1 Using the Law of Requisite Variety (LRV) to Manage Selected Federal ProgramsPresentation at the Policy Studies Organization Dupont Summit December 2, 2016 Morris Bosin - Presenter

2 Overview How do Federal leaders design programs that successfully address the complex and varied needs of their stakeholders? They design a management approach with a sufficient variety of strategies to match the varied needs of the stakeholders Insufficient variety does not effectively meet stakeholder needs. Too much variety poses fundamental challenges in managing the program. Establishing requisite variety requires achieving a delicate balance between over-complexity and over-simplification You need to collect the right kind of information about the environment in order to design effective strategic responses

3 Conversation with My Son – An Ardent Backpacker and HikerMe: Would you like to hear about a topic I'm discussing at an upcoming forum? Son: If you must. Me: It's called the Law of Requisite Variety Son: Explain Me: Blah blah blah Son: Let me see if I can explain it in my own terms I'm packing for a one week trip this January on the Appalachian Trail. If I don't pack the right stuff I may get hungry, frozen, lost or attacked by a bear. If I pack for every single possible eventuality the backpack will weigh 90 pounds and I won't be able to stand up. So I have to pack for the important stuff. Son: Did I get it? Me: You got it!

4 Three Key Steps in Establishing Requisite Variety - Scoping, Modeling, Strategizing1. Scoping: Identify the stakeholder environment in all of its complexity 2. Modeling: Construct a representation of the stakeholder environment, highlighting key differentiators 3. Strategizing: Tailor strategies to address significant components of the stakeholder environment Model Components Strategic Approach Strategy One Strategy Two Strategy Three Strategy Four

5 Unlike mechanical systems or laboratory conditions, the design of Federal programs is impacted by several factors. This complicates the design process Distributed decision making and goal divergence Multi-level problem solution Technical Federal Exec. Industry Managerial Political Congress State Citizen Cultural Tribal Recipient High velocity environment

6 Applying Requisite Variety to Two Federal ProgramsFDA – New Drug Review Responsible for reviewing investigational, new, and generic drug applications from industry to determine their safety and efficacy Around 100 to 200 new drug applications are reviewed annually, and about new molecular entities are also reviewed (breakthrough drugs) Although safety and efficacy is their mandate, FDA is surrounded by stakeholders with varied goals and interests Bureau of Indian Education Oversees educational standards and teaching strategies for 183 BIE-owned schools, and Tribal schools, enrolling over 41,000 students. and Indian colleges and universities Must respect the sovereignty of Tribal nations and work in the best interest of students' current and future quality of life

7 FDA Drug Review Example – From Model Building to Strategy Formulation1. Identify the scope of drug development efforts that must be regulated to ensure safe and effective use 2. Model the drug development universe Investigational new drugs New molecular entities Generic drugs Non-prescription drugs 3. Tailor strategies to address significant components of the drug universe Drug Components Strategic Approach Investigational new drug Investigational application to ensure safety; early consultation with drug developer New molecular entity Exhaustive new drug application process to ensure efficacy; fast track for breakthroughs Generic drugs Paper review process once patents have expired Non-prescription drugs Ensure that drug monographs exist to explain OTC drugs

8 FDA Example – Two ExtremesSymptoms of Over Complexity in the Management Model Proliferation of drug standards to match new technology breakthroughs overwhelm the ability of FDA to manage or industry to comply Slower drug review times Backlog of drug applications Symptoms of Over Simplification in the Management Model Agency unresponsive to critical demands for treatment – AIDS epidemic example Utilization of traditional brick-and-mortar, paper-intensive regulatory practices in light of online trading environment and globalization of drug industry

