In a pre-conference workshop held Monday, government experts from relatively newly-formed government franchise organizations led discussions with colleagues about lessons learned in the day-long session held at the Omni Shoreham Hotel in Washington, DC.

Leading off the conference session, Joe Slye and Anne Kelly, executive consultant, Federal Consulting Group, a Treasury franchise organization consisting of current and former senior executive service employees spoke about the key steps to getting a franchise organization started. The first step is to get management buy-in, operate as a self-managed team, and make a commitment to continual learning. While most of government commits 5% to training, the Federal Consulting Group commits about 12.5% of its budget to training.

The next step is to overcome cultural changes. "Shed off old ways of thinking and be reconstructed into the mindset of the new group," says Kelly. "You have to be aware that you are part of the group that is responsible for the bottom line." Being part of a self-managed team is another cultural team. "You know there is something to do so you do it," adds Kelly. However, while decisions are reached through consensus of experts within the franchise, the client is the only one to make the final decision.

How do you create an entrepreneurial workshop? Don’t hide the information, be willing to take risks, and be open-minded.

The Federal Consulting Group maintains relations with Treasury senior officials through quarterly meetings, and maintains relations with its customers through annual customer satisfaction surveys. The consulting services are provided to other government agencies at a rate of $1800 per day that is based just above the center point for consultant services provided by the private sector in the Washington market. Slye explained that the Federal Consulting Group is allowed to keep four percent above costs and the rest remains in the franchise fund at Treasury. In order for an agency to contract for consultant services, it need only enquire and the consultants will prepare a proposal for implementation. The Federal Consulting Group can be reached at 202-906-6068.

In the next session, Customer Service and Marketing, Mike Duffy, Director of the Reinvention Laboratory, Pacific Southwest Region of the U.S. Forest Service, talked about how the Forest Service set up 20 companies for services through a working capital fund. Employees were given a 45-day training session on developing a business plan that included understanding business principles and writing a plan to include sales, marketing, costs and business administration. The plan is presented to the board and if adopted, it becomes a contract. The process of establishing a plan includes visiting with senior managers, middle managers, employees, and union representatives. The marketing tools utilized by the Reinvention Laboratory are management trade shows, brochures, magazine articles and word of mouth.

Jackie Coleman, Director of the South Carolina Cooperative Administrative Support Unit (CASU,) emphasized customer service as the key to success. "You have to provide a service that is necessary, timely, reliable, and high quality -- and completed on schedule," Coleman said. CASUs are based in 17 locations and provide national services to government agencies on a fee for service basis. CASU has a website at http://www.casu.gov/.

In the afternoon session, David Sutfin, Gov.Works, and Steve Swanson, Veterans Affairs’ Director of the Enterprise Office, led discussions regarding acquisitions and finance Sutfin estimates his government franchise which is part of the Mineral and Mining Services of Interior, will achieve about $200 million in revenue and incur $3.5 million for fees in FY2001.

Sutfin explained the development of franchise legislation and authority that includes the Government Management and Reform Act, Office of Management and Budget, and the Franchise Fund. Sutfin identified Gov.Works as a business-like environment with a strong customer focus. He cautioned anyone planning to develop a franchise to plan for the unknown. "While you can’t predict all that will happen to you, don’t let it stop you and keep moving ahead." The guiding operating principle behind franchising is that it is voluntary, competitive, self-sustaining, full cost recovery, measurable performance goals, and market driven. What’s required to implement an agreement is a business plan that includes a service line, budget, pricing strategy, marketing strategy, and knowledge of the customers. Budgeting must include costs for personnel including accrued benefits and the cost for closing down a franchise should it become necessary. The service line should include a value proposition that reflects what you do that is of value to your customer, and recognize what the customer needs that is important to them such as fast acquisition, cost, quality. Sutfin also encouraged development of specialized areas of expertise. "Look for the niche market," Sutfin advised.

Sutfin further suggested that for developing a pricing strategy, try to base the price on a unit basis or per activity rather than on a reimbursable basis that can get complicated and require a lot of time from accountants. Evaluate profitability on a regular basis was also advised. When developing a marketing strategy, your first opportunities are likely to be any customer you can find and then word of mouth will eventually get you more customers than any form of advertising. After establishing an awareness program that will lead to more customers, you may want to look at your customer base for best opportunities and begin letting some customers go. The keys to success at Gov.Works are knowing your clients, rewarding achievement of your employees in reaching their goals, and celebrating your success. For employees, Sutfin looks for the best and the brightest who are flexible and who can sell themselves to another agency. Sutfin says his employees enjoy what they do because it gives them an opportunity to control their destiny, ensure jobs, and provide an enriching work experience. For the customers, Sutfin sees the benefits in the form of faster service, quality work, and better government.

  Steve Swanson of the VA says his franchise is comprised on 625 employees with 90% of their efforts concentrated in the two largest activities, automation services and financial management. Swanson identified difficulties in using the government accounting systems to develop reports that are useful to management such as interpreting data and identifying trends. They have also had to close an enterprise center that was focused on providing training services because it was not able to generate enough revenue to cover costs. Several participants at the seminar indicated difficulties with providing training enterprises on a profitable basis.

In a discussion following the presentations, some agencies suggest that their fees range from one percent to six percent with an average of around three percent. For rewarding employees, some franchises use OPM approved gain sharing which allows rewards of up to $20,000 and more based on increased productivity. Overall, most franchise organizations attain one-half to two-thirds of their revenue from outside their agencies.

In a final wrap-up, Marnie Furbish of Government Agencies and Partnership spoke on behalf of the grassroots organization that was formed by federal employees interested in knowing more about entrepreneurial development in government. The group meets the second Tuesday of every month and they have a website at http://www.gap.fed.gov/.

FedBid.com sponsored the Entrepreneurial Government session. The Excellence in Government 2000 conference ends July 13. More information may be obtained at http://www.excelgov.com/. The event is sponsored by Government Executive magazine.