Utah state budget chief is sold on management theory. Critics say she stands to profit from it.

Over the past seven years, a niche management philosophy has been injected into every corner of Utah government, championed by one of the governor’s most powerful Cabinet members.

Gov. Gary Herbert has credited principles of the Theory of Constraints (TOC) and its chief evangelist, Kristen Cox, head of his management and budget office, with empowering his administration to achieve one of his major goals — to improve the overall performance of state government by more than a quarter.

Some, however, wonder whether Cox has been leveraging her massive TOC experiment for her own personal gain through a private consulting business she owns — and in which two of her state lieutenants are involved — that offers to export Utah’s success to other governments. Videos and turnaround stories produced by state employees are doubling as promotional materials for this startup company and burnishing Cox’s consulting credentials, they say.

“I don’t know how many people are aware it’s going on, but it is,” said one former high-ranking state official. “State resources are being used for this company.”

As she’s gained national prominence for pioneering the use of the theory in government, Cox has also forged a close and somewhat ambiguous relationship with Goldratt Consulting, a TOC firm that has reaped more than $2.5 million in Utah taxpayer money under her leadership.

This week, her office and Goldratt will co-host their annual “operational excellence” conference, an event that cost the state upwards of $200,000 last year and has ballooned to hundreds of public employees whose attendance — while not mandatory — is strongly encouraged by Cox.

The close ties between Cox and Goldratt appear to have created an incentive for state agencies to contract with the company. Two former state managers said having the firm as an ally seemed advantageous when budget season rolled around, potentially offering department heads a leg up as they asked Cox’s office for money. Both managers spoke on condition of anonymity for fear of retaliation.

One of them, who helped apply the Theory of Constraints in Utah agencies, said he views Cox’s consulting business as an exit strategy for her as Herbert’s administration draws to a close. While that in itself isn’t problematic, a side hustle becomes questionable when it’s supported by state resources, he said.

(Scott Sommerdorf | Tribune file photo) Kristen Cox, executive director of the Utah Office of Management and Budget, turns to answer a specific question about Gov. Gary Herbert's proposed budget during a visit with The Salt Lake Tribune editorial board, Dec. 13, 2017.

If someone is “going and delivering pizzas, that doesn’t matter. But I think if you’re getting extra benefit because of what you do for the state, that becomes a problem for the taxpayers,” he said.

Chase Thomas, executive director of Alliance for a Better Utah, a left-leaning good government group, said Cox’s conduct “doesn’t pass the smell test.”

“Even if no legal or ethical lines have been crossed, to an ordinary Utahn it would look like she is toeing the line,” he wrote in an email. “Government service is about the service, and the public loses trust in government if they believe officials are using their positions for their own financial gain."

Cox argues she has not exploited her state position to boost her business, nor does she plan to use her time in the governor’s Cabinet as a springboard into national TOC consulting. She acknowledges she’s done some paid consulting during her time in office but says she did it on her own time in “very limited situations.”

“We have amazing results because of what we’ve done. I’m active on LinkedIn. I share what we’ve done because I want to directly connect with our employees and let people know what we’re doing,” Cox said. “And I don’t feel like I should be penalized for sharing what’s possible.”

‘Breakthrough’ results

The Theory of Constraints, developed by Eliyahu Goldratt, an Israeli physicist-turned-business guru, emanates from a relatively simple manufacturing concept — that your assembly line is only as fast and efficient as its slowest, clunkiest part. And that you can improve performance by leaps and bounds by making relatively small but strategic adjustments at those chokepoints.

Cox’s innovation has been in tailoring these private sector strategies to a government setting.

Her SUCCESS Framework, management principles adapted from TOC, have enabled what state officials call “breakthrough” transformations and have drawn attention outside of Utah; the publisher of Governing magazine in 2017 identified Cox as “the most prominent and articulate person” currently using TOC in government. And a company representative with Goldratt Consulting — the firm founded by Goldratt and now led by his son — said Utah is “leading the world” in testing the theory in the public sphere.

As keeper of the state’s purse, Cox has a number of levers for making sure the state workforce is on board. State managers are under orders to make sure “all internal promotions” are based in part on comprehension of Theory of Constraints ideas and competency in applying them. And her office evaluates agency spending requests in light of their progress in the SUCCESS system, said Steve Cuthbert, operational excellence director for the Governor’s Office of Management and Budget (GOMB).

