Shortly after CIA Director George J. Tenet coaxed Jack G. Downing out of retirement to run the agency's troubled espionage service, the legendary spy took stock of flagging morale and prescribed a cure: jump training.

Few government bureaucracies losing their best workers in droves would start pushing new ones out of airplanes to build esprit de corps. But jump training appears to have had a beneficial effect. The CIA's super-secret Directorate of Operations now seems on the mend two years after Downing arrived and reminded the barons of Langley and the agency's overseers on Capitol Hill that the DO isn't any old government agency.

Money is pouring in from Congress, the CIA is engaged in the most significant recruiting drive in its history, morale is up and resignations by DO case officers are way, way down.

"I really believe the corner has been turned," Rep. Porter J. Goss (R-Fla.), chairman of the House Permanent Select Committee on Intelligence, said last week in an interview.

He credits Downing, 59, a Harvard-educated former Marine infantry officer fluent in Chinese and Russian--and the only person in CIA history to have been station chief in both Moscow and Beijing. Tenet once called him "a world-renowned operator . . . who reads Chinese poetry for kicks."

As recently as 18 months ago, Goss was lamenting the DO's slide in espionage, counterintelligence and covert action. "The cupboard is nearly bare in the area of human intelligence," he said.

But Goss, himself a former DO case officer, offered a different assessment when Downing retired for the second time at the end of July and turned his reform program over to his deputy, James L. Pavitt, a noted operations officer with much Washington experience.

"Under Jack, DO officers have found ways to penetrate terrorist cells, to get inside the cabinet rooms of rogue states, and to detect and disrupt the movement of narcotics," Goss said in remarks he had inserted into the Congressional Record. "Under Jack, the DO has been put in a position to collect intelligence on whatever threats and challenges come our way in the next century."

Agency critics, many of them former CIA case officers and senior managers, remain skeptical. While nearly all praise Downing, they say even his plan won't be able to reform a Cold War-era espionage service that lurches on, nearly a decade after the Cold War ended.

"I think we should be trying to cut the DO way back," said Melvin A. Goodman, a former chief of the CIA's Soviet affairs division who teaches at the National War College and heads the intelligence reform project at the Center for International Policy.

Goodman believes the DO should become a more elite corps that pursues new strategies to penetrate increasingly hard targets: criminal syndicates, terrorist organizations and rogue states. To do this, he said, far more case officers need to operate overseas using "nonofficial cover"--say, posing as business executives--because most foreign intelligence services are no longer fooled by CIA spies working out of U.S. embassies and posing as State Department political officers.

The DO's exact size is classified, but it is thought to have about 5,000 employees, including about 1,000 overseas operations officers--the spies who recruit and handle foreign agents and manage intelligence collection. Downing's blueprint calls for the spy force to increase in size by about 30 percent over the next seven years, which will allow the CIA to reopen a number of overseas stations closed after the Cold War ended.

Goodman's critique has many adherents, most notably Ruel Marc Gerecht, a former DO case officer who wrote a devastating portrait of his former employer in the Atlantic Monthly in February 1998, seven months after Downing's return.

The Directorate of Operations, he wrote, using the pen name Edward G. Shirley, had grown intellectually dishonest and become an institution where case officers played a cynical "numbers game" to get promoted by recruiting large numbers of paid foreign agents, regardless of quality.

The "secrets" these agents produced were often nearly worthless, Gerecht wrote, and typical case officers either didn't care or didn't know better, lacking language skills and much grounding in the culture in which they operated.

"America's national security would not be compromised by temporarily shutting down the DO," Gerecht wrote. "A Directorate of Operations that produces mostly mediocre intelligence and egregiously stupid coup d'etat schemes against, for example, [Iraqi President] Saddam Hussein harms the United States abroad."

Downing and Pavitt disagree.

Yes, they concede, the "numbers game" once was a problem. And yes, penetrating the new hard targets requires far different strategies than the agency employed against the KGB, the Soviet spy agency. But they reject Gerecht's contention that the DO is--or ever was--a failed organization that contributed little to national security.

