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Four Core Keys to Navigating Bureaucracy
Episode 730th April 2022 • Leadership Forum: The Podcast • John Glenn College of Public Affairs, The Ohio State University
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Irv Dennis, former CFO of the U.S. Department of Housing and Urban Development, discusses how leaders can navigate the most difficult bureaucracies to get things done. He shares the core areas — governance, people, process and technology — that leaders should evaluate to understand an organization’s strengths and weaknesses. Leveraging those findings, you can plan structural change, motivate your team, improve policies and procedures and build resources toward success. 

Transcripts

Trevor Brown 0:04

and Young where he retired in:

Irv Dennis 1:27

Thank you, Trevor. I appreciate the invite and look forward to the conversation.

Trevor Brown 1:30

Great. Well, let's let's start with a little bit of background on HUD. I just wanted to sort of characterize for the audience, the agency and what more importantly, what was the state of affairs when you arrived? What was the challenge as you as you saw it, and what was your goal?

Irv Dennis 1:49

Well, yeah, HUD is a big complicated agency, like many federal agencies, and the mission is to provide safe and affordable housing, and communities to those in need in our society. HUD has operates at about a $68 billion budget. It has 12 programs that monitor and account for and and oversee 38 different grants. It also has the mortgage world and the FHA and Ginnie Mae. And they also oversee disaster recovery funds. And that portfolio is about $90 billion, that the mortgage world has about 1.3 trillion and FHA loans and approximately 2.3 trillion in the the Ginnie Mae world. So it's a big complicated agency. And when I arrived, the financial infrastructure was I would call it dysfunctional. It was the weakest of the financial infrastructure of the cabinet agencies. And it can be characterized as wasn't able to get a clean audit opinion for eight years. When I got there. There was four disclaimers, there's nine material weaknesses, several significant deficiencies and basically 14 areas within the financial infrastructure that could not be properly audited or accounted for. They were not in compliance with many of the other federal reporting, financial reporting laws that the government has the the DATA Act and the phone act, and I won't explain those, but they are basically recording mechanisms to let the let let the the citizens of the United States know how grant money is spent and the status of it. The IT systems were antiquated. And basically, it just lacked a lot of lacked credibility within the inner government agencies amongst Congress in the White House and General Accountability Office. So it was really in poor shape.

Trevor Brown 3:47

So let me interrupt there. And thanks for that context, I want to put those two things together before we get to what you sort of established as your goal coming in. So you got a ton of money, taxpayer money flowing through HUD, and then you've got what you've described as weak financial infrastructure. What's the risk?

Irv Dennis 4:08

Well, the risk is leakage of taxpayer funds through fraud, waste, and abuse. You know, the money HUD, like many agencies that offer grants, it's just the intermediary from Congress appropriates funds, Treasury releases funds through the agencies and the agency is responsible for overseeing the disbursement of those funds out to the state and local communities. And there's a lot of entities and a lot of companies and a lot of people that touch that flow of funds, and without the proper oversight and controls, a lot of it could get leaked through fraud at worst, abuse or just wasting in not managing it properly.

Trevor Brown 4:45

Okay. All right. Good. Thank you for that clarification. Wow, a lot of money at risk there. So you you charted out a long list of deficiencies. As you you know, in those first days, what did you identify as the principal goal you were trying to achieve, what were your targets?

Yeah, the number one goal was to get a clean audit opinion. And you do that through cleaning up the financial infrastructure. There were a lot of areas like I mentioned 15 or 16 areas that needed remediation. And when you review that, once and I'm sure we're going to talk about this, once we understood the root cause of that the real goal was to improve the financial infrastructure to clean up the material weaknesses, or remediate the material weaknesses and obtain a clean audit opinion. So people and users of those financials have confidence that the financial there's financial integrity within the HUDs' infrastructure.

So just a little bit more context before we go into the steps. Why, what's the diagnosis on why HUD was not able to do that for the eight years prior?

Irv Dennis 5:57

Well, it starts with leadership in many ways. The CFO office was essentially vacant, the person that prior administration had appointed unfortunately, passed away in the in the position early on, and they were never reappointed. So the office was basically without a CFO for eight years. And without that leadership, you start to see that deterioration.

Trevor Brown 6:22

Yeah. Okay. All right. So, you know, classic management lesson is lay out your first 100 days, right? You got to be fast, and so what were those first 100 days like for you? What did you try to accomplish? And what was your, your approach?

