How I learned what really matters to bureaucrats
A few months before the launch of a major satellite that I was the chief engineer on, my upper management noticed an issue with our contract with NASA. The contract included on-orbit incentive fees. If the satellite exceeded certain performance metrics, we got paid bonuses (hence, the “incentive” to do better than required). We were on target to earn all those bonuses…
…as long as the rocket didn’t explode during launch.
My upper management pointed out that we’d done everything necessary to earn those bonuses and we had no control over whether the rocket exploded or not (since we weren’t the ones manufacturing it). They directed us to open up negotiations with NASA to amend the contract so that we would still get paid those bonuses in the event of a failure that wasn’t our fault.
This turned out to be far more contentious than I’d expected. To cut to the chase, we ended up agreeing that we would still get paid our bonuses in the case of some “not our fault” failures (such as them failing to give us time to correct problems), but not others. Specifically, NASA categorically refused to give us the bonuses if the rocket launch failed.
And during those negotiations, one of the civil servants made a statement that unintentionally cut to the real issue. She said, (remembering as best I’m able):
“We don’t want a headline in the Washington Post about how we paid you a bonus for a mission that never happened.”
Wow.
The civil servants weren’t worried about whether insuring us for the work we’d done was a good use of taxpayer dollars (a valid point). They weren’t worried about the fairness of the issue (that we’d done all this work and wouldn’t get paid for something beyond our control). They weren’t worried about getting fired (they had Civil Service protection and couldn’t be fired).
They were worried about being embarrassed.
That was their number one goal.
Honestly, it makes sense. Thanks to the Matthew Effect, the average civil servant was unlikely to get much praise if a mission succeeded even as the mission leads and NASA leadership did1. Yes, awards are given out to the teams and good managers will recognize the high performers underneath them, but those are short-lived and rarely heard about outside of very small circles.2
I walked out of of those negotiations realizing how much that applied to the rest of the NASA bureaucracy.
The reason the overseeing NASA thermal engineer insisted on extra analysis and testing that was only of marginal value was because he was worried that, if there was a problem, fingers would point at him for not catching the problem. Better to insist on wasting taxpayer money (not his personal problem) than be embarrassed.
The reason the contract insisted on five different ways to do failure analysis wasn’t because we really needed five different approaches to evaluate the chances of a part failing, but because the department responsible for oversight would be embarrassed if something slipped through.
I could go on and on. The point was, the Washington Post Test identified a core problem with the NASA bureaucracy: the misalignment of Personal and Institutional Risk. Which brings us to the second half of the essay.
Personal vs. Institutional Risk
My team was building a satellite. Our top risk is that it would fail on orbit3. If it did, it would be a black mark on our careers and could even lead to us losing our jobs (have a couple of failures and people stop wanting you to build their satellites for them). At a minimum, the company would lose money (those on-orbit incentive fees) and we had personal bonuses tied to those.
Our personal risk was aligned with the institutional risk of the team and the company risk.
For NASA, the stated institutional risk was the same—that the mission would fail. However, for the NASA bureaucrats working the program, their personal risk was getting embarrassed. These were not aligned. The result was spending a lot of money (it was a cost plus program4), that wasn’t really necessary to reduce the program risk.
In other words, the misalignment of risks led to significant waste of taxpayer dollars.
So how do you fix this?
Well… the military has a proven way of fixing it that’s unpalatable in the non-military world. The individual soldier’s personal risk of charging an enemy position is pretty high. The army’s risk if he doesn’t charge the enemy position is also high. So the army reconciles these different risk positions through three major things: first, they run their soldiers through an extensive boot camp that is design to mentally condition them to follow orders; second, they encourage bonding with their fellows, so that a soldier is willing to charge to protect his teammates (or to not let them down); and third, deserters are executed.
That changes the risk profile. I may die if I charge this enemy position. I will die if I refuse to.
That aligns the personal and institutional risks.
In the corporate world, the common way to align the risks is to give employees a stake in the overall company performance. Bonuses and especially stock options work well, particularly for high intensity environments like start-ups. These tend to not work as well in large companies where it’s harder to tie an individual’s performance to the company performance. Why bust my butt if my individual work is unlikely to affect the company bottom line?
However, even without such direct ties to performance, there’s always a simple risk alignment: if the company (the institution) fails, the individual loses their job. The individual may be “playing to not lose” but that’s at least halfway aligned with the company’s goal of winning.
The Government world creates a different problem. It’s almost impossible to fire civil servants, which is compounded when the government organization has a union.5 The bureaucracy leadership also becomes more interested in preserving the organization than actually carrying out its mission (via Pournelle’s Law). Finally, the “Iron Triangle” that Eisenhower invoked undercuts any effective legislative branch oversight.
Which is a very complicated way of saying that…in reality the personal and institutional risks are aligned in the bureaucracy. The stated institutional goal may be going to space, regulating commerce, enforcing the peace, or improving science, but the actual goal of both the bureaucratic leaders (in any mature bureaucracy) and their legislative oversight compatriots is to preserve the bureaucracy.
So they have to avoid the embarrassing Washington Post headline, because that might disrupt the automatic funding trough. It might lead to the legislative branch actually doing its oversight job lest those legislators gets embarrassed.
This in turn points to two possible solutions.
The first is “the disinfectant of shining a light” on the waste, corrupt practices, and stupid regulations such that embarrassment forces the legislators and bureaucrats to try to fix things. This is what I and some other sub stack authors [https://www.eatingpolicy.com/p/better-politicians] are trying to do.
The second is, well…. revolution. If you destroy a bureaucracy and build a new one from the ground up (like would happen if a company goes under), you can ensure that the people leading the organization are actually dedicated to the stated mission6. However, to avoid that being just a shuffling of chairs, you need to get rid of the political leadership protecting the bureaucrats. So… you have to get rid of the legislators as well.
While that’s theoretically doable in a Republic, the high rates (>90%) of incumbency re-election, the simple cost of running and winning office (from $2M to over $15M), and the ability to rig elections, both legally (through gerrymandering etc.) and illegally, pretty much make it only theoretical.
There may be other methods I haven’t identified yet.
But that’s where the change has to happen—the folks who are dedicated with preserving the bureaucracy either need to “come to Jesus” about getting rid of waste or be removed.
The Matthew Effect says that to he who has much, more will be given. To he who has little, even that will be taken away. In scientific fields like space exploration, this means that the famous named scientists attached to a program will get more credit for any discoveries than they deserve, where the lowly grunts who did the day-to-day work will get little if any.
I was awarded the NASA Outstanding Public Leadership Award, which is the second highest award possible for non-Civil Servants. It got me a medal, a plaque to hang on my wall, and a trip to DC for the awards ceremony. A year later, none of my management even remembered I’d gotten it.
Yes, in aerospace we say “on orbit” instead of “in orbit.” I have no idea why, but it is an interesting way to identify who’s actually in the industry.
This problem doesn’t go away with fixed price contracts. I’ve been involved with about a dozen fixed price contracts and every one of them devolved into the government bureaucrats (NASA or Air Force) trying to insist that something was in scope of the contract when it really wasn’t. They were still trying to avoid being embarrassed.
One of the original purposes of unions was to prevent management from selectively harassing targeting employees they didn’t like. However, “harassing” these days is often defined by unions to cover legitimate discipline, which is a problem, especially for professions like law enforcement.
At least for twenty or thirty years, until the next generation of bureaucrats out for themselves manages to take over.