Booz Allen IRS Article

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“The effort was all-encompassing and involvedmajor strategy and systems work. Our overall strategy

struck a resonant chord.”

PEA-2001-12/11final 12/19/01 10:51 AM Page 32 Louis F. Cruz FWB 17 GB:Projects:PEA 2001:PEA2001Book folder:

Internal Revenue Service

Start with a premise: The U.S.Internal Revenue Service (IRS)makes everybody just a littlebit uncomfortable.

admired institutions. And theU.S. Congress listened to thosevoices, picking up the call forreform. The Internal RevenueService Restructuring andReform Act of 1998 mandatedthat the agency “provideAmerica’s taxpayers top-qual-ity service by helping themunderstand and meet theirtax responsibilities and byapplying the tax law withintegrity and fairness to all.”

That was the context in whichCommissioner Rossotti devel-oped a 15-page vision for the“new” IRS. The 27 years he hadspent in international businessand information technologyconsulting before joining theIRS gave him a fresh perspec-tive. He selected Booz AllenHamilton in 1998 to validatehis vision for the agency andbecome its partner for change.

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And while it makes April 15particularly uncomfortable formany U.S. taxpayers, the IRSby and large has fulfilled itsmission of “collect[ing] theproper amount of tax” accord-ing to the law and withoutpolitical influence. The agencycollects a staggering $2 trillioneach year in taxes—more thanthe total GDP of the UnitedKingdom and 26 times the rateof its first collection nearly ahalf-century ago.

Still, when Charles Rossottibecame the forty-fifth IRScommissioner in 1997, it wastime to revisit that mission.The American public rankedthe agency among its least

Tax Collection for a New Era


“From the start, it was clearthat Booz Allen had a lot ofexperience with reorganizationsand how to deal with the kindof problems that accompanythem,” Rossotti says. “Havinga methodology and the abilityto move quickly and success-fully on the client’s problemwas important.”

Making the Transition—Successfully

Over the next four years, ahybrid Booz Allen team ofmore than 800 governmentand commercial consultantspartnered with a team fromall levels of the Internal Rev-enue Service. Together, theyare helping the agency makethe radical transition from a1950s-style geographic-functionmatrix to a 21st-century cus-tomer-focused enterprise.

“This work defines and affectslasting change in one of thelargest and most pervasivegovernment agencies in theU.S.,” says Vice President JohnJones of Booz Allen. “Virtuallyevery individual and corporatetaxpayer in America will con-tinue to benefit over manyyears from the customer ser-vice improvements resultingfrom our partnership with theIRS. This ongoing program ismore than a simple restructur-ing; it is a comprehensive mod-ernization program of a magni-tude that is seldom attemptedand rarely succeeds.”

The geographic configurationwas effective for most of IRShistory. Taxpayers would callthe local IRS office and receivecustomized service. In fulfill-ing that role, however, agencyrepresentatives were required

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to answer a broad range ofquestions, which could lead tolapses in service and inconsis-tent advice for taxpayers. Thatnecessity disappeared withthe advent of technology—specifically, computer net-works, low-cost long distanceservice and the opportunityto realign along customer-ser-vice lines. “Technology shrankdistances,” says Rossotti, “andmade it possible to createnew forms of organization.”

At the heart of the reorganiza-tion is Booz Allen’s strategy-based transformation, whichdrives both process and cultur-al change through the organi-zation. Growing from the ini-tial IRS mission assessment,the project has realigned the118,000-person workforce—creating a new leadershipmodel, and an entirely new

Above are (l-r): Jann Bullerand RameshRamasjwamy ofBooz Allen, withGaland Brusonand Caesar Ernestoof the IRS.

At the U.S.Treasury Building

in Washington,D.C. (l-r):

Matt Platania andCarol Acree of

Booz Allen, with William Stunder

and Therese Hahnof the IRS.


tively assess and expand uponthe strategy of structuring theIRS along customer segments,but also to see them throughall dimensions of the requiredtransformation. The effort wasall-encompassing, and involvedboth major strategy and sys-tems work. Our overall strategystruck a resonant chord.”

Specifically, the new organiza-tion includes:

● Four operating divisions—Wage and Investment Income,Small Business and Self-Employed, Large- and Mid-Size Business, and Tax-Exempt and GovernmentEntities—which meet thespecific needs of each tax-payer segment while stream-lining top management andretaining most frontlineemployee roles.


strategic planning process withbalanced measures in placethroughout the organization.

There were some tough deci-sions: Wiped away in the neworganization were layers ofmanagement—an average offive layers per operating unit.Gone as well is the traditional“top down” decision-makingprocess: Key to that transition,says Booz Allen vice presidentRoger Blond, “was our introduc-tion of a new concept of team-work in which a diverse mixof levels and skill sets werebrought together to focus onspecific issues.”

“From the start, our commit-ment to the end result wasclear,” says Senior Vice Presi-dent Gary Mather of Booz Allen.“Everyone understood that wewere there not only to objec-

● Four functional units—Tax-payer Advocate Service, ChiefCounsel, Appeals, and CriminalInvestigations—which havedirect, independent access totaxpayers when needed.