Irv Dennis 6:37

Well, the first 100 days for me was I had a lot to learn, you know, as you mentioned, I spent 37 years in the in the private sector with Ernst and Young. And it was, I knew what I didn't know. And there was a lot I didn't know government, and that Ernst and Young, I was really focused on the commercial side, working on large global accounts as an audit partner. So what I how I approached the first 100 days, I needed to do a lot of learning, I needed to learn the business of HUD I needed to learn the infrastructure of HUD, I needed to understand how Washington worked. And what was the interplay between HUD and Congress and the White House and the General Accountability Office, I spent a lot of time developing relationships, I needed to build my credibility, I needed to build my credibility with the CFO staff, I needed to build it with all leadership, the political and the career. And I needed to build relationships with with Congress and the appropriations team, with Office of Management Budget. And I needed to understand how the the financial statement close process worked and how numbers rolled up. And I took a deep dive in understanding the root cause of the issues and, and the way I think of it, Trevor, when when I evaluate a company, I did this in my with my audit experience, there are four areas that you evaluate to understand the the strength of a company, and that's governance, people process and technology. So I spent a lot of time in that first 100 days really trying to understand the strengths and weaknesses within those four areas.

Trevor Brown 8:15

Okay, I want to I want to ask about each of those. But the first, just from a sort of leadership standpoint, when you said you needed to do a lot of this, was it literally you, yourself? Or had you quickly tried to assemble a team of people around you? Because that's a lot of stuff to do for one person for an agency at that scale at scale and scope.

Irv Dennis 8:37

Yeah, no, this was not a this was not an Irv Dennis effort. This was a complete team effort. And what I did in the first 100 days was, again, understand what I didn't know and took the opportunity to use my team to help me understand the business and understand how it helped me walk around Washington without stepping on landmines, and I had a phenomenal deputy CFO who worked his whole career inside of government. So he really knew Washington. He helped me set up meetings with all of the inter governmental agencies that I needed to speak with. And I spent a lot of time with each other. I had 12 direct reports. And I spent a lot of time with each of them, understanding them personally, understanding what their role was, within HUD understand from their perspective, what the issues were, and what they needed, and how I could help them get to a point of remediation. So what I really provided was, and I'm sure we'll talk about this is the overall vision and strategy. And what my team helped me do was build to that and what what what we put in place to make it happen.

Trevor Brown 9:43

So let's take us through that that recipe that you'd learn from your years of working with private corporations of governance, people process and technology and let's just take them one at a time. Sure. So governance you know what, what were you specific basically focusing on there within HUD.

Irv Dennis:

So in the private sector world, large corporations have multiple subsidiaries operating in multiple countries. And at HUD, there were 12 programs, like they mentioned. And then you also have the C suite offices, and it was very siloed. Each of those programs worked in isolation. If they wanted to make a business process change, or if they wanted to make an IT change, or they wanted to change something within their their HR group, it was all done in isolation without looking at HUD at large. So it didn't have that overarching governance structure from, again, I'll put it in private sector have a board of directors and a suite of executives all working together. So we labeled it as trying to develop a one HUD mentality. And the governance needed a lot of work and, and we put processes in place to improve that, which we can talk about now or talk about later. But that was really important to, to get a quick handle on that and put some processes in place. And what made it a little more challenges in government versus the private sector is you almost have two layers of management that are very distinct the political and the career. So it was important in this governance structure to get the political people working with the career and working together to focus on the remediation improvements that we needed to do.

Trevor Brown:

Let's put a pin in that one, I want to come back to that one deeper, and I'm gonna walk through the other three as well. So let's let's turn to people, I can imagine that there was a lot of skepticism about you and your approach from career or civil servants in HUD, you are coming from the private sector, you've never had any public sector experience before. How did you overcome that skepticism and focus on the people in the organization and motivate them to undertake change?

