Using “Lean” Concepts to Rightsize Your Organization

Baker Tilly refers to Baker Tilly Virchow Krause, LLP,an independently owned and managed member of Baker Tilly International.

with Christine Smith

and Adam PayneNovember 30, 2012

WGFOA

Christine Smith

> Principal, State and Local Government Consulting, Baker Tilly Virchow Krause, LLP

> More than 25 years public sector experience, 15 as a consultant

> Worked with more than 55 counties, 100 municipalities, and a

Your presenters

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> Worked with more than 55 counties, 100 municipalities, and a dozen state agencies nationwide

Adam N. Payne

> Sheboygan County Administrator

> Began in January 1999

> Coordinates the administrative and management functions of the County’s 19 departments; 825 staff, $127 million budget

> Formerly with the Wisconsin Department of Agriculture, Trade and Consumer Protection, and former Executive Director, Wisconsin Land and Water Conservation Association

>A change/shift to a learning, continuous improvement culture enterprise-wide

>Eliminates waste (focus on the value add)

>Assumes the most direct way of doing things

Common principles of lean

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>Assumes the most direct way of doing things (straighten the pipes)

>Focused on getting the most out of employee resources

>Demands employee engagement

>Customer-centric―Assumes enhanced service

>Results-focused―Measure what matters

Applying lean in the public sector is different because:

>Elected officials more sensitive

>Perceived need to maintain equity does not align with the

Lean in the public sector

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>Perceived need to maintain equity does not align with the need for creativity and flexibility

>Lack of competitive incentives

>Innovation and union representation often not synonymous

>Efficiency can equate to unpopular short-term decisions for long-term improvements

Local government approaches to resolve budget deficits

>Staff benefit reductions

>Wage freeze

>Staff reductions

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>Shared service arrangements

>Increased revenue

>Consolidation

>Outsourcing

Local government approaches to resolve budget deficits

The goal of lean is NOT cost reduction,

but cost reduction may result.

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but cost reduction may result.

Rightsizing: Key considerations

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Rightsizing vs downsizing

Rightsizing is necessary because of:

>Higher demand for customized public services

>Lower level of funding available to do so

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Adoption of lean within the public sector is necessary to:

>Deal with the impacts of rightsizing

>Meet the growing service demands of communities

Key approaches in lean

>Understand your mission and what your “customers” value

>Focus on core and/or priority functions ‒Eliminate non‒value-add

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‒

Eliminate non‒value-add

>Process improvement – Eliminate waste

>Measure performance in relation to expectations

Many options to ensurelean government

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Lean concepts used

Process mapping Cause/effect

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Lean concepts used

Risk/reward heat map

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Primary options for rightsizing include . . .

>Flexible rightsizing

>Cause/effect

>Risk/reward heat map

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The impact of lean on employees

>Need to learn new skills – Fear of failure

>Longer hours during transition/implementation

>Threatened by younger, more flexible/adept employees or new hires

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or new hires

>Doubt/frustration – Wasted effort because “it won’t last”

>Conflict between proactive management and reluctant peers – Whose “side” are you on?

>Change is uncomfortable, disruptive

>Required to think differently

How do you move people from one end of the change continuum to the other?

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Keys for moving through the five stages of denial (Denial, anger, depression, bargaining, acceptance)

>Engage staff early and often

>Clearly articulate the realities

>Encourage and reward innovation and collaborative thinking and behavior

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thinking and behavior

>Share the options being explored; offer staff the chance to be part of the solution

>Be sure that anything communicated is “ready for Prime Time”

>Celebrate and empower

About Sheboygan County, WI

Sheboygan County:

> Population of 116,000, 12th largest county

> 19 departments, 825 employees, $127 million budget

> 25 County Board Supervisors> 25 County Board Supervisors

> 1 County Administrator

Key components of the 2013 budget include:

