Coyote Blog

In the first part of this series, I wrote

Many readers will know that I have spent 25 years working with government agencies in a company that privately operates public recreation facilities.  Not infrequently I have had my managers, in frustration over something our agency partners have done or not done, complain that the folks they are working with in the government are “bad” people.  More generally this is a common refrain of government critics, that state agencies are full of “bad” people.  I always disagree with them.

The people that the government hires are no different on average than the people hired in private industry.  Sure, there is some self-selection as people may migrate to institutions they trust more than others or to work cultures they find more appealing, but this is true as well among private entities (e.g. choosing to work at a startup vs Exxon).  My strong belief, from theory and long experience, is that when government employees appear to act “badly” or irrationally, it is not because they are (or began as) bad people but because they are working in an organization with terrible incentives and a counter-productive performance management system.  This is not unique to government organizations – many or most of the great failures of once-proud private companies have come about due to issues with incentives.  The difference is that when private organizations go bad, there is a culling by customers and competitors that has no equivalent in the perfect monopoly of government agencies.

In this post, I want to go further into incentives and metrics helping to explain the behavior of government agencies. In particular, I want to look at two interrelated complaints often voiced about government agencies: "why are they so inefficient and/or slow?" and "why do they say 'no' to every new idea?" The answer to both comes down to performance metrics.

But in looking at the performance metrics of government agencies, we immediately run into a problem: many, perhaps most, government agencies don't have any written performance metrics or productivity standards for the majority of their employees. I have worked with public recreation agencies for decades (think NPS, USFS, BLM, state parks, etc) and I have never once seen anyone with a set of written performance metrics relevant to their job (some agencies will claim hey have metrics and then point to their 200-page strategic plan that was crafted a decade ago).

I understand that creating a good set of job-related performance metrics might be hard for some staff functions, but even for people, say, running a park I have never seen any goals for expense reduction, visitation increases, or visitor satisfaction (eg customer review scores) -- all metrics every one of our managers who privately operate public parks have. And even when they do have performance metrics, they are often for the wrong things (** see bonus story in the postscript).

So is Coyote full of sh*t? How can their behaviors be driven by performance metrics when they don't seem to have any?

Here is Coyote's first law of incentives: There are always incentives. If they are not embodied in written performance metrics, then there are unwritten ones that rule behaviors. And these unwritten incentives are generally a) very powerful and b) almost never aligned with the greater organization's goals.

If there is a very good manager, the incentive might be that manager's praise and recognition. Small teams can sometimes be energized by a shared mission they all believe in. To some extent the agencies I worked with were better than most because public lands agencies (eg NPS, state parks) attracted people with a sense of mission which could motivate people even when the organization did not.

But in general, government employees operate in a vacuum without any positive metrics -- they can't prove themselves by meeting or exceeding this or that goal because the goals have not been assigned and are not measured. So the default metric becomes this: to avoid screwing up.

Government employees operate in a web of hundreds, even thousands of procedural rules. The most obvious of these are very strict budgeting rules where (unlike in the private world) money is not fungible but is divided up into scores of buckets and has to be spent within both the dollar limit of its bucket and the narrow expense categories the bucket is assigned for. Everyone lives in fear of violating these spending and budget rules. I will give one example -- I know of $4 million from a private insurance settlement in favor of a public agency that has languished in a private bank account FOR FIVE YEARS because the government agency can't figure out how to receive the money and decide what account it should go in. Fearful of making a mistake, the money sits dormant.

But beyond money-related rules there are scores of others -- rules for environmental reviews and approvals and rules for archeological reviews of any digging. We had to replace a road culvert a year ago in California on public lands and among the 12 reviews that had to be completed was an historical review to make sure the culvert was not some sort of historical artifact. I remember we inherited a shack on the end of a dock that we wanted to replace (because it was falling apart) and the agency who owned the dock said "wait a minute, we think that is a historic building." I have to admit I laughed pretty hard when my COO lost it and said "then I will drop the f*cker on the Washington Mall in front of the Smithsonian for all the tourists to see but it is unsafe where it is and needs to be replaced."

And the list of rules keeps getting longer. When the organization has new top-down initiatives, they are layered on top of all the other initiatives and mandates to add more layers of review. In several California agencies, for example, simple contract changes have to be reviewed automatically by BIPOC and gender groups. There are climate and sustainability reviews of everything.

