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Leadership and Outsourcing

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  1. Leadership and Outsourcing

    OR We are in the What Business?
  2. Lee R. Evett Vice President – Burton and Associates – Tampa Office City Manager - 34 Years – 7 Cities, 5 States B.A. Purdue; M.P.A. Indiana University
  3. Previous Leadership Presentations Elements of Leadership – 21 Irrefutable Laws The Other Side of Leadership Do you have to be Nuts to be a City Manager?
  4. Leadership and Outsourcing Leadership Leadership is a proactive catalyst Leadership recognizes the need for and facilitates change Outsourcing Building a better mouse trap Future of local governments in the “New Reality”
  5. Leadership and Outsourcing Strange combination of topics? No, we are in the leadership business And Outsourcing is how leaders are re-shaping local government
  6. Leadership and Outsourcing First - Who are we ? Where do you work? Why does my position exist? Why does my organization exist? What does my organization provide? You are in the Leadership Supply Business
  7. Leadership and Outsourcing Why is government in the Leadership Supply Business? Because Governments are created to supply Leadership Because Governments are a necessary part of society Why are Government “necessary”?
  8. Leadership and Outsourcing Governments are formed to fill a natural leadership vacuum - arises when unrelated people start living in proximity to others Governments are service providers for what we either can not do by ourselves or can do more efficiently together
  9. Leadership and Outsourcing Governments necessarily exist to protect people and their rights. To provide agreed upon services. To maintain order and promote domestic tranquility. In exchange, people agree to be governed, abide by the laws adopted by the governed, and give up some of their freedoms (mostly to not run around and wreak havoc)
  10. OK – We Are in the Leadership Business – How are we doing? When can we say we have met the service expectations of society? How do we measure our talents of providing services? When can we say we have succeeded?
  11. Measuring Leadership Success In Private Sector – Piece of Cake Success is measured by: 1) Increased market share; 2) Revenue increases meet goals 3) Sales targets are met; and 4) Profit projections are realized And all on a quarterly basis
  12. Measuring Leadership Success In the Public Sector – It’s another story Success is measured by: 1) Satisfying the electorate; movers and shakers 2) Staying out of the media, “successful” re-elections 3) Comparison with other local governments -employees per thousand, expenditures per thousand, crimes per thousand etc. 4) Staying financially healthy (moving definition)
  13. OK, We Measured – Now, how do we do better? Change your Leadership Focus Private Sector Leadership focus is always external–using the base to increase customer satisfaction - revenue, market share and profit – Public Sector Leadership focus is often internal– demonstrating leadership by controllingthe base – favorable number of employees, expenditures, and statistics
  14. Change to External Focus Empower Employees to help customers: Ritz Carlton - Empowerment Disney - Same Replace unsatisfactory or marginal employees: Los Angeles – the very, very, very, very….. 20-year Planners Recognize those who do focus on customers: Coral Springs
  15. OK – We Changed Focus But We Still Want to do Better We changed focus We removed marginal employees We empowered our employees But we still want (need) to do better – How do we do that? Need to think about re-creating the base – need to question why and how you do what you do Remember - Leadership is a synonym for Change
  16. How do we do better? Do we increase staff, if so When ? Answer - never Do we have more employees than needed? Answer - Yes Do supervisors supervise ? Answer - Rarely Do your employees think “internally” to the organization or “externally” to citizens and services? Is your organization run for the benefit of the employees or “stockholders”?
