A study investigating institutional factors affecting the performance of the employment service (ES) focused on (1) organizational characteristics conducive to high performance in state ES agencies and their local operations and (2) the external linkages of the ES with state and local politics, other agencies, and the U.S. Department of Labor (DOL). Field interviews were conducted in nine state employment security agencies (SESAs), five regional offices, and the U.S. Employment Service. The major findings were (1) SESAs with high performance tended to differ systematically in their organizational structures and style from SESAs with low performance, (2) SESAs differed in their adaptiveness to change and their receptivity to federal assistance, (3) the generally low performance of ES offices in urban areas seemed due in part to organizational factors, (4) SESA linkages to state level politics and other agencies were a secondary but important influence on ES operations, (5) SESA linkages to local level politics and other agencies were another secondary but important influence on ES performance, (6) the U.S. Employment Service has limited ability to guide and assist SESAs, and (7) political constraints and policy issues at the national level must be dealt with if the employment service is to improve. (This report includes recommendations for each of the major findings and an appendix containing supplementary information on the study's methodology and on the account executive, a proposed ES staff position.) (EM)