A botched restructuring at the Small Business Administration three years ago weakened the agency's ability to help entrepreneurs, according to a recent report by the SBA's Office of the Inspector General. At a hearing this week, members of the House Committee on Small Business criticized the initiative, in which the agency spent roughly $2.1 million on early-retirement incentives without adequate plans to fill those vacancies with employees with critical skills.

"Anything that needlessly saps resources from SBA means the potential of lost opportunities for entrepreneurs," says New York Democrat Nydia M. Velazquez, ranking member of the committee. "For example, when the agency fails to implement personnel programs correctly, it means initiatives that serve small companies are not operating at maximum efficiency. That's bad for the small-business sector."

An SBA spokeswoman did not respond to a message in time for publication. But according to a release from Velazquez's office, Joseph Loddo, the agency's COO, "admitted that the SBA had significant weaknesses in how it administerd the program." Among other tasks the SBA administers a variety of loan programs to help companies grow.

In 2014, the SBA sought to bring in more early-career employees--particularly those with leadership potential--to narrow skills gaps, and reduce spending to avoid a reduction in its work force. Toward that end, it sought approval for incentives to coax some staff into early retirement. (The Office of Personnel Management may grant agencies that are restructuring the authority to lower age and service requirements and to offer lump-sum payments in the interest of hastening exits.)

That year, 149 employees left the agency. However, because of poor planning and scant metrics, the SBA accomplished none of its restructuring goals, the report states. For example, the agency failed to create new job descriptions in order to recruit for new skills and did not develop a plan to transfer institutional knowledge, which would have helped younger employees advance. Two years after implementation, the average age of SBA employees remained at 51.

"This restructuring was meant to fill competency gaps in SBA personnel, and because the agency failed to reach that goal, SBA is left with employees who do not adequately meet the current needs of entrepreneurs," says Velazquez.

To make matters worse, the claim that early retirements were needed to avoid force reductions turned out not to be true, according to the report. The principal author of the early-retirement plan "added these claims to bolster the weight of the application" to the OPM, the report stated. The plan also identified employees to incentivize toward departure based not on their skills--a skills-gap analysis was not performed until a year later--but on their immediate eligibility for early retirement.

"Restructuring a government agency requires focused planning, clear goals and objectives, and managed execution," says the SBA's Acting Inspector General Hannibal "Mike" Ware. "Our recent review found SBA leadership was unsuccessful in all respects of its 2014 restructuring plan. It is essential that SBA conduct an after action review to ensure any future restructuring efforts achieve desired outcomes." In the meantime, Loddo has submitted a new restructuring plan for consideration.

Not all SBA observers, however, are critical of the agency's performance. "We have not noticed any change in effectiveness or quality of service at the Small Business Administration in recent years," says John Arensmeyer, CEO of Small Business Majority, a small-business advocacy organization. "It remains critical to addressing the needs of America's small businesses, and we hope it continues to help them thrive."

Published on: Jun 16, 2017