● Shared services—InformationSystems (IS) and agency-wideshared services—which providemore consistent delivery of sys-tems and standardized servicesto internal customers, eliminat-ing unnecessary divisional over-sight of transactional services.

● National headquarters—restructured to reduce thesize of the organization by 30percent—which clarifies rolesfor setting policy, reviewingplans and goals of operatingunits, and developing majornew improvement initiatives.

The combined result is a more

At far left: Outsidethe IRS buildingin Washington, D.C.,are (l-r) KathyFeldmann andRhonda Souder ofthe IRS, meetingwith Vivek Massyand Tom Miller ofBooz Allen.

At near left:Conversing withthe WashingtonMonument in thebackground are (l-r)Booz Allen’s ChrisSiddall and MichaelKhalifeh, andCharles AnthonyBurke of the IRS.


efficient organization of cus-tomer-facing business units,each with distinct responsibil-ities, but sharing combinedservices and linked by a smallcorporate core. Starting withthe initial assessment andvalidation of the organizationalconcept, Booz Allen used afour-phase approach to designand implement the new organi-zational structure, transform-ing Rossotti’s 15-page reportinto a 1,000-page blueprint inthe process.

To build a sense of sharedvision, teams of senior IRSexecutives and unionizedfrontline clerks were formedto function as forums to pushchange—“a concept that hadnever before been tried at theIRS,” says Booz Allen principalNancy Hardwick. Within theseteams were IRS employees long

influential in the agency—those who had developed repu-tations as reformers and changeagents, but had never gottenthe chance to affect serviceagency-wide. The extra stepspaid off: The initial group of 14IRS employees participating inthe project had, by early 2000,grown to more than 500 com-mitted participants, who con-tributed knowledge drawn fromprevious positions at law firmsand in the corporate world.

To effectively manage the newIRS operating model, BoozAllen established an executiveteam to integrate aspects ofthe emerging program acrosseach of the teams. This pro-gram management processnot only encouraged the jointresolution of issues amongthe teams, but it facilitateduntold thousands of transfor-

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mation decisions, big andsmall, and kept the overallimplementation on time andon track.

A major communicationsprogram, another key partof the project, was designedto inform IRS personnel notdirectly involved in the plan-ning process of the evolvingproject. From bimonthlynewsletters to weekly voice-mail broadcasts, interactivesatellite television broadcastsand training materials, staffmembers were informed ofmajor decisions and encour-aged to provide feedback.

Measurable Results

The increased customer focusat the IRS has already pro-duced measurable results.Today, 400 walk-in sites pro-

From left to right:Chris Disher, Colleen

Kelly (presidentof the National

Treasury EmployeesUnion), John Jones,

Roger Blond,Charles Rossotti

(IRS commissioner), Gary Mather,

Ralph Shrader, GaryNeilson, and John

LaFaver (formerdeputy commissioner

for modernization).

On-site working session(l-r): Gerry Sladek (IRS),Juliann Castell (Booz Allen),and Nieves Narvaez (IRS).

At the heart of the reorganization isBooz Allen Hamilton’s strategy-based transformationapproach. |


since the new structure wasadopted in late 2000. The over-all IRS public confidence rat-ing has risen 20 percent fromits historic low in 1998. Inrecognition of Booz Allen’s rolein the turnaround, Rossottiawarded the prestigious Com-missioner’s Award to the firm,the first external recipient ofthe award in 20 years. And in2000, the Booz Allen/IRS teamwas honored with the Ham-mer Award from former VicePresident Gore’s Council onReinventing Government.

For Senior Vice PresidentGary Neilson of Booz Allen,the assignment is a cleardemonstration of the firm’sunique ability to merge itscommercial transformationalexpertise with an understand-ing of government issues tocreate a powerful, unrivaled


vide consistent operations,eliminating the previous vari-ations across what had been33 separate geographicallyaligned districts. In 2000, theteam launched toll-free 24-hours-a-day taxpayer tele-phone assistance. In 2001, itstarted a Small Business Website to provide pre-filing assis-tance to more than 45 millionfilers in the small businesscommunity (the second largestIRS constituency after indi-vidual taxpayers). The agencyalso created an organizationdedicated to serving the spe-cial needs of Native Americantribal governments—a tax-payer segment comprised ofmore than 500 officially rec-ognized tribes.

After an eight-year decline,customer satisfaction rateshave increased every month

service offering. “This projectshowed Booz Allen at itsbest,” he says. “We built own-ership among the IRS leader-ship and really helped todrive the program from con-cept through implementation.Think of the IRS and its over-all impact in the everydaylives of U.S. taxpayers. Thatwe helped to make it a differ-ent, more effective organiza-tion is very satisfying.”

Rossotti concurs: “The neworganizational structure isnot the real change that isoccurring at the IRS. It merelyenables us to change, andenables us to put into placethe leadership teams andthe tens of thousands of IRSemployees they lead. It enablesus to give them the authority,tools, and responsibility tomake a difference.” |

Helping to setthe strategy (l-r):Robert C. Turnerof the IRS withBooz Allen’sDwayne Prosko,Cindy McNeese,Michael Gordon,and Karen Wilburn.


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Booz Allen IRS Article