Improvements Afoot in the Division of Enforcement

09/08/2009

9/9/09: Director of Enforcement Rob Khuzami last week released details on the Division’s much anticipated, and badly needed, organizational reform. The reforms as currently outlined constitute a major step towards a more rational and efficient management structure and will move the Division closer to a key objective the Union shares with the Director – to empower frontline investigative staff. As the Director said in his recent address to the New York City Bar, a flatter management structure will “encourage autonomy and accountability throughout the organization by pushing decision-making to the front-line staff." As outlined, the reorganization plan is a welcome first step in the right direction.

Since before the Madoff scandal, the Union has advocated for a flattening of the management structure in the Division of Enforcement by redesignating the branch chiefs as frontline investigative staff with no residual supervisory authority over other Enforcement employees. As the Union has outlined in the past, redesignating the branch chiefs will result in a substantial increase in the number of frontline investigative staff without the need to increase the agency's budget, while simultaneously increasing the speed and efficiency of the Enforcement program. The elimination of a management layer will help to achieve one of the President's key governmental reform goals, and it will also greatly increase frontline investigative employee morale, engagement and empowerment. This one change will have a profound positive impact upon the Enforcement Division and how it does business.

The Union has long noted that, to be successful, this key organizational change must also be accompanied by a cultural shift among managers. Senior managers throughout the Division must embrace the Director's views on encouraging the autonomy of the front-line staff. This will require many senior managers, particularly in the regional offices, to reassess and fundamentally change the role they see frontline staff playing in investigations. Early in the process there was some discussion of employing former branch chiefs as "team leaders" in multiple investigations within their branch. We believe that doing so would have resulted in simply replacing a management layer with a new layer of staff that would carry out the same basic management functions. For that reason, we applaud the fact that the former branch chief's new SK-15 position descriptions will be nonsupervisory and welcome Director Khuzami's assurances that the former branch chiefs will not carry out any managerial or supervisory duties in connection with investigations or otherwise. Without that key component, the management reorganization would fail.

The Union had originally urged a final ratio of staff to frontline management of 10:1, which would be a reasonable one given standard management practices and the level of experience of our frontline attorneys and accountants. However, with the addition of 46 new assistant directors, the Union was disappointed that the final staff to frontline management ratio will be reduced only to 6.2:1. Nevertheless, we continue to believe that the new, streamlined organizational structure will still prove to be far more efficient than the current one, with its 3.3:1 ratio. Furthermore, the Union is also continuing to urge the Division to continue to flatten the structure even further by not adding additional managers when it hires hundreds of new frontline employees over the next couple of years. This will be a prudent and rational way to increase the ratio over time. We are pleased that the Director's proposal expressly includes this option moving forward.

The Union also supports Director Khuzami's plans to increase specialization within the Division. In addition, NTEU continues to believe that the Enforcement program would be improved by the hiring of additional experts to assist front line attorneys in conducting investigations. In an increasingly global financial marketplace, SEC Enforcement attorneys would benefit greatly from more readily available technical and analytical support staff but, in recent years, the agency has failed to deliver such staff.

There are issues related to the proposed changes in the Enforcement Division that still remain to be worked out between the Union and management. Questions to be resolved with the Union include the process for reorganizing and reassigning employees to particular assistant directors as the branch chiefs are redesignated, the selection process for filling the specialization groups, and the rules and practices for changes in those groups in the future. We will keep you informed regarding these issues as we move forward.