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CLC: Transformation at the IRS
Grand Canyon University: AMP-492
CLC: Transformation at the IRS
As companies grow they increase in complexity and responsibility. Government agencies especially the Internal Revenue Service (IRS) must address inefficiencies due to their impact on individuals and businesses. Companies often find ways to overcome both internal and external challenges by implementing what they believe to be effective change. This paper will address the transformation at the IRS by identifying stakeholders, reasons for change, how they compare to Kotter’s 8-step model, and project the outcome of the transformation.
Stakeholders
In this case the stakeholders are a diverse group of people that range from high profile dignitaries to the common customers or taxpayers. We begin with the U.S. President Bill Clinton and the Congress who set up a commission to examine the IRS and accordingly they formulated the Reconstruction and Reform Act. Others include the Members of the National Treasury Employee Union, Commissioner Charles Rossotti who saw the problem as soon as he was hired and compiled the studies and recommendations that had been made, group of customers (voluntary compliance, unintentional compliance and intentional compliance), President Truman (who made major structural changes by dividing the organization in national regional and local offices), John M. Darlymple (Commissioner of Wage and Investment) and John Reece who decided to solve the problem in slots of 3-6 months.
The most important stakeholders are the Commissioner Charles Rossotti and John Reece, CIO and Deputy Commissioner for IRS modernization. Both were highly qualified and had worked in private sector and wanted to bring similar reforms to the IRS. Rossotti identified a five layer change plan which included: Operating divisions that will be focused on customers, clear responsibility in the management roles, revised business practices, new technology and balanced performance measurements. Reece on the other had wanted to break the development process into pieces and deal one at a time modernizing the internal and external system without interrupting with the ongoing work of tax collection. Hence both worked together to bring the IT modernization plan of IRS back on track.
Need for Change
The IRS which fuelled the country’s economy was facing terrible criticism because of its outdated and low level services. Taxpayers felt ignored and defied as a result the tax collection and compliance process got worse. Hence a change was necessary. The IRS had to focus on serving its customers rather than simply collecting taxes. A change was required to reform the organizational, cultural and technological areas of IRS so that it could work as good as a well-managed private sector organization. Structural changes brought by President Truman also became the new targets. The taxpayers who were the customers of IRS were people from very different areas who were grouped on the basis of compliance and dealt with accordingly.
Callcenters faced a challenge of endless calls and the complexity of it which in turn became another target of change. The call routing system was developed to sort this issue. So when a customer called regarding a problem the call was routed to the concerned department and hence the problem was dealt more efficiently. IT technology was used to keep check on the employees and their work and the hiring and firing was done accordingly making people compete for positions. Rossotti’s five layer model and Reece’s segmentation approach were landmarks of this reconstruction and reform process of IRS. So, targeting the above areas resulted in top quality customer service which means lesser errors in tax collection process hence making the communications with IRS clear and easy to understand.
Controversial Change
Internal Revenue Service proposed to transform to a customer oriented corporation. The reason for this modernization were to execute the RRA98 mandated sweeping reform and to provide the improved services to the taxpayers of America. According to the vision of the commissioner of the IRS, the department could care for taxpayers as clients and develop a trepidation bureaucracy into a quality firm. There are about 100,000 employees working for the organization and they are in excess. They are required to act differently and think unique. IRS has designed its leadership policies very interactive and had tried to keep it free from any faulty component.
A new customer goods organization which has a package connected with top quality brands established of which enterprise concrete realities demanded a greater focus on profitability and also bottom-line accountability. The culture of the organization consists of common behaviours, attitudes and beliefs. Change program consisted of creation of values and was built through numerous acquisitions (Hall & Ford, 2006). Experiencing most of these lifestyle commanders seize upon the new plan, other organization swiftly fell into in range. The need of transformation has its roots in the same reason. However, it wanted to please the taxpayer of America but this proposal was opposed for several of the reasons. Firstly, proposed changes did not include the people who are not paying the taxes. The fact that revealed later, was that they openly opposed the proposal in spite of they were being affected or not. Next, the proposal was not supposed to be biased and full of unfairness. Practical, constant and timely communication was missed during all the process and that is why people became against it and proposal became controversial.
Kotter’s 8-step Model
Controversial proposal was the failure of the change and it could be made a successful change plan if certain things could be augmented. Evaluation of the change taken place in IRS using Kotter’s model is depicted below:
Increase urgency – IRS became failed in increasing the urgency as it is the main factor that takes the favour of others initiating the change. The change was mandated by law, but still it could not taken as serious action that it could be.
