At the age of 57, Charles Rossotti (HBS MBA 1964) made a self-described "huge detour" from a twenty-eight-year career at American Management Systems Inc., the Virginia-based computer systems consulting firm he co-founded. He went from helping corporate clients around the world find solutions to information technology problems to volunteering for a potential "suicide mission," as one journalist put it, as the 45th commissioner of the Internal Revenue Service.
By the late 1990s, the IRS had become accustomed to being excoriated from all sides. Errors were epidemic. Taxpayers testified on Capitol Hill that they had been harassed and humiliated by IRS employees. Congress responded by passing the IRS Restructuring and Reform Act, which called for both regaining taxpayers' confidence and collecting taxes more efficiently by overhauling the agency's antiquated IT systems.
The person seen as most capable of meeting the mandate of modernizing the IRS was Rossotti, who was recruited by then-U.S. Treasury Secretary Robert E. Rubin and other top government officials because of his experience in running a major service- and technology-oriented business. Approved in 1997 by a Senate vote of 92-0, he became the first IRS commissioner who was a professional manager rather than a tax attorney.
"I was attracted by the challenge of turning around a huge institution that affects everybody in the country," says Rossotti. "It wasn't acceptable to have an agency like the IRS held in such low esteem. This was an opportunity for me to bring about fundamental change."
The agency Rossotti took over had 102,000 employees who annually collected $1.5 trillion in taxes, processed a billion documents, and churned out 80 million refunds. Amid so many transactions, however, there were glitches galore, and many employees felt hamstrung in their jobs because they lacked up-to-date information on a tax code that had been revised myriad times. "We faced a classic crisis situation with an immense amount of pressure, so my new colleagues and I put together a hundred-day plan that we condensed to one page," explains Rossotti. "This enabled everyone to say, 'Here's what we're doing to improve things.'"
Rossotti dramatized the scope of the agency's IT problems by taking key congressional staffers on a bus trip—first to the virtually paperless office of a credit card company and then to an IRS regional service center, where old computers loaded with out-of-date information sat amid rows of overflowing filing cabinets. "Our most fundamental problem was that we didn't have accurate, up-to-date taxpayer records," he says. "We were like a bank that couldn't tell you how much its customers had on deposit. Basically, we had a financial management system held together by baling wire."
Along with bringing the IRS's financial management system into the 21st century, Rossotti reorganized the agency into four units, each responsible for a specific group of taxpayers: individuals with wage and investment income; small business and self-employed taxpayers; large businesses; and exempt organizations such as nonprofits and state and local governments.
But Rossotti regards the most important accomplishment of his five-year tenure at the IRS—he stepped down in November 2002—as one that can't be quantified. "There was a turnaround in attitude as to what was possible," he smiles. "Expectations were higher."
The only thing Rossotti knew for sure when he graduated from Harvard Business School was that he wanted to be an entrepreneur some day. "My grandfather had founded the Rossotti Lithographic and Printing Company in New York City, and my father worked there, too," he says. "Since my maternal grandfather owned an importing business that my mother later ran, I knew early in life that I would go into business."
MBA in hand, Rossotti did consulting for a year, and then "one of those totally unexpected events in life occurred," he recalls. A friend who had gone to work for Secretary of Defense Robert S. McNamara (HBS MBA 1939) suggested he interview for a defense systems analyst position at the Pentagon. From 1965 to 1969, Rossotti was one of McNamara's fabled "whiz kids," ending up as deputy assistant secretary of defense at age twenty-nine.
In 1970, Rossotti and several Pentagon colleagues started American Management Systems (AMS). "We decided that big companies and government agencies could do a lot more with computers than just sort punched cards faster," he says. "So we wrote a business plan, raised $300,000 in venture capital, and hung out a shingle with five employees and a sublet office."
AMS grew into a global powerhouse with $1.2 billion in revenues, offices in over fifty cities, and more than 6,800 employees. Its clients have included numerous corporations, universities, and municipalities, as well as various government agencies. In his long career at AMS, Rossotti held the gamut of top leadership positions, serving as president, CEO, and chairman before heading to the IRS.
These days, when not at work on a book about reforming the IRS or assisting various nonprofit groups, Rossotti can be found at The Carlyle Group, a global private equity firm in Washington, D.C. "Despite today's uncertain economy," he asserts, "an entrepreneur with good ideas can still flourish."
Earlier education
Georgetown University, 1962
A.B., Economics
Lifelong impact of HBS
"What stood out for me initially was the first-year section, where I made some of my closest friends and thrived in the give-and-take of class discussions. I loved the case method as a process for testing ideas. It forces you to get past generalizations and use the information you have. Ultimately, this process leads you to a zone for judgment; it's a process I have used throughout my career."
- Director, The Council for Excellence in Government
- Director, Capital Partners for Education
- Director, Audit Advisory Committee of the U.S. General Accounting Office
Advice to current students
"You have to like what you are doing. Since you spend more time working than doing almost anything else, it makes a big difference if you're enjoying yourself."