"I still think this is the world's finest intelligence organization bar none," said Pavitt, 53, who speaks German, has served as a DO case officer and station chief in four overseas assignments and worked at the National Security Council during the Bush administration.

"I wish I could convey with greater detail some of our great successes," he said. "My job is to keep those secret. But if I walked you down to the bowels of this building, through any geographic division or any one of our centers and said sit down here and spend a week watching what they do, you'd walk away extraordinarily impressed."

Downing began his last--and perhaps most important--assignment two years ago by drawing a line in the sand: The cutbacks had to end. The DO could no longer do more with less, as the cliche went. It was doing less with less, Downing declared--and he convinced Congress that something desperately needed to be done.

"That's a very important message," Downing said. "It made people feel that they are valued."

Another message Downing wanted to send, in part to help motivate a new generation of case officers, had to do with the importance of technology. This he did by assigning Hugh Turner to head a new Staff for Technology Management. Its purpose was twofold:

* To better use technology in support of human intelligence operations, through such means as improved radio communications, miniature camera technology, disguises and documents.

* To use human intelligence operations better in support of new and exotic technical intelligence collection strategies.

Turner, 56, a veteran case officer and station chief who rose to the DO's number 2 slot last month, speaks Arabic and Turkish and won the Silver Star as a Green Beret in Vietnam.

His presence, added to the likes of Downing and Pavitt, helped send another message: The days of risk aversion were over. The operators were ascendant.

Downing knew it would take time to make believers out of case officers overseas. "People watch what you do," he said, "not what you say."

But after two years, he and Pavitt believe the message is taking root.

"In this business you do get caught," Pavitt said. "In this business things do go wrong. I am not going to take somebody out and hang them because they've done what we've asked them to do and they've done it well."

As part of the rebuilding effort, Downing and Pavitt also paid attention to the prosaic side of espionage. They beefed up training and reinstituted a requirement designed to make recruits believe in themselves under the most challenging circumstances: making all operations officers bail out of the back of an airplane, paramilitary style, at 1,200 feet.

"Ordinary people are not inclined to jump out of an airplane," Downing said, "and we are not looking for ordinary people."

In the same vein, he and Pavitt also emphasized the importance of language proficiency, forcing division chiefs to disclose in the paperwork supporting assignments and promotions that are sent for approval by the director of central intelligence the language proficiency of those they were recommending for station chief and other senior positions.

Emphasizing languages, Downing said, was a no-brainer, given how low the DO's language capabilities had slipped. The directorate had so few speakers of important languages in the Balkans, Downing recalled, that he forced the DO's Central Eurasia Division to send a cadre of young officers to study Serbo-Croatian and Albanian in June 1998. They had not quite finished their year's study when NATO's bombardment of Yugoslavia began in March. But with Kosovo and Albania still critical areas of operation, the class is out of school--and in the field.

Downing and Pavitt also focused on keeping experienced hands satisfied on the job. They made sure that everyone who resigned over the past two years was interviewed by their superiors to find out why. Resignations have dropped by one-half to two-thirds.

"We are beginning to see a significant turn in morale," Pavitt said. "The young men and women who are joining this organization today are among the best and the brightest this country has to offer. They are people with, for the most part, very good educations, good languages, and in some instances languages learned at their mother's knee."

Pavitt rejects the argument that the DO is somehow incapable of penetrating the new hard targets. "This is one of the things that is so extraordinary about this work force. They get everybody around this table and say, 'Here's what we've got to do, how do we do it?' And they come up with answers. They're creative answers, they're different answers, they're different ways of doing business."

Pavitt also rejects the argument that espionage--stealing other country's secrets--is less important in a world awash in information. "If anything, the mission has grown and continues to grow: proliferation, terrorism, narcotics, organized crime," he said. "That's one of my problems. I can't do more with less and hence I've argued for more--and the argument has carried the day."

CAPTION: Jack Downing made boosting morale at CIA's Directorate of Operations a top priority of his reform program.