GAO Accountability Integrity Reliability United States General Accounting Office October 31, 2003 The Honorable Olympia J. Snowe and Entrepreneurship United States Senate The Honorable Donald A. Manzullo Chairman, Committee on Small Business The Honorable Christopher S. Bond and Entrepreneurship United States Senate Like many federal agencies, the Small Business Administration (SBA) has recognized it needs to realign its current organizational structure and processes. In doing so, SBA aims to improve its ability to fulfill its primary mission-supporting the nation's small businesses and protecting their interests-by increasing the public's awareness of SBA's services and products and making its business and loan processes more efficient. For over a decade, SBA has been centralizing some functions of its many district offices to improve efficiency and has been moving more toward partnering with outside entities such as private sector lenders to provide direct services. SBA's district offices were initially created to be the local delivery system for SBA's programs, but as SBA has centralized functions and placed more responsibilities on its lending partners, the district offices' responsibilities have also changed. In a previous report, we found that past realignment efforts during the 1990s had changed SBA's organization but had also left parts of the previous structure intact, contributing to complicated organizational relationships and a field structure that was not consistently matched with mission requirements.1 For example, we found confusion over the mission of the district offices, with SBA headquarters officials believing the district office's key customer was small businesses and district office staff believing that their key customer was the lender who makes the loans to small businesses. 1U.S. General Accounting Office, Small Business Administration: Current Structure Presents Challenges for Service Delivery, GAO-02-17 (Washington, D.C.: Oct. 26, 2001). SBA transformation efforts have not been a reaction to any change in SBA's mission. Rather, SBA's intent has been to transform the agency so that it can more effectively and efficiently achieve its mission. In its current transformation effort, SBA intends to expand centralization to additional loan functions and some of its other small business programs to improve efficiency. As centralization frees up employees in the district offices, SBA intends to better define the district office role to focus on marketing and outreach to small businesses and managing SBA's relationships with lenders and other resource partners.2 Following SBA's testimony in July 2002, which stated that SBA was initiating a 5-year workforce transformation plan, you requested that we (1) review SBA's progress in implementing its transformation initiatives and discuss any challenges that have impeded or could impede implementation and (2) determine whether SBA's transformation incorporates practices that are important to successful organizational change and effective human capital management in the federal government. This report contains the results of our review of SBA's implementation of the first phaseapproximately 6 months of the transformation effort. As part of phase one, SBA planned to implement pilot initiatives to test a new marketing focus for its district offices and centralize some of its loan functions. To conduct this review, we analyzed planning, budget, and implementation documents related to SBA's transformation and interviewed key officials at SBA headquarters. We also conducted site visits at each of the pilot offices involved in the first phase-three district office pilots in Phoenix, Arizona; Miami, Florida; and Charlotte, North Carolina; and two center pilots in Santa Ana and Sacramento, California. At these locations, we interviewed all employees who were directly affected by the pilot. To ensure open communication, we met with directors, supervisors, and employees separately. We compared SBA's implementation process for transformation with practices important to successful transformations, using practices we identified in literature and our previous work on 2SBA's resource partners include organizations such as Small Business Development Centers and Women's Business Centers that provide management and technical assistance and the Service Corps of Retired Executives (SCORE) chapters in which volunteer business executives counsel small businesses and potential entrepreneurs. House Committee on Small Business, Subcommittee on Workforce, Empowerment, and Government Programs, Maximizing Organization and Leadership in a Federal Agency to Fulfill Its Statutory Mission: Restructuring of the Small Business Administration, 107th Cong., 2nd sess., 2002. Results in Brief reorganizations, organizational change, and human capital management.4 We performed our review from February through September 2003 in accordance with generally accepted government auditing standards. SBA has made some progress in implementing the first phase of its transformation, but further progress could be hampered by budget and staff realignment challenges. To meet its objectives for phase one, SBA (1) implemented a pilot initiative at three district offices to test a new marketing focus and (2) centralized a number of loan functions from these offices to two centers to assess ways to improve the efficiency and consistency of its loan functions. SBA is currently nearing completion of phase one, and to prepare for its new marketing focus, it has provided marketing-related training to staff at the three district offices and also conducted an analysis to identify staffs' developmental needs in marketing. In addition, SBA transferred most of the loan processing and liquidation cases from the three district office pilots to the two centralization pilots. However, SBA officials told us that they delayed the start-up of the district office and centralization pilots in phase one due to the requirement in their appropriations that they notify the appropriations committees prior to going forward with any organizational restructuring, the government's fiscal year 2003 continuing resolution, and a shrinking operating budget. As of our report date, phase two has not yet begun; however, SBA officials told us that plans for this phase have been scaled back because the agency did not receive any of the funds specifically requested for the transformation in its fiscal year 2003 budget, and officials believe that SBA may not receive any requested transformation funds in its fiscal year 2004 budget request. Thus, SBA would have to rely on any available operating funds to carry out the transformation. Given the current situation, officials said the focus is now on creating a new center for centralizing all of its loan liquidation and loan guaranty purchase activities. While SBA's implementation efforts have been and could continue to be impeded by budget constraints, we found that the agency's budget requests for transformation were inconsistent and lacked a detailed plan that showed priorities and linked resources to desired results. SBA's centralization efforts could also be impeded by the challenge of realigning staff from The main document we relied on in identifying key practices was our recent report, U.S. |