  17. Now – How do we do better? Concentrate on the Employee/Service “Basics” Employees provide services – not follow rules without exception, complain about temperature, parking spots Providing services is the goal, not improving employee morale Encourage employees to solve service problems – not just report them Every employee is part of the organization – you don’t want to hear, “that’s not part of my job,” or “that’s not my responsibility – you will have to call someone else”
  18. Now – How do we do better? Hire employees based on three criteria: Character Competency Chemistry Every employee should commit to do what they say they will do
  19. Still Not There? Do not assume the only way to provide a service is to employ people Do not assume the cost of providing the service can not be less Do not assume that you have taken the service to the highest level
  20. Now – How do we do better? Outsourcing – Remodeling Your Base Outsourcing is about realizing a private sector corporation can provide a public service Outsourcing is about setting standards for performance –perhaps higher than currently enjoyed Outsourcing is about providing a public service with a recognizable value
  21. What does “doing better” mean?  Doing better isn’t just about higher service levels Doing better also means doing the same with less Revenues are down Worse, revenues are not improving or slowly improving Reserves are used with the hope that things will get better Citizens are continuing the mantra - Property Taxes are too high, government spends too much
  22. What to do? Leadership is about change – consider outsourcing What will outsourcing do for your organization? What do you want outsourcing to do for your organization – control/lower costs, improve levels of service, remove the HR Department? Is outsourcing really better?
  23. Potential Outsourcing Advantages Efficient performance Known cost - potential cost savings Better service levels – quantified service levels
  24. Potential Outsourcing Disadvantages Difficult/awkward to change services or service providers Hard to change back, infrastructure – who owns it? Maintenance of public property Service levels will be what you specify, be careful and know what you presently offer
  25. Outsourcing - Not a New Idea 1955 - Directive of the Office of Management and Budget – discouraging Federal Government from producing any goods or services that can be obtained from the private sector Peter Drucker coined the term Privatization in 1968 1972 Rand Corporation. In-depth study on Outsourcing
  26. Common Examples of Outsourcing Garbage collection, recycling, accounting, building code enforcement, debt collection, parks and grounds maintenance, recreation, 911 Primary Service Answering Points (PSAP), Police, Fire, Ambulance Abandoning a public service is a forced “outsourcing”
  27. Key Aspect of Outsourcing- Accountability Accountability is a fundamentally required aspect of social existence – In government - it is often a problem Some crucial functions must be carried out collectively, such as elections, who is accountable? We act on behalf of the public – but who really knows what they want - how can we be accountable when seemingly everyone has a different thought of what we should be doing?
  28. Outsourcing may not be for You Hard to measure the value of production – hard to demonstrate efficiency, cost reduction More disruptive it is to change providers Internal experts know more about how to accomplish the task And: Always Remember - hiring employees is more politically popular than paying a for-profit corporation
  29. When Outsourcing May Be The Answer More the service can be identified/quantified/specified More the efficiency/production of the services can be measured and costs identified Multiple vendors for the service – good market place – competition – other examples in operation Performance can be objectively evaluated after the fact
  30. When Outsourcing May Be The Answer More readily a failing contractor can be replaced Less government is seen as caring only about dollars Stronger the case for employing profit seekers than employing individuals – usually the more technical More it can be shown that the city “wins”
  31. OK – You want to Outsource a Service or Function What do I do (being the leader I am) and yet still survive to another day How do I do what I want to do (being the leader I am) and still survive to another day
  32. Step 1 – Pick a Low Hanging Service Consider well defined services with know quantities - garbage collection, 911 PSAP’s, utility operations, and grounds maintenance are good examples Less precise but still doable: engineering, planning and zoning, parks and recreation
  33. Step Two – Research and Talk Know your present actual costs, not budget costs - the fully allocated real cost Know what costs you will avoid (save) Have all the facts, actual costs, anticipated savings, comparable examples from other communities. Know what worked and what did not Do NOT do this in a vacuum, do your research quietly: discuss your thoughts with each elected official BEFORE MAKING PUBLIC COMMENTS
