourages collaboration and reduces cycle times across the network. Problem-solving conferences are hosted online, and key decisions are posted on the knowledge network, replacing faxes and e-mails, and saving time and money.

Measure Performance
Measuring and tracking performance within a complex network is a major challenge for public innovators. Here again, CIOs can exploit technological advances to overcome a perennial challenge to partnering. Until recently, government managers could not monitor real-time performance of complex, dispersed organizations. Thanks to distributed IT, networking and digital record-keeping, however, service providers can now see each other's information immediately, while the contract monitor can follow individual cases and aggregate data for online reporting. The end result: Governments have a clearer picture of how well the overall network and its individual partners perform at any one time. Wisconsin's Department of Workforce Development, for example, uses a data warehouse to collect performance information about its contractors. The warehouse provides the state with extensive information about every welfare-to-work client's progress, which the state uses to analyze whether contractors are exceeding or falling behind performance targets.

Arizona's Motor Vehicle Division also uses cutting-edge technology to better evaluate its partners' performance. The department's quality assurance group monitors the compliance of its 89 third-party motor vehicle service providers with their performance agreements. The assurance group's electronic accountability system centralizes all data from third-party companies, tracking everything from the number of transactions the third party does in a given time period, to customer complaint information, to the average amount of time it takes to complete transactions. The system makes it extremely difficult for providers to defraud the state; it automatically flags providers that engage in an unusually high number of transactions and generates an activity report to ensure work is legitimate.

The CIO as Relationship Manager
CIOs themselves increasingly use networks to meet several government IT needs. Many of the largest and most complex, multiprovider, government outsourcing projects fall wholly or partly under the auspices of public CIOs. The Navy Marine Corps Intranet and the National Security Agency's Groundbreaker -- two huge IT outsourcing projects -- are multibillion dollar deals. Nearly half the states outsource their Web portals -- as do dozens of cities and counties. At the Transportation Security Administration (TSA), Unisys manages a vendor network of at least 25 companies, including Dell, Cisco, Oracle and Motorola, on behalf of the agency. Together they provide all components of the agency's IT infrastructure, including computers, software, networks, data center and help-desk services.

As more CIOs forge varied partnerships with private corporations, their performance will increasingly depend on how well partnerships are managed. To achieve high performance in this environment, CIOs must develop core capabilities in a multitude of areas where today many have scant internal expertise. In addition to planning, budgeting, staffing and other traditional government duties, managing in a networked environment requires proficiency in activating, arranging, stabilizing, integrating and managing a network. To do this, CIOs and their staffs must possess some degree of aptitude in negotiation, mediation, risk analysis, trust building, collaboration and project management. They must have the ability and inclination to work across sector boundaries and the resourcefulness to overcome the prickly challenges of governing by network.

Case in point: Public CIOs must handle the difficult tasks of approving or rejecting the contract changes that inevitably arise in outsourcing deals. Some vendors will try to take advantage of government through lowball bids and the subsequent change-order process. Strong CIOs will not let that happen; they know how and when to stand up to private partners. "If a partner is not performing, you're going to have to deal with their management," explained a Defense Department official. "You better have a person who has the savvy to do this well."

The most successful CIOs in a networked government will be those best able to assess the public value, and if sensible, look "outside their own world" to identify other mechanisms or organizations they can involve to enhance public value. Successful CIOs will fulfill government's mission by keeping the agency's outcome-focused goals foremost -- the "product" rather than the "process." Successful CIOs will understand not only how to address the make-or-buy decision, but how to bring others with needed capabilities and resources into the supply chain.

Given the challenges, what kind of people will make effective CIOs in this environment? In our experience, they tend to be organized, have strong oral communication skills, think creatively -- rather than from the framework of "that's the way we've always done it" -- and are highly adept at resolving problems. They know how to create win-win situations.

Thriving in the Networked Age
As we have argued, CIOs have a central role in making the transition from hierarchical to networked government successful by deploying IT to help tear down walls between organizations, and giving governments and their private-sector partners tools to work effectively across organizational boundaries.

Ultimately the CIO's role must go beyond simply supplying the technical infrastructure for networked government. CIOs will need to effectively manage people and relationships. Technology, after all, is only an enabler. It cannot solve problems of building trust between organizations, or get organizations with different values and cultures to collaborate and share knowledge. These and many other challenges of integrating and managing public-private networks require creative and skilled public managers with the vision and know-how to bring together multiple organizations across sectors into a functioning whole. Public CIOs who excel at this task will thrive in this networked age.

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Stephen Goldsmith

Stephen Goldsmith is the Daniel Paul Professor of the Practice of Government and the Director of the Innovations in American Government Program at Harvard's Kennedy School of Government. He previously served as Deputy Mayor of New York and Mayor of Indianapolis, where he earned a reputation as one of the country's leaders in public-private partnerships, competition and privatization. Stephen was also the chief domestic policy advisor to the George W. Bush campaign in 2000, the Chair of the Corporation for National and Community Service, and the district attorney for Marion County, Indiana from 1979 to 1990. He has written The Power of Social Innovation; Governing by Network: the New Shape of the Public Sector; Putting Faith in Neighborhoods: Making Cities Work through Grassroots Citizenship; The Twenty-First Century City: Resurrecting Urban America, and The Responsive City: Engaging Communities through Data-Smart Governance.

William D. Eggers Contributing Writer