Taming the culture vulture

Terry Lutes has said that one of his priorities as the new deputy associate chief information officer at the Internal Revenue Service will be to help with the inevitable transformation of the agency's information technology services organization.

When the IRS was not offering online tax-filing services, Lutes said, IT staff

members had no need to deal directly

with taxpayers, tax preparers and software companies.

But as agency officials press ahead with modernizing systems and offer more Web services to the public, the IT organization is under pressure to change its culture to become more like other financial services' IT organizations.

"We are struggling with how to make that transition," said Lutes, speaking last month to tax preparers and tax software officials in Arlington, Va. Factoring in the product development schedules of software companies is one of many new challenges.

That the IRS is undergoing a difficult transition is no secret to anyone who has closely followed the agency in its dealings with Congress on tax systems modernization.

"This is a cultural issue and will take time," said Larry Levitan, a member of the IRS Oversight Board, summing up a problem that many experts agree has undermined efforts to modernize IRS computer systems.

The board made nine recommendations to the IRS last fall. Members' advice that agency officials try harder to create an environment of trust, confidence and teamwork received less public attention than the other recommendations.

But among employees of the IRS and Computer Sciences Corp., the agency's prime contractor on the modernization project, the cultural issue has been a painful problem that they are working to resolve.

CSC officials said they failed at first to understand the IRS' IT culture. For example, they did not appreciate the resentment that 20-year IRS employees felt when members of Congress insisted that the tax agency put an outside contractor in charge of modernization.

That created an atmosphere in which veteran IT employees felt they were being told they were not good enough to do the job, said James Sheaffer, a CSC vice president and general manager of the PRIME Alliance, a group of five partner companies working with CSC on the latest modernization project.

Company executives said employees, in turn, did not fully appreciate the aversion to risk that is the hallmark of the IRS' IT culture. Paul Cofoni, president of CSC's federal sector, said the high-pressure, inwardly focused fish-bowl environment has served the nation dependably each tax season for as long as most can remember.

"We didn't demonstrate enough understanding and empathy for their world," Cofoni said.

Instead, CSC employees viewed the risk aversion as a transformational opportunity, he said, adding that the attitude was, "'we're going to teach the IRS that they need to take more risks.'"

Some industry observers wonder why it took so long for CSC and IRS employees to try to resolve the tension that has hurt the modernization effort. But at least one former IRS official said he thinks agency employees will learn how to deal with the new Web-based services that are changing their culture.

Such tension is not unique to the IRS, said Stephen Holden, assistant professor in the Information Systems Department at the University of Maryland-Baltimore County.

"Whenever you have an outside group coming in and taking over responsibility, whether it's for outsourcing or for a major piece of the development work, the two cultures of the organization have to reach an accommodation," said Holden, a former modernization program director for the IRS' Electronic Tax Administration.

He thinks that accommodation is starting to happen and cites the number of new e-services that the agency has been offering almost weekly. That includes interactive taxpayer identification number matching, Form 1120 corporate e-filing and online tax-preparer registration.

"They couldn't be having those successes if they were still experiencing fundamental cultural problems, which is not to say that they've totally gone away," Holden said. "But they're obviously making good progress because they're getting work done. They're getting good work done."

Indeed, it is possible to imagine a day when the National Taxpayers Union would be monitoring a whole new category of complaints or compliments about the IRS, said Pete Sepp, the union's vice president for communications.

With more citizens relying on software to prepare and file their taxes, it is perhaps inevitable, Sepp said. "I would expect more feedback about how the IRS is operating as an IT agency," he said, "as opposed to a tax agency."