Irv Dennis:

So yeah, I really, you know, I was in retirement mode, right. So I really was doing this to do meaningful work and give back to the community. And I did that through public service. And so I didn't come with any agenda other than to help my team, my team, immediate team being is the office of the CFO. So I did not come with a sense of arrogance that I knew more than them, because I didn't, and I told them, you know, we need to work together on this. And I knew financial excellence, they knew government. And I said, we got to just merge those together to make this happen. And, you know, the people area needed a lot of work, but it wasn't about the people themselves, it was about the processes within government. And, you know, the people need, they need the right tools, they need the right training, and they need the right mentoring to to blossom in their careers. And the government at large, I don't think does a great job of providing necessarily the training aspect or the right mentoring. And they certainly didn't provide the right tools and what we'll talk about that as part of the remediation, so I made that a focus, and they were looking for leadership. And these, the people with inside of government are very, very smart. They're very mission driven. It's very impressive to see how hard they work for the American people. But what they needed was, you know, against some leadership and, and someone supporting them to to show them the way to remediate.

Trevor Brown:

Yep. Great. Okay, now, let's let's you mentioned processes, sort of diagnose for us what the process challenge was, what you saw as the corrective.

Irv Dennis:

So from a process standpoint, you know, there's lots of policies and procedures inside of government, as you would expect, and a lot of them were old, they were outdated, they weren't current. If people were to change roles in jobs, there wasn't really a footprint to follow. And we, I think there's probably over 250 processes, and we took the policy statements, if you will, and we we tweaked them around quite a bit, and we updated them. And we talked about the importance of the ones that really would help us with the remediation efforts. You know, the the infrastructure of government, you know, you know, operates on a industrial revolution, infrastructure platform that was done back in the 1900s. And we're in a digital age right now, right and, and the government hasn't caught up with that. But so a lot of the processes that we put in place were around IT modernization, that made a huge difference and created a lot of efficiency and effectiveness. So that's that the process that we that we focused on.

Trevor Brown:

You're doing a great job putting the softball or the T ball up so we go right to the neck, which is technology. I heard this factoid once it was probably three years ago, so it's been some time that then HUD had no IT staff under the age of 30. That suggests an agency relying on technology from a bygone era was that the case? I mean was it?

Irv Dennis:

Absolutely was the technology, it was very antiquated, it was age that didn't communicate well within itself. And it was it was very fragile. Yeah, I often speak of the technology as being a bowl of spaghetti, that's aged and dried, and you've put some pressure on one side of the other and it's ready to crack. And the, the workforce within HUD, which I don't know is terribly different than other agencies, but there's a high percentage that are eligible for retirement over the next few years, technology is going to be really critical when you have that that environment and, you know, they were operating some of their platforms under cobol. And cobol, was something I dealt with in college back in 1980. Not a it's not a platform of choice in today's world, but technology needed a lot of work and, and, you know, it's that's hard to change technology. And many times it's not about the IT, it's about business process changes. So we really had to think all of that through and, you know, at the end of the day, we'll chat about IT modernization was a big part of our remediation. It wasn't about changing the program was about putting cheaper technology on top of the the infrastructure that was there, you know, with robotics, and, and, and data extraction techniques and artificial intelligence and things like that. But yeah, it was a very, very IT was, it was shocking, antiquated it was.

Trevor Brown:

So before we go deeper into some of these, I just want you to reflect a little bit on this, this quartet of sorts of things to work on in that first 100 days governance people process and technology was born of your experience working in the private sector. Now that you've had a little bit of time to reflect and you sort of not about bias, but this was a framework that you used successfully in other places, did you think it was the right framework? Like was that the right quartet of things to be focused on?

Irv Dennis:

Well, you know, governance people process and technology is in every entity, no matter what, no matter what size or industry. So what was helpful to me in the audit world was as an audit partner, I rotated large accounts every five years, you only can sign as an opinion for five years from the opinion trees by the SEC. So I had to quickly assess companies and there are the four areas if you if, you know, strong people might be able to hide weak technology and, and strong technology might be able to hide weak people. But if it's all working together, it's a, you know, it's the risk assessment that you do and, and when you walk into an entity, you you look at those four things, understand where the strengths and weaknesses are, you can start to identify where the risks are. And that's really how I approached it.

Trevor Brown:

Okay, so let's, let's take that chronological approach. So that first 100 days was a lot of assessment, relationship building, and by extension, trust, building and listening. So then you've got your sort of diagnosis, what tell us what comes next? How did you decide which of those things to prioritize and where to really lean into?