  34. Step Three - The RFP Write clear, tight specifications: Number of units/frequency of activity/special programs currently in place Detail exactly what you want – be cautious of imaginative providers Hold a pre-bid meeting to ensure no misunderstandings on what YOU want Customer service expectations/penalties for service infractions (e.g. tardiness/non specified practices/behavioral infractions, uniforms, personal appearance)
  35. Step Three – The RFP Spell out when early termination is appropriate, city should be the final decision maker Define payments; detail invoicing, when payable, how paid, based on what service frequency, when (if) fee is to be increased, by how much - beware of CPI increases Define each required or optional management report by type, contents, when to be delivered, to whom, penalty for non delivery or incomplete performance
  36. Time

    10:50 AM
  37. Step Three – The RFP Define the city’s option to identify future service changes, special events, special and/or specific reports and data requests Define extraordinary events (injuries, accidents, etc.) and spell out reporting responsibilities – to whom and how soon Spell out extra duties and specific compensation for known special events, including hurricanes
  38. Step Three – The RFP Spell out minimum staffing by using performance standards - not numbers of employees Spell out the city will specify uniforms or establish dress code Identify behavioral expectations and specific consequences for infractions
  39. Step Three – The RFP Make clear the city determines contract infractions Provide for an internal administrative (not arbitration) appeal process Don’t be afraid to individualize the services to your communities expectations If something “can’t be done” know exactly why – research yourself if necessary
  40. Step Three – The RFP Review the RFP with each impacted department – include front counter personnel and main receptionists – those who will be the first to hear citizen issues/questions Clearly define the term and possibility of renewal or extension before re-bid Periodically re-bid - establish the precedent - even when you like the contractor
  41. Step Three – The RFP Speak candidly with vendor references including both management and field personnel Meet company’s top management, learn their personal history, goals for the organization. What is the company personnel turnover rate/why (indicate you will be doing this) When you have finalists, put together a core group who will hear two or three presentations
  42. Step Three – The RFP Visit existing contractual operations Select a service provider with the same care you would use to hire a department head, key assistant or auditor Contractor must assign a senior management person as your key 24/7 contact – home phone, cell phone etc. Key contact should periodically attend departmental management meetings
  43. Step Four – Approving The Contract Each elected official must understand all aspects of what is happenings before it is on the Agenda Develop FAQ’s for the Council and appointed staff to insure continuity of answers Develop a public presentation on what is being outsourced and why (benefit to the city)
  44. Step Five MONITOR AND ADMINISTER THE CONTRACT
  45. Other Thoughts Hey, its NOT an easy task Most cities have outsourced a service – but not recently Political ramifications – every elected official campaigns on running government like a business and then votes for what will get them re-elected
  46. Other Thoughts Do not outsourcing police or fire services unless: A) You are a brand new city or B) The union agrees - which means it is in their best interest and may or may not be in your best interest or C) You have a death wish
  47. Real Life Examples Three Examples of Leadership making a change: The Osceola County Library System The City of Weston The City of Sandy Springs, GA
  48. Osceola Outsources the Library October 2011 Headline - Osceola Commissioners put library privatization on hold County will look at how it can make cuts without outsourcing Osceola County officials find themselves with a dilemma: move ahead with an unpopular proposal to outsource libraries or continue to run the libraries and make cuts themselves
  49. Osceola Outsources the Library What Happens County listens to the headlines and re-negotiates the contract Removes most onerous provisions, insures the County controls policies of operations/administration
  50. Osceola Outsources their Library Result Osceola County did Outsource their Library Cost savings was the motive 73 County employees affected Contract signed in December 2011 Private Operation started January 3, 2012 All employees offered positions with same salary but company benefits – “8 or 9” did not accept