And all of the above does not even get to the subject of decision-making authority. In many organizations people are unclear who has the authority to make a decision, so "to be safe" they will kick it upstairs to their boss. Who might kick it upstairs to their boss. The hardest problem we often had in working with agencies was, even when we were pretty sure person X could approve our request, person X often felt safer kicking the decision to a higher level. Now the decision is on the desk of someone who isn't directly involved with the issue, and thus who is reluctant to do make a decision for something they don't really understand.

I want to remind folks that this is intended to be sympathetic -- the behaviors that can be so irritating are NOT the result of bad people being jerks. They are the rational responses of absolutely normal people operating without positive incentives and walking through a minefield of ways to screw up.

All of this leads logically to several behaviors:

• If you go to an agency for a decision, there is absolutely nothing positive they can gain from the situation. They don't get rewarded for satisfied citizens or number of requests approved. What looks like a simple decision to you is fraught for them. Every decision is a chance to screw up on any one of scores of rules without any possible upside for them.
• Even the simplest approvals and decisions take forever. Given that they are now saddled with your request, they are going to make sure they respond to the only incentive they have, which is to make sure they can't get criticized later. They are going to run an environmental review even if it is not necessarily required. They are going to insist a historian does an evaluation. They are going to check with their DEI folks to make sure you are being inclusive. They are going to kick the decision upstairs one or more levels higher than they actually need to. Meeting after meeting will be held with everyone who could possibly be involved, sometimes over a dozen people.
• They will not care about the time, because they are not rewarded for responding quickly. They have no upside and can only focus on making sure that they don't skip a step some later Monday morning quarterback thinks they should have followed. This could, by the way, be by an external group -- say the Audubon Society or a tribal group -- that sues the agency for its decision. The US Forest Service, which has to balance diverse activities on public land from mining and off-road vehicles to conservation, is sued over everything.
• The default answer is "no." Every "yes" is a risk, and government employees don't get any reward or recognition for a "yes." But they frequently get called on the carpet or trigger a lawsuit when they say "yes."

I will add that every agency has brave people who get positive things done for the public and their agency despite the incentives above. I met one such person a few weeks ago, Superintendent Trimble at Mammoth Cave National Park. He and his team are doing a fabulous job creating new ways for the public to enjoy the park. But folks like this are recognized and stand out as exceptions. It takes an unusual person to rise above this quagmire of bad incentives. Many folks that see these problems but don't have the nerve or energy or skill or will to persevere eventually leave government service for other things.

There is a lot more I want to get into on this, but before I do I want to step back and review another old business-economics chestnut, the agency problem. That will be the next post.

**Postscript -- Bonus Story. It used to be that California State Parks had a rule that only front-line employees badged as law enforcement could be promoted to higher ranks of the Agency. This was incredibly limiting and distorting and my favorite parks director Ruth Coleman got the rule changed 10-15 years ago (she later took the fall for a financial problem in the state, in part I think because the union was still angry about this change).

Anyway, before this change (and as a good illustration of why the change needed to be made) I was going to visit one of their parks and looked at the online reviews. They were terrible! Apparently the state park rangers handed out a zillion parking and related citations. When I visited their office, I saw on the wall a performance metric! Apparently there was a tracking sheet showing who had made their minimum citation goals and issued the most tickets. Apparently since this was the only metric they had, this is the one they focused on. And according to the reviews, they did a bang-up job finding any excuse to drop a citation on their visitors. But these were the folks responsible for the parks management -- it was like a McDonald's manager spending all their time citing customer cars in the parking lot. It was crazy.

I still think my first reaction to the Left's pushback on DOGE's probe of the spending of USAID and later other government departments was on target:

Which led to this meme (it's an old standby but under @boriquagato
influence I am dipping my toe into meme creation:

As an aside, I am fully supportive of addressing real privacy abuses found in the DOGE process, though having these concerns come from the party and the media complex that spent the last four years trying to leak Donald Trump's and other rich people's tax returns and whose first response to these privacy concerns was to dox members of Musk's analytical crew makes me skeptical this is the real concern. For government workers, "privacy" means keeping secret bad or stupid decisions. Remember this one (which was again about covering up spending)?

