Mitch Daniels: Heartland Reformer
Case Study in Culture Change: How Reforming the Bureau of Motor Vehicles Can Change a State
“Last month, the average total visit time at an Indiana BMV license branch was – anyone care to guess? – eight minutes, 11 seconds. Statewide, the customer satisfaction rating was 96 percent. And that’s among those who had to go to a branch at all.
You can now do almost all your business by mail, or Internet, and get a discount for doing so. You can register a new vehicle at the dealer, rather than making a second trip to a branch.
If you have to go in person, you can check online and see exactly how long the visit times are right now at every branch near you. Or, you can make an appointment, so when you get there, you don’t wait at all.
These improvements did not come quickly, or easily. We made mistakes along the way; some experiments worked poorly, and were abandoned. Some changes, like most changes in life, aroused concern and discontent. But the results are real, and dramatic. I dwell on this one example because, as most Hoosiers readily understand, if our people can fix the BMV, they can fix anything.”
– Governor Mitch Daniels, 2008 State of the State Address
For those who track successes in governance across the country, the Indiana Bureau of Motor Vehicles (BMV) story has become iconic. As a case study, it summarizes the Mitch Daniels era in one story.
What was once a hated agency that treated customers as if they were an inconvenience became a customer-focused retail operation that slashed wait times and made going to the license branch as easy as going to Jiffy Lube or McDonalds. The customer and her satisfaction sit at the center of the entire operation, and every business process flows from that fundamental objective.
The BMV, as every driver in every state in America knows regardless of where they live, is usually an exercise in taking a number, sitting forever until your number is called, going to a window to fill out paperwork, only to get sent to another window (sometimes via another stint in a chair), and perhaps even another window before escaping to your life of freedom again.
Indiana was no different. It may have been worse than most other states.
Daniels revolutionized the state’s approach to its BMV, and just a few years later, an agency that had been almost universally despised enjoyed a customer satisfaction rating of 95.9 percent. Three times during the Daniels era, the BMV won the International Customer Service Award from the American Association of Motor Vehicle Administrators (AAMVA). What had once been among the worst motor vehicle bureaus in the nation was in a few short years consistently considered the best.
What explains the turnaround? At a high level, the revolution in the BMV experience came from the simple realization that the most commonly-visited government “storefront” is the BMV – which worked anything but like a sensible retail outlet. Daniels got an earful from people all across Indiana during the 2003-2004 campaign about their frustrating experiences with the BMV.
So how to go about changing the citizens’ primary retail experience with the state? By putting the customer at the center of the business model and working backwards through the processes – and by getting people who understood retail involved. Daniels hired a former sporting goods store executive to lead the reform. Branch staff wore uniforms that made visitors feel more like they were at Best Buy than the BMV they remembers. BMV employees were rewarded for helping customers rather than paid regardless of whether they harassed or helped them, as in the past. The goal from the start was to transform the BMV into a full-service retail experience.
As the BMV story is also a story in how culture change happens within a government agency. As branches implemented reforms, updated their systems, and engaged staff in solving problems, morale also changed not just among customers but within the agency itself. The BMV of today is a very different animal that what Daniels inherited.
Getting Retail Right
Indiana’s BMV completes more than 13 million transactions per year, which includes registering 7.2 million vehicles and 4.6 million drivers’ records. Nearly 4 million people visit a BMV branch each year, and the agency’s web site handles almost 5 million visits annually.
Like any other state, Indiana had never imagined making those millions of visits anything like going to the customer service counter at Target or the Geek Squad counter at Best Buy. Daniels’ team, led by its former retail executive, began to prioritize the customer experience from the beginning. They put a customer-service management team in place and began tracking customer visit times from the moment the visitor walked in the door until the time she left.
Daniels’ BMV lead began consolidating operations and shut down unneeded locations, which set off a political firestorm. It turns out citizens feel similarly to having a BMV branch in their neighborhood as whole cities feel about having military bases in theirs. Once the dust settled and the initial pass at a retail operation were in place, Daniels’ initial BMV head stepped aside and a new executive was put in place to operationalize the excellent model that had been adopted.
For starters, the call center had been a number one complaint because of wait times and poor service. BMV brought in the person who had developed Columbia House’s call center to put a first-rate phone operation in place. Mail-in registrations had been managed disastrously in the past, as dysfunction led not only to inaccuracies but angry customers. So Daniels team brought in a mail-order professional to design a new efficient process from scratch.
Two-thirds of BMV’s business was registrations. Online registrations were by far the least-costly registration channel to operate, but BMV had been charging a service fee for customers who chose to do their BMV business online. So the team cut the online prices $5.00 below those of a visit to a branch, and online volume shot up. Daniels team created a merit pay system based on cash management, which had been subject to mismanagement and possibly fraud in the past, and suddenly the cash system at the heart of BMV began working as any good retail operation would expect.