During Cox’s tenure, Goldratt Consulting has left its fingerprints all across state government, offering assistance in everything from Herbert’s Utah Life Elevated 2020 Initiative to how officials decide what products to put on liquor store shelves.

Stripping away all the TOC jargon, Cox says she’s aiming for radical mental shift — convincing often-overworked government employees that their agencies can unlock secret stores of productivity without additional money or staffing.

“The real challenge is to believe that [hidden capacity] is there, even if they don’t know how to see it,” she said in a 2018 video.

(Christopher Cherrington | The Salt Lake Tribune)

Cox says she first read Goldratt’s seminal work, “The Goal,” during her time leading the state’s Department of Workforce Services, as the Great Recession was hitting the agency with a double-whammy of budget cuts and increased caseloads. And the department became her first laboratory for experimenting with the Theory of Constraints.

The reforms she instituted there saved taxpayers nearly $30 million, officials say, even as the office was absorbing a spike in demand for services. But rapid-fire changes caused such turmoil inside the agency that state lawmakers caught wind and pressed for an investigation.

The resulting report said more than 72 current and former employees of workforce services had lodged complaints, driven by an “atmosphere of frustration and unrest” inside the agency.

But by the time the legislative audit was completed, Cox had moved on to GOMB and had begun implementing her management philosophies across the entirety of state government.

‘Decorating the fish’

A short video that Cox posted to Facebook in February opens on her state budget team after a long day reviewing agency spending requests that there would never be enough money to grant in full. Wearing grim expressions, the five men are slumped around a conference room table littered with red Solo cups.

Cox, on the other hand, is animated by TOC-inspired indignation.

“We are here late working on the budget, and I’m pretty furious, actually,” Cox says, turning toward her silent companions. “Are you guys furious?”

One man appears to giggle uncomfortably and shrugs. Two others nod almost imperceptibly, while the one nearest the camera stares unblinking into the middle distance. No one speaks.

“They don’t dare say,” Cox laughs before venting frustrations about funding requests that aren’t outcome-driven or backed by sufficient information.

The segment concludes with a screen-fade to the cover of “Stop Decorating the Fish,” the 2018 book she co-authored with a Goldratt executive.

Cox has filmed a couple of dozen instructional videos — in her backyard, on a ski slope and in her home. A couple of the segments that feature state employees, including the one filmed with her budget team, end with the plug for “Stop Decorating the Fish.”

Cox defended the way she’s advertised the book, saying she hasn’t profited personally from it. At Cox’s request, North River Press, her publishing house, confirmed that she has not received any royalties from the volume or its accompanying workbook. Her co-author has not accepted money, either, according to Goldratt.

All proceeds go to the National Federation of the Blind, and Cox says she hasn’t benefited from any tax deductions on the contributions.

However, the book, her work with Goldratt and her leadership role in Utah government have certainly heightened her prominence as an expert in the specialized world of Theory of Constraints.

She’s a charismatic leader with a compelling personal story: Having lost most of her vision from a genetic eye disorder, Cox was on Social Security Disability Insurance at one point in her adulthood before her career took off. She held positions at the National Federation of the Blind and in government, even running on the ticket of a Maryland gubernatorial candidate. In 2016, a few years into her tenure at GOMB, she was named one of Governing magazine’s public officials of the year in an article that paid particular attention to her TOC work.

While she hasn’t profited from her book, she does make money as a management consultant in the theories she’s become known for practicing. Cox’s Twitter profile identifies her as a TOC expert. As recently as May, her LinkedIn resume described her as the founder and CEO of a “small consulting firm with world-class expertise in applying the Theory of Constraints to Government,” although that entry has since been removed.

On these social media accounts, she shares a blend of videos and articles that put her own management expertise in the forefront, along with blog posts and videos produced by the state to highlight TOC-fueled success stories in various agencies.

It’s against Utah’s conflict of interest rules for public employees to use their positions, influence, power, authority, state time, equipment, property or supplies for private gain. And while the governor’s office says Cox has maintained an appropriate separation between her public office and private ventures, some people have felt ill at ease with her activities in light of these restrictions.

One of the former state officials interviewed by The Salt Lake Tribune noted that state time, resources and equipment went into producing videos and other materials that seem to reinforce the marketing pitch used by Cox’s private business.

‘Greater return’

Cox founded her consulting company, Epiphany Associates, in 2012 just before Herbert appointed her to lead GOMB, according to state business records. And she runs it along with Cuthbert and Greg Gardner, her lieutenants in the state management and budget office and leaders of the team that helps promulgate TOC practices in Utah government.