Create short term win – The aims which are easy to achieve, must be addressed first.
Make change stick – By a change in leadership and structure, and by improving wages of employees.
Build the guiding time – this law says to get the right group of people at right time while change process. IRS grouped the people in two categories – Customers who were complying laws and second, who were not doing the same.
Get the right vision – Right vision is highly required and was taken by the IRS appropriately.
Communicate for buy in – Maximum number of people should be agreed to initiate the transformation but IRS could not do this as numerous people were opposing the proposal.
Empower action – obstacles should be removed and support from the leaders should be there during the change initiatives process (Rose, 2002).
Do not let up – encourage and foster ongoing transformation is also required. The IRS effort to foster the change process but could not build success into it. Further, change processes takes time and in between contributions from the leaders are highly required.
Outsourcing Collections
As the IRS self-reflected on its performance capabilities it considered outsourcing its tax collections to private debt-collection firms. Wells (2004) notes that “In 2003 alone, there was an estimated $120 billion in uncollected taxes” (para. 2) due by deadbeat taxpayers. The American Jobs Creation Act authorized the IRS to use private collectors and for their services the agencies were able to receive up to 25% of the tax debt collected plus bonuses. The program with firms in India did not prove to be effective and ended up costing the IRS more than it would have saved (Newman, 2015). The agencies found they had little power to influence the delinquents, and for an agency that was trying to connect with taxpayers and the American public this did not instil any confidence in the system. The country faced some very difficult economic times during the last recession and witnessing jobs go overseas does not sit well with the public. As Assistant Deputy Commissioner Operations David Mader mentioned in the case study by Edmondson and Frei “lose the confidence of taxpayers, then you are going to run the risk of losing the voluntary nature of our tax system” (Edmondson & Frei, n.d., page 7). Maintaining a connection with taxpayers is vital to the IRS, and by having the collection process sub-contracted this connection would be in jeopardy.
Managerial Challenges
As the IRS continues to transform its operation it must make many consideration for not only its connection with taxpayers but also continue to make improvements internally. Managers face many challenges not only in the understanding of current tax codes, but must also stay on top of future changes and taxpayer behaviours in regards to payments and refunds. As electronic filing increases so does the threat to taxpayer information and the strength of cyber security. Managers must instil competency on all levels especially those who are in direct contact with the public. Ensuring the legitimacy of the system by training personnel not only to understand individual returns but also large corporations especially those who interact on a global basis will be challenging for the managers of customer service representatives. The customer calls must be able to be handled not only with accuracy but must also keep customer frustration to a minimum. The IRS has an obligation to make tax paying as easy as possible, and this could change as the methods as to how customers interact adapts over time. Utilizing the Internet and by incorporating technology especially software capabilities to assist taxpayers in understanding the requirements may be the best use of resources.
With growth comes responsibility and maybe even the need to make changes to a core part of a company’s business. As companies implement these changes they must consider how the change will effect itself and its customers and come up with a lasting plan for the future. This paper looked at the IRS case study by discussing who needed change, how the change effected employees, and evaluation by Kotter’s 8-step model and what the future might hold for the IRS.
References
Edmondson A.C., & Frei F.X. (2002). Transformation at the IRS– Harvard Business School. Retrieved from https://lc-ugrad1.gcu.edu/learningPlatform/externalLinks/externalLinks.html?operation=redirectToExternalLink&externalLink=http%3A%2F%2Fgcumedia.com%2Fdigital-resources%2Fharvard-business-school-press%2F2002%2Ftransformation-at-the-irs_ebook_1e.php
Hall, G. E., & Hord, S. M. (2006). Implementing change: Patterns, principles, and potholes.
Newman, N. (2015). The folly of IRS privatization [blog]. Retrieved from http://www.huffingtonpost.com/nathan-newman/the-folly-of-irs-privatiz_b_8232642.html
Rose, K. H. (2002). Leading change: A model by John Kotter. Retrieved December, 5, 2006. Retrieved from http://www.siriusmeetings.com/files/Leading_Change_by_Rose1.pdf
Wells, R. (2004, November 24). IRS to begin outsourcing debt collection. The Wall Street Journal. Retrieved from http://www.wsj.com/articles/SB110125350589182413
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