In an expanded interview, Steven Preston, head of the Small Business Administration, talks about his efforts to improve the agency's processes -- and its image.
Last year was a mixed one for the Small Business Administration. The agency unveiled new services, including a popular loan for the military community, and claimed progress in streamlining its operations. But it also struggled to bounce back after years of starvation budgets that demoralized the work force. And the agency's name has recently surfaced in cases of alleged fraud. In December, I spoke with Administrator Steven Preston to catch up on his efforts to reanimate the agency. Here's what he said.
This is an expanded version of a conversation that appears in the February 2008 print edition of Inc. magazine.
What was your biggest priority in 2007?
The first thing we took on was the disaster loan administration. We totally reengineered the entire process of making a disaster loan and disbursing a disaster loan. At the end of the day, we've ended up with a situation that's dramatically more customer responsive, much faster, and has a much better quality of oversight and fiscal responsibility associated with it. That was a massive effort requiring literally thousands of man-hours. There's over $6 billion in people's hands today rebuilding the Gulf.
In addition to that, on June 1, which is the unofficial beginning of hurricane season, we submitted a comprehensive disaster recovery plan to Congress which showed exactly how this agency would ramp people, facilities, and production capacity to meet catastrophic disasters of varying levels. That has required us at the agency to train hundreds of people who are non-disaster SBA employees, so that they're ready to jump in if it's a major catastrophe. It has required us to expand our non-currently employed reserve force dramatically, so we have thousands of people around the country now that don't work for us currently that are trained to jump in if a massive disaster hits. It significantly improved our coordination with the state, local, and federal government and non-governmental entities alike. And it makes our district offices all around the country active participants in that process. Before, one of the things the agency was criticized for -- and probably rightfully so -- was that our non-disaster district network wasn't coordinated with the disaster operation, even though the district network frequently knew the chamber of commerce, knew all the political people locally, knew all the support providers. It works much more hand-in-glove today.
So, for example, when the San Diego fire hit and the national disaster was declared, we had people on site working with victims, in some cases less than hour after the announcement. We had about a hundred people on the ground when the announcement was made, immediately deployed to help people. I was on the phone with local chambers, helping them understand how we were going to work with them. I think that has been an enormous success for all of us.
How have you applied that to the SBA's main line of work, the credit program that guarantees commercial loans to businesses?
We've done a few things. We're about to a roll out a pilot in the northern Plains states for small community banks to use our loans called Rural Lender Advantage. A lot of rural lenders left our programs when a product called LowDoc was discontinued. [LowDoc catered to less established, often rural, borrowers with smaller loans that required less paperwork. The Bush Administration canceled the program in 2005, claiming high losses.] We think this is going to be run much better from a credit perspective than LowDoc, but also provide those smaller banks a much-simplified process. It's going to be a very short application form, and they'll be able to do it online. We'll turn their applications around in a few days. We're going to put in place a customer service desk to help them if they have questions on eligibility or other stuff. We're hopeful that's going to be an important tool for us to start bringing back the smaller banks into the fold.
And we are rewriting our SOP, our standard operating procedure for the loan program, which is over a decade old. This sounds like the most boring thing in the world, but it's one of the biggest sources of frustration for our lenders because it's hard to understand and it's outdated. It's taken almost a year to get completed. It's going to be available electronically; it's going to be searchable. We are also providing lenders with a greater ability to update their files electronically, rather than work back and forth with faxes and hard documents. We are dramatically decreasing our response times for lenders when they send us loan packages to purchase their loans if we need to make good on a guarantee. That process has taken too long and it's been terribly back-logged. In fact, we are getting much more committed to consistent levels of responsiveness. We're telling people how quickly our turnaround times are going to be, and we're meeting them consistently across the organization.
All of this is to automate the front-end, demystify our processes, and to give banks a much higher level of support so that when they do business with the SBA, it will be a good, responsive experience. Then they'll turn around and use our products to reach more small businesses.
A big part of all of this is getting the employee base to work effectively. We have got three hubs of activity: headquarters, which sets policy; the field network of district offices that actually are sort of the hands and feet of the agency; and several high-volume processing centers for our guaranteed loan and our disaster loan programs. Those three hubs of activity need to understand very clearly what their roles and responsibilities are, how they support each other in the process of delivering service to the customer, and as a result, how to communicate.
Staff morale has been a problem at the SBA. What are you doing to make employees feel good about their jobs?
Over the last several years we've gone through this process of centralization, dramatic downsizing, and changes in people's jobs. But we had not adequately trained people for the new jobs, nor engineered the centralized processes to provide much efficiency or responsiveness. If a customer or a bank or somebody had an issue, the resources weren't engineered in a way that they were as responsive as they needed to be. So many employees felt like they couldn't do their jobs effectively because the organization wasn't coordinating well. They couldn't help the people they wanted to help, because it wasn't their jobs any more. Uncertainty is a terrible thing when you're trying to help a customer and you don't know how to get there.
