State of the Laboratory -- 1997

The following is the full text of Argonne Director Dean Eastman's "State of the Laboratory" report, delivered May 20, 1997.

Good morning, and thank you all for coming.

For almost everyone here, this is the most recent in a series of annual State-of-the-Lab reports. For me, however, this is the first one.

So you will notice some differences from the last one you attended -- a few major changes, and probably several more minor modifications.

For one thing, I'm shorter than the gentleman who did this for many years.

Of course, almost everybody is shorter than Alan.

We are in a new location this year. And when I say "good morning," I'm talking to Argonne people in several auditoriums at Argonne-East, as well as at Argonne-West. I am particularly pleased that, for the first time, employees in Idaho are hearing this report live, as it happens.

Another change this year is the way we are going to discuss Argonne's status and future. After briefly discussing our vision, the environment we are in, and our strategic planning, I'm going to talk about the Lab by our mission areas rather than by our management structure. That's because it is our success in performing our mission that will determine our future.

You know those major mission areas: Science, including our state-of-the-art user facilities, especially the Advanced Photon Source, Energy, and Environmental quality. Argonne also has a small but important National Security mission focused on nuclear nonproliferation technology.

Also this morning, we'll talk a bit about management and administration, present this year's Director's Awards, and recognize our colleagues who have earned patents or won R&D-100 Awards.

That's a very full agenda, and I know that several of you might be intending to eat lunch today, so I had better begin with Argonne's vision.

A vision is a way of articulating what we intend Argonne to be. And ours is a performance-based vision of an Argonne that is continually improving. It is a vision of Argonne as a widely recognized world-class provider of high- quality Science, Technology, Engineering, and Technical services, with excellent customer and stakeholder satisfaction.

Our scope is defined by our mission areas and our core capabilities, and by our customers and stakeholders -- including the Department of Energy, other government agencies, businesses, and the science and technology users of our facilities.

External Environment & Strategic Planning

Stating a vision is one thing. But to make any vision a reality requires strategies and plans. Typically, strategic plans outline the organization's strengths and present situation, then go on to review the challenges it faces, the opportunities ahead, and a high- level business plan summarizing what the organization must do to overcome the challenges and seize the opportunities.

In the 10 months that I've been at Argonne, I've been spending time extensively reviewing Argonne's programs, activities, and prospects.

In formal settings such as reviews of the science and technology divisions and administrative divisions and organizations, in ongoing management settings, and in less- formal settings such as tray lunches, I have met and talked with many people as I have learned about and reviewed the Laboratory, for a variety of reasons:

• First, to begin to understand the "culture" and the ways things are done here, which, as you know, are many and diverse;
• Second, to understand our science and technology programs and projects;
• Third, to meet the people who carry out the research and who manage the research;
• Fourth, to understand our administrative and operations functions and meet the people who perform them.

Weighing this information based on my experience in what factors drive institutional success, what I have found is a largely talented team with skills and potential across an exceptionally broad spectrum, and the facilities needed to bring those skills to bear on a wide range of R&D opportunities.

In short, we have the people, the management system and infrastructure, and the tools to move this Laboratory toward our vision of world-class performance and reputation in our main DOE mission areas.

We also have multi-disciplinary core competencies that, in total, cover an unusually large range of science and technology. Programmatically, these include:

• Large-scale research project capabilities in materials, chemistry, and biology;
• Large, accelerator-based user facilities;
• Nuclear energy and environmental technologies and unique facilities;
• Environmental assessment, characterization, and remediation technologies;
• Modeling and simulation of complex systems and phenomena; and
• Industrial, transportation, and other end-use technologies.

We also have a strong set of R&D partnerships with industries and universities. And we have an excellent core competency in the education and training of future scientists and engineers, with undergraduates, graduate students, and post- docs being an important part of our workforce.

Our people, infrastructure, and these core capabilities are the foundation on which we will maintain and strengthen the Argonne of the 21st Century.

And from which we must address several key challenges.

Challenges

World-class performance and a world-class image are not just desirable for Argonne. They are really essential.

In marketing, finance, communication, manufacturing, and R&D, the competitive and strategic environment is global. Countries today compete to attract and retain industry, jobs, and plants. The old national "protected" industries are giving way to competitive ones. In our country, that's happening right now with electric utilities

Increasingly, we see corporations becoming focused on their core businesses, with an emphasis on near-term results. In many industries, alliances, mergers and acquisitions, and outsourcing are growing.

Most industries are under intense competitive pressures. As a result, real growth in industrial R&D is slowing.

Industry now emphasizes short- term R&D with greatly diminished (and mostly absent) long- term science and technology research.

Such research priorities tend to stress maximum return on development, often leveraging suppliers and partners. For Argonne, this is both an opportunity and a challenge.

While industrial R&D is evolving rapidly, there also is significant bi- partisan pressure on the U.S. federal discretionary budget -- which includes federal spending for R&D -- due to continuing long- term challenges to achieve a balanced budget through changes in discretionary spending, while there remains a large and growing non-discretionary budget.

R&D trends and changes in national labs and universities occur more slowly than industry, and should. However, this general trend will be influenced by industry, and those institutions that respond to change will have a competitive advantage.