While Epiphany no longer has an active website, an archived version from last year suggests the business focuses on government consulting, promising clients “greater return on each tax dollar.” The now-defunct site held up Cox’s Utah track record as a selling point for the company’s services.

The now-removed LinkedIn description billed the company as “literally the world experts at helping a very select group of government clients learn how to apply [TOC] principles … to do more with less.”

While Cox wouldn’t share her client list, she says she hasn’t done any paid in-state consulting while she’s led the state budget office and views any training in Utah as part of her government job. For instance, she presented on TOC and other management theories to Lehi City employees earlier this year without receiving a speaking fee, the city’s human resources manager said.

The governor’s legal counsel has reviewed the conflict of interest form in which Cox disclosed her ownership of Epiphany and the publication of her book and has determined that Cox followed all protocols appropriately. The Tribune initially filed a public-records request for the disclosure in May, finally receiving it in late August.

She indicated in it that she will not receive any royalties while she’s still employed by the state. And she contends she has no interest in becoming a traveling TOC consultant once she leaves.

“I have no desire to be a road warrior. I have no desire to be traveling,” she said. “I’ve spent 12 years of my life working nonstop. I’m here to help the governor and then I’m taking a break.”

Pressure to attend

The mutually admiring relationship between Cox and Goldratt has blossomed beyond just her book.

Cox in April traveled to Japan — a trip that coincided with a Goldratt partners meeting in the country — where she visited with company leaders and spoke to hundreds of business executives about Theory of Constraints. (Goldratt said Cox was in Japan to participate in two TOC conferences and was not there for the partners meeting.) Articles quoting her have been promoted by Goldratt, and her videos have been shared on its Facebook page.

Then there’s what’s billed as the world’s largest TOC convention, an annual event that Cox’s agency hosts with Goldratt. The Utah Ops and Goldratt Consulting conference, scheduled for Monday and Tuesday at the Davis Conference Center in Layton, is on its sixth year and is designed to effect a culture shift across all levels of government, convincing them that “breakthrough results” are possible, Cox says.

Starting in 2014 as a one-day event that drew about 480 people, the annual gathering has ballooned to more than 1,000. And one former high-ranking Utah official, speaking on condition of anonymity for fear of retaliation, said the event’s size and extravagance seem excessive for a conference aimed mainly at state workers.

Despite heavy advertising, individuals with a state email address made up 709 of the 1,138 attendees at last year’s Utah Ops. Utah agencies pay a discounted registration cost of $199 per employee out of their own budgets; between that and the annual GOMB subsidy of about $70,000 to $80,000, the conference cost the state at least $210,000 last year.

By comparison, the annual Utah Economic Summit, which has nearly the same attendance, only costs the state about $15,000, according to a spokesman for the Governor’s Office of Economic Development.

One reason for the conference’s continued growth was because GOMB pressured agencies to send staff, making it clear failure to do so “wasn’t going to be looked upon favorably,” said the former high-ranking official. In a June email, for instance, Cox told state supervisors that “every effort should be made to ensure your agency is adequately represented” at Utah Ops.

(Scott Sommerdorf | Tribune file photo) Kristen Cox, executive director of the Governor's Office of Management and Budget, makes a point during a state budget discussion at a meeting of The Salt Lake Tribune editorial board, Dec. 9, 2015.

No money flows between the state and Goldratt for the conference, Cox said; MediaOne of Utah technically organizes Utah Ops and bills the state and Goldratt separately. Goldratt’s support is crucial in staging the two-day event, Cox said, given the scarcity of potential sponsors for a wonky TOC convention.

Goldratt long sponsored a different U.S.-based conference, but in Utah Ops, it found a way to introduce the Theory of Constraints to a broader audience, company representative Rachel Scheinkopf said.

Over time, the former state official came to view Utah Ops as a platform for Goldratt to sing its own praises. Stories of come-from-behind successes in state agencies that have hired Goldratt have been showcased at the conferences. And, at last year’s gathering, attendees each received a free copy of “Stop Decorating the Fish,” the book Cox co-authored with a Goldratt senior partner.

Cox said the book, among others handed out at the Utah Ops conference, distills complicated principles into a digestible narrative; giving it away was a “complimentary service,” she said, to help state employees understand her goals and direction.

‘Chances to get money’

In 2016, Utah put out a call for consultants in Theory of Constraints concepts.

