Leading CFO measures what matters
Linda Combs discusses management in the Office of Management and Budget
Linda Combs knows what it takes to run large organizations with big budgets and big problems. As the Controller of the US Office of Management and Budget (OMB) from 2005 to 2007, Combs was responsible for the audits of almost US$3 trillion each year.
In this role, Combs led the Office of Federal Financial Management, chaired the US Chief Financial Officers Council and oversaw three items on the President’s Management Agenda: improving financial performance, eliminating improper payments and managing real property. To help monitor and improve each of these areas, Combs relied on a performance management dashboard that tracked progress toward the goals set for her office.
With a strong commitment to measurement and analytics, Combs and her team achieved an impressive record of improved financial reporting and increased performance from almost every federal agency. Some of her specific accomplishments include:
- Every federal department now completes audits and performance and accountability reports within 45 days after the end of the fiscal year.
- Nineteen of the largest 24 departments get clean audits.
- Improper payments were reduced by $9 billion.
- Unneeded real property was sold for $4.5 billion.
Here, we talk with Combs about the roles that leadership and technology played in her success.
When you started as the Controller of the Office of Management and Budget, how did you decide what to focus on first?
The thing I focused on first, last and always was what I began focusing on many years ago: measuring what matters. Before my time in the Controller’s Office, I had recent experience as CFO for the Environmental Protection Agency [$8 billion budget] and the Department of Transportation [$58 billion budget]. So I knew from the perspective of a CFO what it really took to get a clean audit, tighten internal controls, reduce improper payments, and basically how to do all of the things that CFOs are supposed to do. Those were the primary objectives that I pushed CFOs in departments and agencies to achieve when I was Controller.
When you talk about measuring what matters, are you talking primarily about measuring milestones in the auditing process or more specifically about meeting particular targets?
Both. Not only is it the CFO’s job to measure and monitor the audit and financial processes – but it is also the CFO’s job to help others become more efficient and more effective in their operation.
Can you give any examples?
One of the things my team and I did consistently was to ask business unit managers, “What is it that’s causing you the most pain?” When I asked that question of the business unit executives and managers at the EPA, one of the things I found that was causing them the most pain was the earmarks they were responsible for during that time. So, we were able to develop a dashboard system at the EPA that has gone even further than anyone could have imagined to help managers keep up with their spending on earmarks, obligations on expiring dollars and superfund re-certifications.
Another EPA unit manager used a dashboard extensively during the cleanup of Capitol Hill buildings after the discovery of anthrax in the Hart Senate Office Building. His team really wowed the Hill because any time Hill staff called, he could tell them up to the minute exactly how much money was being spent on the clean up and in what categories just by clicking on an icon on his computer screen.
One of the demonstrations I had for my senior managers when I was with the DOT was to have your CEO, Jim Goodnight, come to DOT and share his dashboard with us – the one he looks at every morning.
How did these experiences carry over with you to the OMB?
We had a monthly CFO Council meeting, which I chaired, where all of the CFOs and deputy CFOs for the largest 24 agencies came together once a month. For the first six months when I was Controller, at every meeting I had one of our department CFOs come to the group and show the dashboard that they were using or sometimes they would show a business unit dashboard. It was a great learning experience where everyone could see how other people implemented their dashboards.
I’ve also read that you invited CFOs and CEOs of large corporations to present at your CFO Councils. What did that teach?
One of the most important benefits was that it was a two-way engagement. The CFOs from very large corporations would hear from me about what we were doing and learn a lot about the federal government. The scope and size is always a lesson for them, as they look at our group of CFOs, they realize that the entire federal budget is almost $3 trillion and it’s being managed by the people sitting in the room in front of them. That’s pretty awesome, since CFOs of even the largest corporations are managing budgets in the billions of dollars, not trillions. The federal budget is roughly eleven times the size of the budget of Wal-Mart – the largest Fortune 500® company.
What we learned from them is just as important. I asked every single one of our speakers to tell us what challenges they were facing, particularly in financial management, and how they had dealt with those challenges. What consistently comes up No. 1 for them is the same thing that comes up No. 1 for us: how to get information to business unit managers that really matters to the bottom line.
Providing information to business units helped you accomplish a lot during your time in Washington. What achievements are you most proud of?
I’m very proud that we were able to complete the annual audits within 45 days of the end of the fiscal year. The two years that I was Controller was the first time in history that every single department met that 45-day timeline. I’m proud of that because I know what the 45 days meant. It meant that a lot of efficiencies and effectiveness in all the departments throughout the government were being realized that had not been realized before. You cannot meet this deadline if you’re not very efficient and very effective all during the year.
One thing you have to work at when you measure what matters is: Why does it matter? Why is the 45 days important? Well, it shows everybody that we care about integrity and accountability. We care about shareholder value. We care about efficiency, we care about effectiveness, and we care about being transparent. We want everybody to know that we care about the shareholders, the American people. They deserve nothing less than our very best. I’m very proud of that accomplishment.
The other thing I’m proud of is the reduction in improper payments, and that’s going to continue. If you can reduce that by $8 billion in one year as we did, then you can do that year after year after year and eventually get it down so that the $45 or $50 billion in improper payments that are currently being paid every year will not happen.
How will technology continue to help in those areas?
When I talk about tools and processes, technology is right at the top of the list. There are many tools out there today that we couldn’t have imagined in 1990 when the Federal CFO Act went into existence. You have to start with the right people and believe in excellence and peak performance, and really get people in jobs who have a passion for optimal performance. But they also have to truly believe that efficiency and effectiveness is created through technology and analytics – and they have to know how those can help. There are still plenty of opportunities out there within the public sector to help create better technologies. Leaders at every level are eager to make a difference. They are eager to find better ways to measure what matters.