  51. Osceola Outsources the Library December 2011 Headline – Osceola County Approves Privatization of Library System Saving an estimated $6 million over five years Maintain current hours of operation at all branches All employees offered positions with LSSI at their current salaries Osceola County retains full ownership of all facilities and resource materials, as well as policy-making and management decisions
  52. Osceola Outsources the Library Five year contract First East Coast operation for California Company County savings so far $1 million per year Some of the saving due to county cut back on book purchases County understands the company’s operation is profitable
  53. Real Life Examples Florida’s Outsourcing Poster Child – The City of Weston: (FY 2012) $6.4 Billion Assessed Valuation– Pop 65,000 $115 Million All Funds Budget – Zero “G.O.” Debt $35 Million General Fund - $89 Million in Reserves FY 11 27 Square Miles – AAA Credit Rating – only 2 in State Their Mission - Value Nine “real” employees – 278 contract “employees” provide City services
  54. City of Weston Multiple Contractors Only Executive Staff are City Employees Specific contract areas Building Information Technology Police/Fire - Sheriff Parks and Recreation Planning and Zoning Public Works Finance
  55. City of Weston Three Types of Contracts: Perpetual, Prime and Demand Perpetual Contracts – Key Positions; City Manager, City Attorney, Engineering/Planning & Zoning, IT and Administrative Services Prime - 30 plus contracts for basic on-going services - landscaping, fire, police, parks and recreation, accounting, engineering Demand – hurricane clean-up, special events, specialized services not used regularly, infrequent use of large or unusual equipment
  56. City of Weston Weston incorporated in 1996 as an “outsourced” City; originally Indian Trace CDD Weston Model - city employees administer multiple contracts In the beginning – only one employee, the City Manager – later added employees to insure adequate monitoring of contracts
  57. Real Life Examples Sandy Springs, GA Population – 97,898 Annual Operating Budget: $83 Million Government Service Model:  Non-public safety service provided through Private/Public Partnership (PPP) Model – one contract – contractor issues subcontracts Long Term Debt: $0 – Short Term Debt: $ 5 Million
  58. Sandy Springs, GA City acquires needed assets City retains budget control Private Sector - responsible for staffing/service costs Private Sector responsible for normal repair/replacement of equipment City controls capital planning and expenditures Employees work for private company/Subs
  59. Sandy Springs, GA Recreation and Parks Services PPP Traditional Model Revenue $352,000 $352,000 Expenses:  Personnel $1,702,521 $2,268,752 Operating $520,000 $520,000 Other $252,500 $252,500 Net Expenditure $2,475,021 $3,041,252 Total Cost  $2,123,021 $2,689,252 Estimated Cost Savings:  $566,231
  60. Sandy Springs, GA Human Resource Services Expenses PPP Traditional Model Contract for Service $350,000 $0 Personnel $0 $364,650 Operating $0 $69,638 Total Cost  $350,000 $434,288 Estimated Cost Savings: $84,288
  61. Sandy Springs, GA Public Works Services Expenses PPP Traditional Model Contract for Service $550,000 $0 Employees (14) $0 $560,560 Maintenance $0 $96,000 Equipment                                 $0 $81,910 Total Cost  $550,000 $738,470 Estimated Cost Savings:  $188,470
  62. Sandy Springs, GA Ambulance Services PPP Traditional Model Revenue: Patient Reimbursement $0 $1,984,317 Expenses:  Contract for Service $450,000 $0 Personnel $0 $3,213,613 Operating $0 $521,647 Total Cost  $450,000 $3,735,260 Net Cost  $450,000 $1,750,943 Estimated Cost Savings:  $1,300,943
  63. Sandy Springs, GA Essential Elements for a Successful PPP: Value Cost Savings/Efficiency Accountability Performance Measures: Customer Satisfaction Survey component
  64. Final Miscellaneous Thoughts Contract with a professional – resist the urge to tinker Citizens will not appreciate the inability to bully council or staff for a “personal” change/service Potential manpower reduction in emergency situations, water/sewer line breaks – hurricanes (but you can contract for these as well)
  65. Final Miscellaneous Thoughts If outsourcing were a drug – read the cautions on the label Do not go into this arrangement simplybecause of dollars and cents Benefits paid contract employees are lower than paid public employees
  66. Final Miscellaneous Thoughts Contractors are paid their costs and a profit Many citizens think government services should be free or provided by “not-for-profit” agencies Test the winds for Red and Blue Consider the council’s business / professional sophistication (Business IQ)
  67. Final Miscellaneous Thoughts Community Business IQ Higher the Business IQ – the higher probability of success (usually Red) Lower the Business IQ – the lower the probability of success (usually Blue)
  68. Thank You