Is the Most Efficient Office in the World Run by the United States Government?!

The search for better economic policy.
July 31 2013 5:43 AM

The Most Efficient Office in the World

It’s run by the United States government. We’re not kidding.

Exterior of the Hudson Street Passport Services Office.
Exterior of the Hudson Street Passport Services Office.

Photo by Lisa Larson-Walker/Slate

A few months ago, we had lunch with a friend who is a management consultant. He arrived at the restaurant raving about the fantastic experience he’d just had at the passport office on Hudson Street in lower Manhattan, where he’d gone for a need-it-by-tomorrow expedited passport. Having booked an appointment by phone, he arrived to have his application materials checked by a greeter (lest his papers be out of order, which might hold up others later in the process), who then handed him a number and sent him to a waiting room. Five minutes later, his number was called, and he was asked to hand in his paperwork. Then he was on his way; he had his new passport the next day. There was nothing that McKinsey, Accenture, or any other workflow consultant could have done to improve his experience.

It turns out our consulting friend isn’t the only one singing the passport office’s praises. The Hudson Street branch gets 4.5 stars on Yelp, accompanied by mostly glowing commentary (recent reviews: “absolutely fantastic,” “five mother effin stars”). This will surely come as a surprise to those who view the U.S. government as a refuge for pointless regulation, lazy bureaucrats, and layers of inefficiency: A State Department–run passport office sits at the vanguard of workplace effectiveness.

The praise for the Hudson Street office stands in sharp contrast to Yelpers’ takes on, for example, New York City DMV offices or the passport agency in Los Angeles. (New York processes the most passport applications in the country; LA—with a three-star rating—is second.) New York City’s post offices rarely get as many as two stars from Yelpers. Elsewhere, it seems, federal, state, and local government agencies are earning their bad reputation.

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Part of the government’s image problem may come from the fact that many of the functions it performs put it in opposition to their clients: You don’t expect service with a smile when you’re handcuffed in the back of a cop car or when confronting social workers in a child custody case or asking the Internal Revenue Service why it chose to audit you. But often the government is in the business of providing a pleasant, efficient experience. Michael Hoffman, director of the New York passport office, told us that 99 percent of the time, his office’s objective is to give customers exactly what they want.

So why do so many people have terrible experiences with even the more customer-oriented branches of our government? We tend to chalk it up to the pernicious effects of government bureaucracy, which we assume smothers creativity and innovation, especially when there are rules, regulations, and standardization involved. But as the praise for the Hudson Street office shows, not all government customer service is terrible. Which raises another question: Why do some government offices perform well and others poorly, even when they’re providing the same services and working with comparable resources?

Michael Hoffman in his office.
Michael Hoffman in his office

Photo by Lisa Larson-Walker/Slate

It’s actually a question that plagues for-profit enterprises as well. Private companies often exhibit wide variability in efficiency across branches, even when they’re making exactly the same thing with identical technology. Think of cement, a product that economists love because cement is cement is cement; it’s made more or less the same way everywhere, and yet some manufacturers are more efficient at producing it than others. Why would there be variation in productivity? For decades, the economics profession has tried to understand why these differences persist. If you’re the low-productivity concrete plant, why not just go and figure out what they’re doing over at your more successful competitor? And if you’re the high-productivity plant, why not buy out your less-efficient neighbor and give the operation a makeover?

If only it were so simple. There’s an emerging body of research that chalks up these productivity gaps to the all-too-human ways that different companies (and divisions within a single organization) are managed. The fact that management matters—a lot—shouldn’t come as a shock to anyone who has ever worked under a good manager and also a bad one: Good managers coach, listen, support, and make their employees feel like they’re making progress. Bad ones don’t—often in uniquely horrible ways. And if this is true at for-profit companies, why wouldn’t it be true for branches of the government?

The management matters view certainly fits with our experiences and conversations with Hoffman and his higher-ups at the State Department Executive Office who oversee passport operations. Jim Herman, the executive director for the Bureau of Consular Affairs within the State Department, knew the ins and outs of activity-based costing, balanced scorecards, and seemingly the entire contents of Harvard Business Review. He certainly talks the talk of a corporate operations chief, despite having spent his career in consular services.

As for Hoffman, he faces the same combination of constraints that many middle managers in the corporate world do. He has to deal with some amount of standardization. For example, to manage the assignment of customers to interviewers, he uses the queuing software that’s uniform across the agency, since the State Department manages procurement on behalf of all offices. (Hoffman says he could in theory petition to buy his own, but he’d need a very compelling reason.) Similarly, the New York office can’t start making up its own idiosyncratic criteria for passport applicant background checks. (Our friend’s one complaint with his experience was that he had to make a special trip to provide a picture that met the passport office’s specifications; the office supervisor can’t waive such rules even if they boost Yelp ratings.)