Irv Dennis:

Well, I had a very strong sense of what needed to be done, I had a very strong sense of where we needed to be. And I, once I did that evaluation, I knew where the areas were that I needed to focus on. So I, at this point, after the 100 days, I had my credibility built with my team with the leadership of HUD, and with the inter governmental agencies that we dealt with. So what I had to do then was get resources. And I did that through creating a document that laid out very clearly what the issues were. And that's the first time of many folks had seen it. And that was that type of clarity. And I needed my people to help me build the the, the the financial platform or the financial framework to make that happen. We put a very detailed financial plan in place. And they helped me build that out. And then they started to get ownership of it and feel the ownership of it. And once I developed the transparency plan, and what the current state of affairs are, as I documented what the causes were, we put a detailed meeting remediation plan in place, identify the resources that were needed, I understood the barriers that it was to success and there were barriers. And once we put all that together, my team was bought into it that became the the the platform or the energy to make the remediation happen, and we put together a very detailed plan, then to to improve, and just to launch the project.

Trevor Brown:

So I'm going to fast forward to the end of this talk talk. And have you talked about how you embed some of these changes. But before we get there, I want to talk about, or have you talked about that your your experience and the differences between that you've alluded to some of these the public and the private sectors, and what what the sort of major challenges were and you could pick any one of those four areas we were just talking about as an example, but just start by describing what you see is the primary differences between the two sectors.

Irv Dennis:

rvThe number one difference in my mind is the word accountability and consequences. When you think of the financial financial health of HUD, which was was terrible, with the material weaknesses and the disclaimers, lack of audit, that can't happen in the private sector. And you know, stakeholders will pull out shareholders will pull out you wouldn't be able to, to get that entity's just don't survive and the private sector with that those those weaknesses. And you think about why it's happening in government, well, the same folks that were working on the infrastructure of HUD, the infrastructure was were there for 10 years, again, great people. But they weren't being held accountable. And there were no consequences. There's plenty of Oversight in Government, you have the oversight of the the audit process, you have the oversight of the General Accountability Office, you have the oversight of Congress. So lots of reports being written about how poor the situation was, but no one was no one was really forcing change. And so that's a big difference, probably the number one difference. The second difference is, when we got into exercise, or got into the process of performing the remediation, it was very clear that we you didn't have the command or the control the resources in government that you do in the private sector. And the resources that you need to make change are people and dollars. And in the private sector, it's easier to put people in place to succeed, terminate and hire those three things are much easier in the private sector, it's easier to get dollars. In government. It's very, very difficult to to fire someone if they're not performing, it's very difficult to move someone out of their position, if they're not performing. The hiring process can take anywhere from eight months to a year within HUD. I don't know what the other agencies but at least that was our experience at HUD. So resources that people saw are very difficult to to, to, to maneuver around to make quick progress. And the budget process is extraordinarily difficult in Congress and the appropriations let you know, they probably appropriate the money, and they let you know how to spend it, when to spend it. And when I went to the appropriators laying out our plan, and asking for dollars, they balked at it. And they didn't give me anything nearly what I wanted in the first year until I proved myself so those two resources are very difficult to control in a big difference between the private sector and government are no consequences and controlling resources.

Trevor Brown:

So I want you to elaborate on each, these are great. I just want to restate I thought that statement that there's a lot of oversight in government, but very little accountability, at least in the part of it that you experienced. How did you during the time you were there, change the culture and the operation to move towards accountability?

Irv Dennis:

So my team, the direct reports, within the CFO office, they were, they were tired of getting beat up. They wanted change. They just didn't know how to do it. And once we came in with a vision, I got them bought in to helping me put the remediation plan together. We had a little bit of success in what we're doing. And they knew I was there to support them without any other agenda other than to help them make an improvement. Once I got them bought into that there was a lot of excitement. And I took the blame off of them. They were feeling this was all the CFO shop and then I said on day one, in my experience most of the material weaknesses in companies are not within the CFO shop. It's out in the operations. And that's exactly what happened to all of the the material weaknesses and the aged audit recommendations were out at the programs and what the CFOs office their biggest weakness was they did not have the controllership, oversight, and functions so programs were doing stuff in isolation of the CFO office. And we talked a lot about leadership, I said, leadership doesn't start at that this starts at the top. But it's so critical throughout the complete organization. And you need to be a leader within your sphere of influence. And we spent a lot of time talking about that. And I basically said, You need to walk around HUD, like you own the place, and no one should be making as it relates to financial infrastructure. And no one should be making changes and without our approval from a policy and procedure standpoint. And once I gave them the courage and the support, to lead in that regard, it was a big difference.

