Prof Has Some Lessons for City Hall

The experiment is over. William Ouchi has left his post as chief of staff to Mayor Richard Riordan to return to UCLA’s Anderson School of Management, where he is a professor of policy and organization.

“I’m very glad I did it,” Ouchi said last week of his two years at City Hall. “I learned a tremendous amount. I knew nothing about government.”

Which is a nice sentiment but raises a question: Why did he do his learning as chief of staff, a complex job that demands political skills to deal with a fractious City Council?

Because Riordan, a businessman himself, appointed Ouchi, believing that the author of such management books as “Theory Z” and “The M-Form Society: How American Teamwork Can Recapture the Competitive Edge” could bring business principles to running a sprawling city.

In some ways he did, but in others he was frustrated--just as William Popejoy, the crisis-appointed chief executive of Orange County, has been frustrated by politics.

Indeed, Ouchi’s brief time in City Hall offers insights to all who have ever asked, “Why can’t government run like a business?” and also to everyone concerned for the future of Los Angeles, Orange County and all of Southern California.

“The fundamental misunderstanding of business people is that they assume the governmental process must be like decision-making in business, in which you almost always have an incentive to reach consensus,” Ouchi says.

He found division, not consensus, among the 15 City Council members, each looking to benefit his or her district and maintain power.

It offended Ouchi’s sense of organization that the council has undercut the mayor’s authority as the city’s chief executive by “arrogating to itself approval rights over specific projects and 33 city departments.”

Anyone familiar with politics in other cities would shrug and say such tussling over power is inevitable, especially as the Los Angeles mayor’s office by law has less authority than do those in New York, Chicago, Boston, Philadelphia and other cities.

Visibility is the mayor’s main lever of power--the opportunity to organize public support and exert his will on the council. But visibility cuts two ways, and Riordan has slipped in the polls as voters in uncertain times have taken out their frustrations on the mayor rather than the council.

That’s why political operatives have been named to succeed Ouchi--Robin Kramer as chief of staff and Michael Keeley as chief operating officer. “They will twist arms and be able to close deals with the council,” says a consultant to City Hall.

So Ouchi, the management professor who reveres consensus in U.S. and Japanese corporations, retires from the rough-and-tumble of politics. Seemingly, it’s another case of an amateur disillusioned by the pro game.

But dismissing Ouchi and the city’s need for business-like management would be a mistake. He has a point about the City Council: Los Angeles hands out more than 50,000 business permits every year, 98% of them unnecessarily requiring council approval, thanks to decades of ordinances written into law. The result is a subtle corruption--council members with power to specify favors for friends or block any project.

“Everybody knows Los Angeles has the worst permitting system in the United States,” Ouchi says. “It’s a serious deterrent to companies coming here or expanding here.”

The professor of organization also understands how the loose and complex structure of city and county government makes Los Angeles vulnerable. “If County USC hospital closes, the indigent patients won’t go away,” Ouchi points out. “They’ll call 911 and become the responsibility of the paramedics service; the city’s Fire Department will become the new emergency ward.”

And if that strains the system to the point of collapse, the residents will have no recourse other than a public petition drive to change government, Ouchi says.

Business would handle the matter differently. A chief executive would simply assign responsibility for medical care to one division or another. Ouchi’s lessons contain an unsubtle plea for charter reform to give more power to the mayor’s office--something Riordan will campaign for if he gets a second and final term.

But however it’s done, the region must change its management practices. “Los Angeles and Orange County are like companies that grew fat, dumb and happy through years of rising earnings,” says Ouchi. “When revenues turn down, you have to learn how to manage.”

Ouchi cites the introduction of mission statements and evaluations for city departments as a successful application of business principles.

“Stated goals give department heads freedom,” he explains. “If they meet their objectives, neither the council nor the mayor’s office can criticize them.”

For example, he says, staff reductions through early retirements at Los Angeles Harbor and the Department of Water & Power will give the city a budgetary cushion in the future. Meanwhile, a one-time infusion from the Los Angeles Airport helped finance hiring police in the latest budget.

It reflects well on Riordan that he recognized that the city must run efficiently and so brought in Ouchi, an old friend, as a consultant when he took office two years ago. But making him chief of staff a year ago was not a great idea.

“And that he left him in the post shows Riordan to be sensitive and caring,” says a political consultant. But now he and his aides have to play catch-up to show whether, as his campaign slogan put it, “he’s tough enough to turn L.A. around.”

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Hitting the Bumps

William Ouchi, former City Hall Chief of Staff, compares the City of Los Angeles and Orange County to companies that became “fat, dumb and happy” through years of rising earnings and were thus unprepared to cope with recent flat receipts. City of Los Angeles general fund revenues, in billions:

1995-96*: $2.47**

* Estimated

** Projected

Source: City of Los Angeles