Branch staff were awarded for their customer service, and branch managers were given bonuses based on a range of indicators, chief of which was wait times. Daniels insisted BMV refer to “visit times” rather than “wait times,” in an effort to purge the whole system of the mindset that BMVs are placed where waiting is expected. By driving more people online, BMV reduced the foot traffic in general, which ultimately helps branch staff manage visitor flow. Today, more than 70 percent of BMV business is done online.
Next, branch managers were empowered to lower visit times as much as they could through a variety of measures. BMV put in place a system that alerts the branch manager if a customer visit takes longer than 30 minutes, which allows immediate trouble shooting. Visit times are analyzed every single day at each branch to determine whether and how fluctuations in visit times are changing. In some instances, branch managers may even move workers from other locations to manage changes in visitor flow.
By building the retail business around reduced visit times, visit times had dropped from 40 minutes to under 9 minutes by the time Daniels began his second term. Customer satisfaction ratings with BMV rose to an all-time high, as both the retail and online operations reinforced the new principle that BMV was there to serve taxpayers rather than vice-versa.
Addressing the Security Backend
The second big problem Daniels had repeatedly heard about BMV during his first campaign had to do with poor security protocols and high levels of fraudulent activity. When Daniels installed his second BMV director to push through the reforms that have since catapulted the agency to national prominence, the Indiana board of accounts had recently issued a report detailing more than 30 findings – an account of serious breakdowns at all levels of the BMV.
While Indiana’s customer satisfaction improvements have received a lot of national attention, security improvements under Daniels were no less pathbreaking for a state whose systems and practices were still stuck in the muddy backwaters.
In the pre-Daniels era, branches kept petty cash on hand at the end of the day with little security protocol. So the first order of business was to install safes and make cash management part of the merit pay for branch managers. Beyond such basics, though, Daniels’ team knew the BMV would never succeed long-term if they didn’t revamp the technological backend to its entire business.
Before 2006, the BMV kept drivers license, registrations, and title records for individuals in separate systems that didn’t communicate with each other. By the end of 2006, the BMV had instituted the STARS system that organized all records in a single customer database. This was followed by digital drivers licenses in 2007 with embedded security features to protect against the kind of fraud that had been far too rampant. Facial recognition technology was added in 2008, which allowed the BMV to identify individuals using multiple identities for fraudulent activity. By 2010, the BMV had instituted “SecureID,” its full program to protect the identities of Hoosiers and weed out identity thieves or people attempting to use false identities for fraudulent activity. New document requirements were added for identification verification, and all licenses and registrations were issued centrally through the mail after all facial and other checks had been completed, rather than at the branch on the day of application.
The BMV also instituted online Social Security verification early on and discovered nearly 250,000 mismatches between the identities in their systems and those in the Social Security Administration’s databases. They gave Hoosiers a set period of time to ensure their records were accurate, and by the time the process was completed, approximately 19,000 drivers licenses were invalidated.
The Measures of Success
As with other innovations Daniels undertook, the BMV didn’t succeed because Indiana was the first state to undertake such reforms, but because Indiana did it better than others. A number of states across the nation had tried with varying degrees of success to introduce retail improvement to their motor vehicles bureaus. Indiana simply did it better. It took the idea of retail seriously and quickly surpassed other states.
As with any effort that tries to achieve big things, the multiple BMV change initiatives could have failed at multiple points along the way. There were two constants that made the reforms work.
The first was the cultural change that occurred on the front lines at an early point. The customer-oriented processes in the branches ultimately worked better for branch managers and staff, too. Instead of pushing paper, they were serving customers, which is inherently more rewarding – especially when merit pay systems are aligned accordingly. As the BMV implemented online verification systems, worked to cut visit times, and so on, the staff made it happen as a matter of course.
The second was the Governor himself. He was personally involved. He pushed for change. He even went after the right things when it may have been politically unwise to do so. For example, when the BMV found that they could expedite registrations by offering more due dates throughout the year, he fully supported the move. Previously, there were 19 due dates throughout the year, and as customers would wait until the very last minute to register, the BMV would be faced with a glut of applications. Daniels’ team decided to move up to 46 due dates. The risk was in the first year, the benefit in the second year. It turns out the risky first year was 2008, the year of Daniels re-election bid. He could have easily decided to push the new system back until after the election, since a foul-up of the new dates could have created an election-year fiasco. But he insisted the BMV do the right thing, despite the risks.
There is a view among elected officials that government bureaucracies are too big and rigid, and therefore impossible to change at the level of culture. The BMV experience in Indiana shows just how misguided this view is. But it’s not just a matter of introducing new technologies and innovative processes. It also requires political leadership that consistently prioritizes the public good over the politically expedient.
Ultimately, the commitment to the public good made all the difference. The BMV turnaround wasn’t without its challenges, such as early unpopular efforts to close branches or hiccups as the STARS system began trying to merge previously different data sets. But by keeping the customer experience at the center of the reforms and making higher standards of excellence the new normal, the challenges became part of the path to success. And no one doubts today that the BMV in Indiana is a model for the nation.