> Preservation of core services

> No reliance on County reserves to balance the budget

> A reduction of $1.8 million (3.12%) in overall personnel-related expenditures

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About Sheboygan County, WI

Sheboygan County Budget 2013

Key components of the 2013 budget include (cont’d):

> Employees contributing $1.2 million towards their retirement and health insurance costs

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their retirement and health insurance costs

> A reduction of workforce by 29 FTEs, mostly due to retirements

> Consolidation of the Airport & Highway Departments

> Second consecutive year of delivering $250,000 savings associated with the Finance & IT consolidation

> Expanding psychiatric care for vulnerable populations and improving our mobile crisis response by $161,000 (36%)

About Sheboygan County, WI

Sheboygan County Budget 2013

Key components of the 2013 budget include (cont’d):

> Funding of $4.3 million for road maintenance and improvements,

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maintenance and improvements, an increase of 26%

> An increase of $125,957 (20%) for the Clerk of Courts Department, including upgrading a staff position to Chief Deputy Clerk of Courts

> Continued support in the amount of $100,000 for the Sheboygan County Economic Development Corporation

About Sheboygan County, WI

Keys to our success:

> Budget process

> Leadership and collaboration

> Operational reviews:

> Health Care Centers (2004)

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> Health Care Centers (2004)

> County-wide Program Evaluation and Prioritization Process (PEPC – 2005, 2009)

> Health & Human Services (2006)

> Sheriff’s Department (2008)

> Highway Department (2008)

> Child Support Department (2009)

> Information Systems Department (2011)

> Human Resources Department (2012)

> Clerk of Courts (2012)

> Health & Human Services Administrative Services (2012)

CASE STUDY2005 Program Evaluation & Prioritization Process

Scope

> Review, evaluate and prioritize all county programs

and services

Approach

> Establish a 10-member County Board ad-hoc committee composed of the chairs of the standing

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committee composed of the chairs of the standing liaison committees charged with developing a uniform analysis and prioritization of all mandatory and discretionary programs and services

Key findings

> 207 programs and services (93 mandatory, 114 discretionary)

> Yes, priorities CAN and should be established

Key lean changes

> Subsequent implemented program and service delivery modifications

> Shared and consolidated programs and services

> Outsourced or eliminated programs and services

> Enhanced performance measurement

CASE STUDY2008 Sheriff’s Office

Scope

> Comprehensive review of staffing, operational approach, and

organizational structure to balance operational and service delivery

requirements with available resources

Approach

> Review and comparison of staffing, labor, operating costs, and best

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> Review and comparison of staffing, labor, operating costs, and best

practices with similar sized operations

Key findings

> Baker Tilly made 57 recommendations with several of them being adopted; most focused on staffing or organizational changes

Key lean changes

> Reorganized command structure and eliminated redundant supervisory positions

> Improved approach to providing administrative functions

> Addressed jail overtime costs driven by staff shortages

> Developed incarceration alternatives to manage jail capacity

> Estimated annual savings of $150,000

CASE STUDY2008 Highway Department

Scope

> Assessment of organization, staffing, fiscal trends, and the

effectiveness of current process and functions relative to

construction and maintenance activities, blacktop operations, services to municipalities, winter

maintenance, department workload measurement and

reporting, fleet maintenance operations, and facilities use

Approach

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Approach

> Review included interviews and focus groups with staff, shadowing of staff in

the field, and comparison with other peer county highway departments

Key findings

> Baker Tilly made 38 recommendations and provided a long-term plan and roadmap for restoring the Department to a fiscally sustainable position while preserving critical functions and services

Key lean changes

> Improved project time management and preventative maintenance of fleet utilizing GPS

> Consolidated an outlying highway shed

> Reduced staffing levels from 110 to 90

> Rightsizing resulted in $1.1 million annual savings, while protecting core services

CASE STUDY2011 Information SystemsDepartment

Scope

> County-wide needs assessment, 21 departments

Approach> Inventory of major systems, surveys, assessment of

governance, customer services, cost allocation, job duties and associated staff resource allocations, and best practices

