'The IRS has historically been in a difficult position,' says Booz Allen Senior Vice President Gary Mather. 'Some years Congress would demand additional funds and urge the IRS to collect as many taxes as possible; other years, responding to taxpayers, Congress would tell the IRS not to be so heavy handed in tax collecting.'

A Plan for Change

The IRS Restructuring and Reform Act of 1998 mandated a geographically based structure to set up to serve particular groups of taxpayers with similar needs. In response, IRS Commissioner Charles Rossotti announced plans for a massive reorganization of the agency to align it more like commercial businesses that are segmented to serve different customer groups. 'Many large financial institutions have different divisions that serve retail customers, small-to-medium business customers, and large multinational business customers,' he said in testimony to the US Senate Finance Committee. 'The taxpayer base falls rather naturally into similar groups.'

According to Rossotti's plan, instead of working with 33 geographically dispersed IRS offices and 10 service centers, each trying to address the full range of taxpayers and taxpayer needs, the IRS would create four streamlined centers. Each would concentrate on the needs of a specific group of taxpayers: individual wage earners and investors; small businesses and the self-employed; large and mid-sized businesses; and tax-exempt organizations. These four strategic business units would have responsibility for everything having to do with their service group: from pre-filing, to filing, to post-filing activities.

In 1998, the IRS asked Booz Allen to do an assessment of this concept, sparking the first significant restructuring of the IRS since 1952.

Better Service-More Efficient Operations

The Booz Allen assessment started with a critical look at the existing structure, which proved to have some significant drawbacks. Serving every kind of taxpayer in 33 districts meant that the same resources and capabilities had to be duplicated 33 times. Tax data might reside in eight or nine different, incompatible databases, making it difficult and time-consuming for the IRS to get information on a taxpayer from different perspectives; for example, on an individual taxpayer who also owned a small business or a large corporation with offices in different taxpayer districts.

Districts varied in the amount of attention they directed toward different types of taxpayers, so large corporations might get a lot of attention in a big city like New York, but not as much in another district.

Booz Allen was able to validate that Rossotti's proposed restructuring significantly benefit both the IRS and taxpayers.

With so much attention devoted to meeting customer needs, reorganizing offices, and changing its business focus, the IRS remained cognizant of how its employees were being affected. The National Treasury Employee's Union partnered this process from the beginning.

The IRS sought staff volunteers from all levels - from union employees to senior executives - to determine how the new organization would operate and how the agency would make the complex transition. Approximately 500 IRS staff were selected from the 3,000 who responded.

Twelve teams were established. Headed by IRS executives and Booz Allen team members - from both the Worldwide Commercial Business and Worldwide Technology Business - these teams reviewed where the business units should be, what the human resources issues were, and how criminal investigations would be affected.

"The IRS processes 200 million tex returns a year, produces 89 million refunds on a 40 day cycle, and collects $1.6 trillion in revenue.'>

The resulting design set the stage for the third phase of the program - implementation. Booz Allen is helping the IRS roll out each of the new business units.

'The IRS has embarked on a truly formidable mission,' says Mather, who has been involved in the project since its inception, 'to restructure the entire IRS from top to bottom while keeping the ship afloat. That is, no one said the IRS could stop collecting taxes throughout all of the changes - all of the transitions have to take place between tax season'

That's a pretty tall order, considering the IRS processes 200 million tax returns a year; produces 89 million refunds on a 40-day cycle; collects $1.6 trillion in revenue; and is continuously adapting to complicated changes in tax laws.

Mather and OIC John Jones say the IRS staff have been extremely supportive of the project. 'At the beginning of projects like these there is usually a sense that it's just another exercise in government analysis - a 'this too shall pass' attitude,' says Mather. 'Now that IRS employees can see a significant transformation is going to happen, they want to be a part of it.'

A 'Customer' Focus

The impetus behind the project has been, in essence, to resolve the dual nature of the IRS mission - serving taxpayers and collecting for the government. The IRS and Congress have decreed that the agency's performance will no longer be measured solely by how much money it can collect, but, rather by a series of balanced measures.

Where the focus was previously on enforcing tax laws and making sure taxpayers were paying what they should, the focus now is on encouraging taxpayers to comply voluntarily. The three strategic goals of the modernization program can be summarized as follows: provide top quality service to each taxpayer, one at a time; serve all taxpayers; and increase productivity by providing a quality work environment for IRS employees.

Booz Allen will assist IRS efforts to understand the customer's point of view; enable managers to be accountable, to take action, solve problems, and achieve goals; align measures of performance at all levels; support open, honest communication; and foster an environment of total integrity.

'Most taxpayers really want to do the right thing,' says Jones, who leads this major transformation project for Booz Allen. 'What we and the IRS are focusing on now is how to make doing so as easy as possible.'

story posted December 1999