9 FDA Complexity Challenges and Variety Reducing SolutionsDrug approval decisions are a composite of multi-level perspectives Technical – Science assesses the risk Managerial – Reviewers must consider costs vs benefits in managing the risk Political – Review decisions influenced by views of current Administration Cultural – Lawyers and scientists operate from different paradigms – must arrive at consensus FDA Complexity Challenges and Variety Reducing Solutions Impact Slower drug reviews Needed medications do not reach patients Variety-Reducing Solution Collaboration – FDA advisory committees provide neutral perspective in drug review decisions Standard protocols define specific roles for scientists, managers and lawyers in the review process User fees for drug review and performance metrics drive accountability and help to galvanize different perspectives to support review decisions FDA attempts to maintain political neutrality

10 FDA Complexity Challenges and Variety Reducing SolutionsHigh velocity technology environment Difficult for drug reviewers to keep pace with changes Difficult for pharmaceutical firms to focus drug development efforts so that they comply with FDA research protocols Impact Slower drug reviews Needed medications do not reach patients Variety-Reducing Solution Technology forecasting - Recruit and train chemists, physicians and pharmacologists based on forecasting emerging trends in new drug development Early consultation - Provide guidance to drug manufacturers early in the drug R&D process to ensure quality applications Online reviews of drug applications to accelerate drug review process Computer simulations to test impact of new molecular entities on the human body; reduces need for time consuming tests using animals

11 Indian Education Example – From Model Building to Strategy Formulation1. Identify the scope of Indian Education challenges in Indian Country 2. Model the Indian Education universe Tribal schools BIA-owned schools Indian colleges Pre-school 3. Tailor strategies to address significant components of the Indian Education universe Education Components Strategic Approach Tribal Schools Administrative support to assist Tribes in managing their own schools BIA-Owned Schools School modernization through construction and broadband access Indian Colleges Enhance scholarships Pre School Early child and family development programs

12 Indian Education Example – Two ExtremesSymptoms of Over Complexity in the Management Model Proliferation of approaches to educational standards between Federal, state and Tribal entities strain school administrators' capacity to teach and test simultaneously Symptoms of Over Simplification in the Management Model Over-reliance on uniform national educational standards is unresponsive to individual needs for educational standards at the Tribal level

13 Indian Education Challenges and Variety Reducing SolutionsConflicting Federal, state and tribal standards of learning Tension between goals of maintaining cultural integrity and preparing students to succeed in the larger society Impact Testing overwhelms teaching environment, leaving little room for learning Frustrated students who are being tested at levels beyond their capacity Students marginalized between cultures that detract from learning readiness Variety-Reducing Solution Collaborate among governing entities to align standards; have minimum core competencies throughout – establish intergovernmental bodies Align from top down or bottom up? Establish strong leadership at the school level that can mitigate the impact of complex and competing standards; strong leaders are great variety reducers

14 Generic Strategies to Reduce Complexity/Absorb VarietyForm partnerships that combine complementary capabilities and create synergies "2+2=5" impact Johnson & Johnson – FDA - FBI – developed a holistic solution to Tylenol tampering Economies of scale FDA shares laboratory space with other Federal and state agencies to spread fixed costs Schools spread fixed costs by renting facilities for non-education purposes Transfer core competencies Provide guidance to drug manufacturers early in the drug R&D process to ensure quality applications Establish teacher mentoring programs

15 Generic Strategies to Reduce Complexity/Absorb VarietyPrioritize risks Assess student risks; design tailored educational curricula for students at highest risk Establish fast track reviews for most needed drugs Use information technology Accelerate drug review by submitting online drug applications Broaden educational opportunities through online learning; Kahn School example Improve process design Parallel rather than sequential drug review steps Team teaching

16 Summary Federal managers instinctively employ LRV in managing complex problems The challenge is achieving the delicate balance between over-complexity and over-simplification in the design of an effective management approach Unlike closed mechanical or human systems, the LRV approach encounters extenuating circumstances when applied in the dynamic open system environment of a Federal program Strategies are available to assist in reducing complexity and enabling successful problem management…if not resolution