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best practices

Key findings> 33 “initiatives” suitable for consideration:

� Organizational structure enhancements

� Outsourcing/shared service considerations

� Modifications to product, labor, and contract approaches

� Discussion of key IT infrastructure and network options

Key lean changes> Hybrid public/private partnership in IT service delivery (DataMax IT)

> Improved help desk support – reduced outstanding tickets from 250+ to average of 50 and have a 90%+ 5 star rating

> Merger of the IS and Finance Departments resulted in $250,000 in annual savings

Lessons learned and recommendations from Sheboygan County

Lessons learned over the course of lean projects:

• Key involvement of County Board Supervisors

and department heads

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and department heads

• Dlearly define scope and expectations

• Critical to ensure recommendations

are supported by facts and data and accompanied with estimated

savings

• Excellent opportunity for organization to make improvements

• Importance of following up on implementation plans

Sheboygan County track record

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Sheboygan County property taxes decreased

4 of the last 6 years

Sheboygan County track recordM

illio

ns'

Sheboygan'County'Actual'Levy'vs'Average'WI'County'Levy'

27This chart compares Sheboygan County's actual levy to what Sheboygan County's tax levy could have been if the County Board approved levy increases equal to the average WI County tax levy increases.

Change leadership vschange management

Change Management – Structures used to keep the change process under control

Change Leadership – Communicating the vision and

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Change Leadership – Communicating the vision and engaging stakeholders, role modeling new behaviors, empowering, and providing support

“Managers are people who do things right, while leaders are people who do the right thing.” ~ Warren Bennis, Ph.D., On Becoming a Leader

Change avoidance questions/statements into acceptance questions

Employee questions Manager/leader restatement Goal/benefit

Why? What new opportunities will this provide?

Focus on the benefits

How will this affect me? What problems will this solve? Let them know how they will be part of the solution

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of the solution

We don’t do it this way

What would it look like? Show them, provide plenty of explanations and compassion, and get your team to ask and answer questions

When will this change be over so we can get back to work?

What can I do to help? Get them involved in implementingthe change; help them become part of it

Who is doing this to us?

Who can help us? Focus on the challenges to be overcome; enlist help from other departments and colleagues

SOURCE: http://www.nwlink.com/~donclark/leader/leader.html (“Leadership and Change”)

Using lean to make it real

>Introduce concept carefully

>Identify vetted champions at all levels

>Treat as a long-term journey

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>Prepare for roadblocks and resistance

>Proactively manage through to your destination

>Support required culture change with required resources

Lean lessons learned

> Be deliberate/strategic (e.g., what data is needed, from whom?)

> Embed it in your culture

> Customize it to your needs

> Don’t promise no job loss

> Technology is not always the answer

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> Technology is not always the answer

> Focus on the process, not the people

> Justify why a proactive look at finances is important and appropriate

> Carefully define lines of business (categories/functions) for costing approach

> Involve appropriate department directors/staff in pre-report release

> Intentional and continuous communication with employees and unions is critical

> Regarding labor unions, understand the required processes and timeline before you begin the decision-making process

Sustaining a change culture

Diagnosing current culture

Defining culture shifts required

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CultureChange

Developing programs to

engage people in behavioral

change

Senior management role-modeling

Aligning systems and processes to

culture

Identifyingdesired

behaviors

Change leadership vschange management

In 1963, Martin Luther King, Jr., did not say, “I have a very good plan.”

He shouted, “I have a dream!”

You must provide passion and a strong sense of purpose of the change.

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For more information, please connect with:

Christine Smith, Principal, Baker Tillychristine.smith@bakertilly.com608 240 2391

Contact information

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608 240 2391

Adam Payne, County Administrator, Sheboygan Countypayneanp@co.sheboygan.wi.us920 459 3103

Questions?