Therefore, when one is in a situation where business from existing stakeholders and customers is static or declining, the paths to stabilization and growth involve persuading current customers and potential new ones that their R&D dollars will yield greater value at Argonne than anywhere else. Other R&D centers worldwide will be thinking and trying to do the same thing. Which means we have to do it better.

And I am quite confident that we can.

Budget

And while I am on the subject of things we must do better, I also want to brief you on an imbalance between our income and our outflow that has been occurring for several years. Essentially, here's the problem:

The Lab's budget authority for our DOE work seldom exactly matches our expenditures. During the early '90s, budget authority generally exceeded expenditures, and DOE encouraged us to carry-over funds into succeeding years. The effect of this was to create and build a reserve. However, starting about four years ago -- coinciding with the beginning of a gradual decline in our budget authority -- our expenditures began exceeding authority, meaning we had to make up the difference each year from our reserves.

This has in part been encouraged by DOE and also has been due in part to the difficulties in estimating future income in these changing times.

Now, the reserve fund has fallen to the point where we must, over the next one to two years, do what we always wanted to do: bring expenditures more in line with budget authority.

Using a "family analogy," we have been spending more than we are taking in, and drawing on our savings account to balance the books. We're running out of savings, so we have to do some belt-tightening to bring expenses in line with income.

In the coming months, the lab's management team will be challenged to help us prepare plans and actions to "balance the books." I will keep you all posted on how that effort develops.

Just as budgets in general are declining in real dollars for DOE and for major research universities nationwide, budgets also are declining throughout the national lab system.

Argonne has fared better than most, thanks in part to our outstanding DOE programs and our work- for- others programs. But we still have declined. This has recently become evident for 1997 as our annual expected budget authority has fallen short of both our estimate of last Fall and our spending plan.

Employment levels tend to track with budgets of course. So as you might expect, employment also is declining. Ours has been trending downward for the last several years and we expect that trend to continue next year.

Rumors

Now, I know that talk of declining budgets and employment levels leads to rumors, and there have been some remarkable ones circulating at Argonne lately. Let me address the top three that I've heard:

First, that there will be no merit pay increases in October, that the increase will be delayed. That is not -- repeat not -- true.

We plan to have the same schedule for increases this year as last year, and -- just as last year at this time -- we haven't begun planning on the amounts.

The second persistent rumor is that the people in Building 900 at Argonne-East will be moving back to the campus. Also not true. At least not anytime soon.

Third, and probably of greatest concern, there is the rumor of massive layoffs being imminent. The biggest number and shortest timeframe I've heard is 1,000 people by Oct. 1. You will be pleased to learn that this rumor also is not true.

Without a doubt, we have a budget problem. The entire senior management team has been and will be working to get our income and efficiency up. And I just told you that our overall employment levels will continue to decline in fiscal year 1998.

But we are just beginning to analyze our options to deal with the budget decline and imbalance, and there is at this time no estimate of any reductions in jobs other than by reason of normal attrition. If that changes, I will tell you.

For everyone's peace of mind, let me suggest that the best way to deal with rumors is to ask people who know. Repeating rumors without confirming them usually doesn't help.

The management of this laboratory is committed to openness. Openness is among my highest priorities. So the next time you hear one of these rumors, rather than pass it on, ask your supervisor if it's true.

And if you cannot get an answer in reasonable time from your supervisor, ask me. I will both tell you what the situation is and find out why your supervisor could not get the information you wanted.

Opportunities

Now let me turn from false rumors to real opportunities.

The picture in Washington has brightened somewhat since last year's grim forecasts. Out-year projections for federal science budgets have improved considerably for us.

In particular, the Administration's fiscal 1998 R&D budget request is up several percent for DOE's Office of Energy Research, which is Argonne's primary customer and stakeholder. Last year, the plan had been for a 25 percent reduction over 1998- 2000. What's more, DOE-ER is now recognized by the Administration as being on a par with the National Science Foundation and the National Institutes of Health as key national research organizations, and it has a flat- plus five- year outlook, a considerable improvement from a 25 percent reduction.

Also, there seems to be less opposition in Congress this year to civilian technology R&D than we saw last year, and more Congressional support for R&D on renewable energy and energy efficiency technologies.

There is also much more backing in Congress for technology transfer in support of economic competitiveness, which I believe is very important for the Labs in general, and especially for Argonne.

The rapidly spreading deregulation of the U.S. electric utility industry may also open some opportunities for Argonne.

We also see clear opportunities in enhanced and new user facilities, computational applications, civilian nuclear R&D, and advanced environmental technologies. I will offer detail on those in a few minutes, after I briefly discuss our strategic planning.

To ensure that we apply our strengths and core competencies to take maximum advantage of these opportunities, I initiated an extensive strategic planning process several months ago. Each of our science divisions and major user facilities was asked to prepare a strategic plan, as were our major technology programs, and our administration and operations units.

Through this planning process -- which involved intensive review and discussion of each unit's plan -- we set priorities, identified major initiatives, and developed our strategies. Over the coming year, much of my time and that of the senior management team will be devoted to help promote and develop these initiatives and their attendant income.

Several other elements of our general strategy include strengthening our governmental affairs and business development efforts, and working with DOE along the lines of the Galvin Report to improve our working relationships in many ways, ranging from strategic planning and program development to more efficient administrative and operations processes and improved communication and cooperation.

Now let's examine our accomplishments and objectives in greater detail, by mission area, starting with science and facilities.

(Continued)