17 Appendix

18 FDA Example – Important ConsiderationsManifested in Agency Implications for Program Design Distribution of decision-making authority FDA makes final approval decisions in consultation with advisory committees, but influenced by industry and consumer interests Regulatory decisions can be centralized, but must be backed by credible science Goals of the regulators Safety and efficacy; but potential conflict between stakeholders – accelerate reviews to ensure economic profits vs. assurance of safety and efficacy Success of the regulatory model may be viewed as a balance of economic and safety interests; industry says go faster; consumer says go slower to ensure safety and efficacy Level at which problem is addressed Technical – science assesses risk; Managerial – agency must consider cost-benefit in managing the risk Political – Regulatory rigor may be influenced by views of current Administration Cultural – lawyers and scientists operate from different paradigms, but must arrive at consensus Multiple perspectives on problem solution complicates the regulatory model; may slow the drug review process Rate of change Rapid advancement in biotechnology and genomics create a high velocity environment for drug review Regulatory model is further complicated by the need for drug reviewers to keep pace with new developments.

19 Indian Education Example – Important ConsiderationsManifested in Agency Implications for Program Design Distribution of decision-making authority Decisions on learning standards are dispersed among Federal, state, Tribes and Tribal advisory boards Must include a mediation process that defines roles and responsibilities for standard setting among stakeholders; this increases capacity for absorbing complexity of a distributed decision-making environment Goals of the regulators Tension between goals of maintaining cultural integrity and preparing students to succeed in the larger society Design must accommodate multiple goals; increases complexity of management mechanism and decreases ability to control outcomes Level at which problem is addressed Technical – Define educational standards based on research; Managerial – Match standards to educational setting Political – Negotiate learning priorities among stakeholders Cultural – Clarify differences in values and accommodate in model Multiple perspectives on problem solution complicates the regulatory model; complexity is absorbed by tailoring 'total educational solutions' to individual regional, state or Tribal needs; Tribal sovereignty fosters strong resistance to a National concept of 'Indian education standards.' Rate of change A degree of cultural resistance and goal conflicts acts as a brake to the rate of change in the Indian Education environment Slow and deliberate progress enables regulatory model to keep pace with changes.

20 Complexity Challenges and Strategic Solutions to Enhance Requisite VarietyStrategic Approach Agency Illustration Widely distributed decision-making in design of management approach Leverage complementary capabilities Bureau of Indian Education Incorporate positive features of Federal, state and Tribal educational standards in evaluating student progress Goal conflicts among stakeholders Establish adjudicating mechanisms to mediate among competing goals NOAA Marine Fisheries Established Marine Fisheries Commissions to collaborate on resource management decisions that address diverse goals of stakeholders Problem manifests at technical, managerial, political and cultural levels Holistic program initiatives Address Tribal educational needs by combining proven teaching approaches with competent school administrators, awareness of Federal-state-Tribal political interaction and sensitivity to the cultural context of Indian education High velocity environment Engage in foresight activities – e.g. technology forecasting FDA Drug Review Recruit and train chemists, physicians and pharmacologists based on forecasting emerging trends in new drug development Transfer core competencies Provide guidance to drug manufacturers early in the drug R&D process to ensure quality applications

21 Single level - technicalAdditional Considerations That Impact the Design of the Regulatory Model Federal programs exist in an open system milieu. Many stakeholders influence program design, as do other characteristics of the operating environment. Unlike mechanical systems or laboratory conditions, the design of Federal program are impacted by several considerations. These are a few: Impact on Program Design Considerations Impact on Program Design Distribution of decision making authority Must mediate decision rules Decentralized Centralized Simplifies decision rules Goal coherence among stakeholders Must include resolution process Conflict Consensus Clear criteria for success Levels at which issue must be addressed – technical, managerial, political, cultural Must add nodes to address each level Multiple levels Single level - technical Simplifies model Rate of environmental change Must include 'surge' capacity Stable to moderate Greater capacity for complexity High velocity