Goldratt was one of four applicants and ended up as the second-place finisher in the statewide bid, with a consulting company called NOVACES claiming top berth because it offered better prices and had significantly more experience with governments (most of Goldratt’s consulting work was in the private sector, as with many TOC consultants).

The selection panel, which Cox was not part of, awarded both companies high enough scores to land the statewide contracts — which are potentially lucrative agreements that let state agencies, universities and even local governments short circuit their typical procurement processes and hire these companies directly.

Since then, Goldratt has gobbled up nearly all of the state business available through the two consulting contracts. Despite being the highest-ranked consultant, NOVACES has done about $77,000 in work for the state since 2014, according to state purchasing officials — that’s about 3% of the roughly $2.6 million in consulting work that Goldratt has done for Utah agencies over that time frame (both companies performed some services for the state before the 2016 statewide contracts).

A NOVACES executive pointed to the close ties between Cox and Goldratt leaders as the reason that his competitor has claimed the lion’s share of the state’s TOC consulting business.

"I think Goldratt has a relationship with one of the key people at the state, and they're basically just giving them all the work on the contract," said Ivan Radovic, president of New Orleans-based NOVACES.

Cox says Goldratt Consulting’s philosophy syncs with her own.

“I use Goldratt because I trust them. They’re some of the smartest people I know,” she said.

In at least a couple of cases, Cox’s office made the introduction between Goldratt and the state agency that ended up hiring the company. And another of the former state officials interviewed for this article said agency heads had a strong motivation to solicit Goldratt’s services because of the company’s close relationship with Cox.

“If you have a consultant that’s telling the gatekeeper for budget requests that your budget request is good, then that’s a good thing for your chances to get money,” he told The Tribune.

(Christopher Cherrington | The Salt Lake Tribune)

Asked whether Goldratt had an unfair advantage over its competitors, Scheinkopf said the consultants had no relationship with Cox before they began working in Utah and it follows all rules of professional engagement.

The state has summoned Goldratt for some of its stickiest projects. In 2018, the Utah Department of Human Services hired the company to help clear massive backlogs for the forensic wing of the Utah State Hospital.

The care facility was under the gun after the Disability Law Center had sued it, alleging mentally ill criminal defendants were forced to “languish in jail” while waiting for a hospital placement to open up.

A Goldratt representative first toured the hospital at Cox’s invitation to explore a potential business relationship, according to a report attached to the contract. And later, the company signed on to help the hospital meet aggressive targets laid out in a settlement agreement with the DLC, though Scheinkopf said that work was subcontracted out.

Cox commended the hospital team for reducing wait times from about six months to 40 days within a half-year, without any additional resources. Even the Disability Law Center attorney said he was “pleasantly surprised.”

“You can’t argue with success,” DLC attorney Aaron Kinikini said in a phone interview.

Cox’s office also called on Goldratt for logistical assistance with the ongoing prison relocation project, said Marilee Richins, spokeswoman for the state’s Department of Administrative Services.

Richins said her department brought in Goldratt again to ferret out cost savings for a project that she contends was underfunded from the beginning.

(Scott Sommerdorf | Tribune file photo) Utah Gov. Gary Herbert, center, turns dirt along with other dignitaries at the site of the new prison, Aug.t 16, 2017. Rep. Brad Wilson, R-Layton, is left of Herbert, and then-Corrections Director Rollin Cook is to the right.

Richins said Goldratt was instrumental in expediting and facilitating the process. It was only after Goldratt and project partners went through this savings exercise, she said, that the state agreed to downsize and provide more funding for the prison.

State officials say Goldratt’s consultants more than pay for themselves — with $1.4 million in savings at the Department of Alcoholic Beverage Control, more than $1 million in savings from a technology services project and $2.5 million freed up in last year’s state budget because of changes at the State Hospital.

More broadly, the governor’s office points to what it says is a 27% improvement across state agencies as evidence TOC practices are bearing fruit.

“Change this dramatic does not come easily, or without some pain, but the results speak for themselves. Wait times at the State Hospital are down. Wait times at the DMV are down,” the office said in a prepared statement. "Utah consistently ranks at the top of the nation when it comes to best-managed states. You cannot achieve these results without working for them and earning them, and Kris Cox’s work has been critical to these efforts.”

Editor’s note: MediaOne of Utah is a company jointly owned by The Salt Lake Tribune and Deseret News that is responsible for the newspapers’ printing, circulation and advertising.