[The following article appears in the Spring 1995 edition of
_The_Public_Sector_Network_Newsletter_, pages 7 and 12.]


     CREATING CONDITIONS FOR ORGANIZATIONAL TRANSFORMATION


BACKGROUND

     "Good enough for government work!" These pejorative words
have strayed far from their original, late 19th century meaning
of "best in class." Government desperately needs models of
effective change and excellent service as well as descriptions of
the events and theories surrounding such performance improvement.
     The books Incredibly American by Zuckerman and Hatala and
Riding the Tiger by Harrison Owen both indicate that Americans
are at their most creative and innovative in times of
uncertainty, rather than in a planned and organized change
effort. This is the story of how such a period of uncertainty
produced a dramatic improvement in performance.
     The California Department of Consumer Affairs, Bureau of
Automotive Repair (BAR) regulates the automotive repair industry,
including the Smog Check program. Established in 1972, BAR
representatives mediate over 40,000 complaints annually and
investigate violations of the Automotive Repair Act of 1971. In
1984, BAR implemented a Smog Check program, licensing some 9,000
stations and over 20,000 technicians as well as investigating
violations.
     In late 1991, the bureau's Field Operations Division was
organized into four regions, with centralized control exercised
through a powerful "compliance unit." Within each region, a small
cadre of consumer services representatives (CSRs) mediated about
20% of the complaints. The more technically qualified program
representatives (PRs) also mediated complaints, performed initial
and periodic inspections, cleared lockouts on Smog Check
analyzers, performed random undercover citation runs on Smog
Check stations, and conducted auto repair investigations. Each
region also had shops to document undercover vehicles.
     In 1990/91 the bureau filed the following enforcement
actions related to fraudulent practices.

YEAR 90/91   |     Administrative | Civil/criminal
_____________|____________________|_________________
Auto repair  |         18         |      22
_____________|____________________|__________________
I/M          |         46         |       8
_____________|____________________|_________________

     An internal program review conducted in late 1991 showed
little difference between the types of complaints mediated by
CSRs and those handled by PRs. CSRs also handled the complaints
in one-third the time using telephone mediation, whereas PRs
usually conducted face-to-face mediation as well as limited
investigation and vehicle examination. There was no significant
difference in customer satisfaction between the two methods of
mediation. The effectiveness of periodic inspections (as measured
by number of notices of violations issued) was 0.7%. The
effectiveness of the undercover citation runs had fallen from
over 50% at the inception of the Smog Check program to a steady
level of 16%. Lockout clearances were taking up to 10% of total
time.
     There were indications of considerable fraud in the Smog
Check industry and a limited, but consistent, pattern of consumer
fraud in auto repairs. Particularly, regulatory activities, which
had been appropriate for a new Smog Check program, were
ineffective in a mature industry with considerable fraud.

Management Role

     Management first identified outcomes that would effect
positive change in the repair industry; it increased enforcement
and analysis and feedback to the repair industry of their
performance problems derived from customer complaints and
investigations. It was also necessary to find time to develop new
ways to investigate fraud and to perform more investigations.
     Reorganization delivered the first wrenching change to the
BAR. The twofold purpose: to create teams responsible for
improved performance in each area of bureau responsibility and to
create the conditions under which creativity could flourish,
unencumbered by prior rules and past practices.
     Complaint mediation was centralized in five regional
centers. At each, work teams handled complaints requiring
mediation with no investigation. Auto repair investigation
teams were formed in 17 offices to handle complaints requiring
investigation and to improve and increase fraud investigations.
Seventeen Smog Check investigative teams were formed to handle
complaints, investigate and prosecute fraud, and detect and
correct or sanction incompetence. A vehicle documentation team,
centered in 13 regional shops, was to provide timely and
high-quality documented vehicles to the investigative divisions.
     The second change was to eliminate all nonvalue-added work.
Up to 60% of the complaints were appropriately handled at the
mediation centers. Periodic inspections and random undercover
runs were suspended, and a method to clear up to 75% of Smog
Check analyzer lockouts, using computer and modem, was developed.
This created a "time vacuum" that investigative staff in each
office were asked to fill by developing new approaches to
investigation. Bereft of existing practices on which to rely for
guidance, the initial atmosphere was one of uncertainty.
Management turned to the on-the-ground knowledge of the
front-line people and their supervisors to perform local problem
diagnosis and solution experimentation. Quality expectations,
outcome measures, and checkpoints were established at key points
in the investigative process, and the results fed back to field
supervisors.

Supervisor's Role as Team Leader

     The role of the field supervisor changed from office
caretaker and order giver to team leader and coach. A "fast
experiment" strategy was employed that encouraged office work
teams to collect and analyze information about industry practices
and to experiment with new approaches to investigation. A
statistician analyzed the rich flow of data from the over 10,000
Smog Check analyzers to create "triggers" that identified those
Smog Check stations showing patterns of potentially fraudulent
activity. Another experiment involved the formation of a small
team in the Los Angeles area to develop new methods to
investigate so-called "cert mills": Smog Check shops issuing
certificates to a "failing" car while testing another "clean"
car. In five months, this four-person team concluded the
investigation by closing 24 fraudulent Smog Check shops and
arresting 42 suspects. This paved the way for similar
investigations in all 17 offices. A statewide investigation
involving 38 vehicle repair shops of a major chain was
successfully completed and record penalties levied. This led to a
reassessment of repair and sales practices throughout the auto
repair industry.

Partnerships

     New partnerships were developed with insurance industry
investigators to provide insight and resources into auto body
repair fraud. Partnership with the Los Angeles district
attorney's office led to a new approach to the immediate closure
and rapid prosecution of "cert mills," using statutes against
computer crime.
     Local office supervisors were encouraged to develop
resources to perform investigations, rather than wait the 18
months for the budget process. One team partnered with the Los
Angeles city police to build an undercover van that was
instrumental in numerous successful surveillances.

Results

     Early failures were diagnosed and learned from rather than
criticized. Early successes were publicized and celebrated both
internally and externally. This enabled the bureau to spread the
message of the new capabilities and effectiveness to both
employees and industry. Employees were encouraged to identify for
elimination rules that prevented intelligent action. As expected,
progress was slow and halting at first, with doubts, setbacks,
and opposition slowly being overcome. Some supervisors were
uncomfortable taking independent action in this new era of
uncertainty, and required considerable management
support and coaching to take their first halting steps.
     Can total success in this effort be declared? The
organization is less than three years into the change effort, yet
the results are impressive, as evidenced by the table below.

YEAR 93/94    |     Administrative   |   Civil/criminal
______________|______________________|__________________
Auto repair   |       248            |      263
______________|______________________|__________________
% change      |                      |
from 90/91    |     1,278%           |    1,095%  
______________|______________________|__________________
Smog Check    |       658            |      374
______________|______________________|__________________
% change      |                      |
from 90/91    |     1,330%           |    4,575%
______________|______________________|__________________

     A clear and focused mission for each part of the
organization, freedom to experiment within key result areas at
the front line, and an effective evaluation and feedback system
have produced successes for mission-driven teams. This "planned
crisis" has provided the impetus for dramatic improvement and is
preparing the organization for the inevitable changes in strategy
that this successful effort will bring.

For further information contact: A. Keith Smith Bureau of
Automotive Repair 
10240 Systems Parkway 
Sacramento, CA 95827 
Phone: (916) 255-1340 
Fax: (916) 255-1369