Trevor Brown:

You really did inculcate a culture of accountability, and by empowering your your employees. Now, now, let's switch to the you made this statement that, you know, you don't control resources, whether people are dollars, you put this proposal before Congress to say, look, I've done my diagnosis, here's what I think we need to do to change and reform and, and they said, No, and then you said you needed to prove yourself first. So how did you do that? How do you take us through what what was involved in proving yourself to Congress to be able to secure the resources you needed to?

Irv Dennis:

Well, it's very similar, like what I did, when I went to a board meeting or an a, an audit committee meeting, I took a prepared a document that laid out very clearly what the issues are, why they need to improve, here's a path to improvement. Here's what I need to do, here are the resources I need. Here's what the results will be. And I took that document. And I shared that with all four corners of Congress, I shared it with General Accountability Office, and I shared it the White House and OMB. And once people saw that there was a path forward, they started to buy in themselves. So I got I brought a private sector mindset into how do I how do I convince the ship of what I need. And Congress balked at, quite frankly, and I asked for $250 million. And their view was, that's $250 million I can't get to the people you serve. And I tried to convince them that $250 million is going to be able to allow me to get more money to the people we serve without the fraud, waste, and abuse, and they didn't give me everything I wanted upfront, but they said I'll tell you what, I'll give you a little bit right now you show me some progress. And we'll give you more later. That's that's in essence, what happened.

Trevor Brown:

Yep. So now let's take it to the end, which is another difference, I suppose, between the public and the private sector, which is not to say that people don't exit out of the private sector. But there are these these milestone, there's this sort of exit points, I either transition of one administration to another where sometimes people stay on but often a new administration says we want our people and so then your time was up. How did you? What steps did you take to try and embed some of these changes and fundamentally that culture of accountability as you as you walked out?

Irv Dennis:

You know, it's interesting, when you say, I walk out, one of the other big differences in private and government is the complete leadership change every four to eight years. It wasn't me walking out, it was all a political walking large. And so and I was very conscious of this early on in the process, like what does happen when if the next administration has a different agenda, and a President's management agenda, I should say. And it was really important to me to get the the career folks bought into what we're trying to do. And once I, they believed that they understood how to make it happen and understood what what levers to push to sustain the progress and continue to progress. That's what was going to make it sustainable. And we spent a lot of time talking about that. And fortunately for me, a lot of the stuff as relates to financial excellence within the internal control structure they bought in and that was that was actually going quite well, when I left some of the IT modernization stuff that impacts a lot of the programs. A I'm not sure that that would continue. I hope it is, and I hope it does. But that requires buy in at all departments. So getting the people buy in that are going to be leading it going forward was really important to me.

Trevor Brown:

So as we as we pull this to a close normally I would would ask what what advice counsel do you have for aspiring young people going into this but I want to pivot this a little bit in light of your experience and your success. What What advice do you have for agency leaders, whether they be at the federal level, state local, where the context is somewhat similar to what you went into? What What advice do you have to them about how to attract people into government service particularly those that perhaps like you came from, from the private sector, and what's what's the pitch?

Irv Dennis:

To me the pitch, and I've become a huge fan of people going into public service in working inside the agencies and any government level. I think it's a fascinating career spot for people either as a full career or, you know, as a stopping point in their career for three or four years. I think the pitch is, the government needs to advertise themselves more. And there's two things actually, they probably need to do they need to improve the infrastructure to attract young talent. You know, these folks, college today, like this high tech, digital world we're in government probably needs to catch up to it to attract. But that's on the infrastructure side, when you get think about policy and others. The government is a phenomenal place to work through, there's no industry you can't learn. They they touch it on the regulatory side, policy side, infrastructure side. But if the government did a better job of advertising itself on college campus, getting out and reaching people, the students, I think it'd be really helpful to them. And, you know, one of the things I'm doing now with American Cornerstone Institute is developing an educational program to help educate people on the executive branch and on the infrastructure because I really do think if we can get civic money, people started that have a bit of some private sector experience or have that knowledge and really helpful to the financial infrastructure government.

Trevor Brown:

Irv, thank you for a really invigorating and insightful conversation. And thank you, even though it was it was late in your career, for taking those great talents of yours and putting them into practice in public service. We all are the beneficiary. So thank you very much.

Irv Dennis:

Yeah, thank you, Trevor. I tell everyone that listens, it's one of my favorite three and a half years of life. I really, really did.

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