As with any divisional manager, Hoffman has a lifeline for resources at the organization’s headquarters, in this case the State Department in Washington. He receives visits from his supervisors at the State Department and the regional passport headquarters in Portsmouth, N.H., who evaluate him based on performance metrics like cost savings and the rate at which passport applications are processed.

Applying for passport renewal at the Hudson Street Passport Office.
Applying for passport renewal at the Hudson Street passport office

Photo by Lisa Larson-Walker/Slate

But Hoffman also has a great deal of discretion in how the place is run: the layout of the various waiting rooms, the particular queues that move people through the application process (Hoffman has chosen four: one for appointments, one for walk-ins, a special-requests line, and one for applicants with complicated cases), and the color of the walls (they’re currently a dull institutional blue; he’s planning on painting them a cheerier yellow). And it’s his job to motivate and manage his workforce. He promotes high-performing agents and disciplines—or in extreme instances even fires—lower-performing ones. (Yes, while it isn’t easy, it is in fact possible to fire federal employees.) He’s been given enough autonomy within the context of a federal bureaucracy to make the passport experience in New York terrible or fantastic, and he’s achieved the latter. Hoffman, a modest and unassuming mid-level bureaucrat with a fondness for baseball memorabilia (a bat and a row of balls have pride of place in display cases behind his desk), has just done a great job of using his power to make the office run really well.  

This isn’t to say that the passport office is the happiest place on Earth. During the summer rush, when we visited, the waiting areas featured row upon row of unsmiling applicants waiting for their numbers to come up. The only happiness came from three young girls running around in the hallway who Hoffman told in a friendly but direct way as we passed, “Stop it now and find your parents.” Of course, no one goes to the passport office for the fun of it. Customers want to be in and out as fast as possible, and that’s what Hoffman gives them—efficiency. When we went into our meeting with Hoffman, the overflow waiting area was full. When we came out 30 minutes later, it was nearly empty.

The success story of New York’s passport office tracks with a study recently released by a pair of economists at University College London, Imran Rasul and Daniel Rogger, who looked at the effectiveness of Nigerian government departments. They found that autonomy—in this case, whether project managers have the discretion and resources to do their jobs without approval from higher-ups—is a critical predictor of whether projects get done and whether they’re done well. For Hoffman to design a passport office that works for New York—and to manage the process well—he can’t be overruled by a one-size-fits-all approach that’s dictated from Washington or New Hampshire.

Rasul and Rogger also found that incentives—rewards for getting projects done well and done on time—tend to backfire in the Nigerian bureaucracy, and there’s no reason to think that the country is unique in this regard. It’s a helpful reminder that managing in government involves a different set of constraints and objectives than you find in corporations: A company wants to maximize profits, which can be a lot easier to measure than the complicated, multifaceted, hard-to-evaluate jobs that often fall into the laps of governments, for whom it can be difficult or impossible to design incentives that will actually accomplish the intended goal. (It’s not entirely easy in a corporate context either.)

The typical vision of government bureaucracy is not a flattering one. We assume that faceless bureaucrats will make our lives resemble some version of Terry Gilliam’s Brazil. But with people like Hoffman around, that's not the case. So the question—whether you make cement or passports—is where to find more Hoffmans.

That won’t be easy, partly because there aren’t many Hoffmans around, whether in government or industry, and governments and many nonprofits face a special challenge in recruiting talent. Hoffman doesn’t earn as much as a starting MBA consultant at McKinsey. That’s changed in some quarters: There are many university presidents who are paid millions, and nonprofit hospital execs can earn as much as their for-profit counterparts. The Singapore government has taken the same approach to running bureaucracy. In 2012 the prime minister took home more than $1.7 million.

But Hoffman is content with his 30-year career in government. He’s served his country and has no interest in becoming, say, a regional manager for Costco or Wal-Mart. If we can’t pay him and other outstanding public-sector managers the salary that’s commensurate with the social value they’re creating, we should at least give them the recognition they deserve. Perhaps in the process we could imbue the much-maligned title of government manager with the respect that will attract the next generation’s finest to a life of public service.

Ray Fisman is a professor of economics at the Columbia Business School and co-author of The Org: The Underlying Logic of the Office. Follow him on Twitter.

Tim Sullivan is the editorial director of Harvard Business Review Press. Follow him on Twitter.

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