Some of the questionable redactions, by contrast, are charming efforts at bureaucratic butt-covering. Lisa Page, for example, was discussing with Peter Strzok the challenge of having an intimate meeting in Andrew McCabe’s conference room, given the size of his grand new conference table. “No way to change the room,” Page texts in the version provided by Justice. “The table alone was [REDACTED]. (You can’t repeat that!)” Hmmm, what classified, top-secret, national-security information could possibly have been redacted? The blacked out bit, it seems, was a simple “70k.” The DoJ—and can you blame them, really?—didn’t want Congress to know they were in the habit of spending $70,000 on a conference table.

Update 2-17: DOGE is seeking access to IRS systems with taxpayer data. As loath as I am to slow this effort down, I think we need to hear about some strong controls before this proceeds.

But having thought about this longer, I think this is about more than just money. It is also about class. Just listen to how the cool kids in the media talk about Musk's group of young weirdly-nicknamed geeks. This is fairly typical:

He was speaking specifically about a Trump executive order that decrees that the Department for Government Efficiency can force federal agencies into firing four people for every new hire. “Who the hell voted for Mr. Musk?” Begala raged. “Who the hell voted for—excuse the phrase—a guy who calls himself Big Balls? A 19-year-old kid going in there and trying to fire cancer researchers and scientists and teachers and agricultural specialists. It’s, it’s appalling.”

This is moderately hilarious from a) a party who still has not told us which unelected people really were making decisions behind the curtain for a senile Joe Biden; and b) an individual (Begala) who wielded immense power and influence across all departments of the Clinton Administration. The department staffs in DC are 99.99% people who are both unelected and unconfirmed by Congress. The issue is not that they are unelected, the issue is that they are "the wrong sort." I am reminded of the British aristocracy in the 19th century that would tolerate almost any sort of governmental incompetence or malfeasance as long as the people were "the right sort" -- meaning of their class.

The mention of Victorian England reminds me of another way that class is likely involved here. In the English aristocracy the oldest son inherited the title and often all the land and income (which was entailed to the title). This left little for any additional sons, so an income had to be found somewhere for them in a profession that did not require them to sully themselves with "trade" (daughters were handled a different way, through the marriage market). Reading for the law was an acceptable profession for a son with brains, and the army or navy were outlets for many. But most families needed a way for their sons without too much brains or ability and not militarily inclined to make a living. A position in the Church was often the solution.

Modern American blue-blood parents are no different -- they need a way to secure a living for their kids who won't or can't land a job in the modern elite career choices (law, consulting, investment banking, or a sexy startup). Unlike in Victorian times, the military or the Church are no longer preferred elite options? So what to do with your 22-year-old gender studies major? The parents need her to get an income and they need her to do it in a context that they can proudly report to their friends -- Paul Begala does not want to tell his friends that his son's job is maintaining distributor pricing lists ** (anyone who does not believe the latter criteria should have been at my Princeton or Harvard Business School 25th reunions).

The solution? Get them a job at a non-profit, the modern American version of going to the Church. As Arnold Kling noted once, non-profits tend to have much higher status than do for-profits. And without competition they don't have to carry the same performance standards as for-profits. And they are incredibly susceptible to trading a position for your kid in exchange for a nice donation.

The employment rosters of non-profits and NGO's are stuffed with the children of privilege. So much so that there are many non-profits that seem to do nothing EXCEPT employ and pay the travel expenses of 20-something kids from rich and/or influential families. I have been writing about the non-profit scam for years. As I wrote then:

From my direct experience, I would go further.  There is a tranche (I don't know how large) of non-profits that are close to outright scams, providing most of their benefits to their managers and employees rather to anyone outside the organization.  These benefits include 1) a salary with few performance expectations; 2) expense-paid parties and travel; 3) myriad virtue-signalling opportunities; 4) opportunities to build personal networks.  This isn't just criticizing theoretical institutions -- people I know are in such jobs in these organizations.

The spending that DOGE is going after at USAID and other departments likely threatens the income of a number of under-qualified elite kids. So I will update my meme:

**Footnote: I will proudly tell the world that my son's first job out of college was indeed maintaining distributor pricing lists for Ballast Point beer. Trying to optimize profits across the matrix 100+ sku's and scores of distributors is a great real world skill building entry-level job that so many of the change-the-world-before-I-am-25 college kids currently eschew.

Postscript: If you want the blank template for the Astronaut meme updated for DOGE, I share it here.