Cutting Budgets without Slashing and Burning

The great M*A*S*H character Dr. Hawkeye Pierce was once asked to name his favorite book. He said it was his dictionary because it had all the other books inside of it. That is exactly the situation with Human Resources. No manager or professional in any field — certainly not public administration — can be successful without also being an HR manager.

As I look back at 35 years of public service with many more to come, the greatest moments of joy have come by having some role in developing the next generation of public administrators, in creating internship programs, and helping to substitute innovation for inertia in creating version 2.0 of Civil Service Rules, benefit innovations, and much more. The saddest and most difficult times have come on the rare occasions when layoff letters had to be written.

For at least the next decade, Florida’s local governments will be under the same kind of attacks that California agencies suffered in the wake of the passage of Proposition 13 three decades ago. Economic pressures, horror stories of government waste, the perception of excessive compensation to public employees, and the seeming lack of long-term vision have come together in a perfect storm of tax revolt. The easiest target is local government. The principal perpetrators are found in state legislatures. These are the bodies that inflict unfunded and often caseload-driven mandates on local governments. They are quick to attack the property tax which is the local government’s lifeblood of general revenues.

Nonetheless, it is the lot of local government administrators, including elected officials, to look to the future with optimism, and to live in a world of balanced budgets — even if the population at large and the federal government, in particular, seem fascinated with the short-term massive expenditures, credit card borrowing and subprime mortgages.

How do you go about balancing budgets without engaging in wanton mass destruction? The answer is not at all easy. I am pleased to share a few insights derived from service as a city and county HR director in California, and, for more than 20 years in Florida, as well as serving as a county chief administrative officer in the wake of Proposition 13.

These insights also come from many years of consulting with other government agencies and service as an intelligence officer. Two fundamental points about how to deal with any liabilities at work and at home are essential. The two philosophies are simple but profound:

Take action now to put off the day when something bad happens.

Don’t walk by something wrong.

Managers commit malpractice when they don’t look at strategic issues and when they don’t view a situation such as chronic revenue shortfalls with a “view from 40,000 feet.”

To those of my colleagues who have a tactical focus on getting past the next commission or board meeting, the options to deal with acute revenue problems are very, very limited. They are limited to what can be done in a period of three months to six months. That usually means organizational and service reductions, reorganizing, freezing and eliminating vacancies, writing layoff letters and postponing capital and fixed-asset purchases, as well as perhaps closing facilities.

It also generally means slashing what little training and development budgets are present in organizations in the first place. To balance budgets coming up in a matter of weeks or months, such as July 1, the tactical administrator has few options other than budgetary extreme cage-fighting.

The trauma can be minimized and indeed met with optimism and innovation by acting now so that years from now things will be different and much better than they would have otherwise been. All of these approaches require the skills of a strong communicator, an innovator, and someone who deliberately sets out to overcome an inherent fact of life in many bureaucracies—inertia. The possible strategic approaches center on several fronts:

•Knowing Where You Now Stand

You can’t get to a new and better place without knowing where you are now and how you got there. This is a basic map reading, and way-finding strategy. Do you know how many vehicles are being taken home every night? Do you know how many credit cards bear the agency’s name, where they all are, and who is authorized to use them?

Do you know what the provisions of the pension programs and the health insurance programs are in the organization? Have you surveyed the fixed assets, such as computers, to understand how many there are, where they are, and their relative conditions? What is the history of employee relations in the organization? How much unscheduled single-day sick leave occurrence is taking place? Are they connected often to holidays or weekends? Do supervisors really pay any attention at all to performance evaluations and take active steps to interrupt sexual harassment, race discrimination or bullying? Are there even up-to-date policies in these areas?

After taking your own pulse, just as doctors do when you first visit their office with baseline tests and medical histories, it’s time to look at specific opportunities for cost reduction.

•Review Benefit Management Cost Controls

This includes pension reform to limit the spiraling cost of pensions — especially in the public safety area. Seek out innovations such as establishing a two-tier system so that the benefits of current employees are not affected — or perhaps enhanced — but the future employee pension benefits are locked in at a lower and much more cost-effective point. Explore incentives for early exit from the organization as long as the resulting vacancies are not filled. Do the same with phased-in retirements, allowing some employees to move to part-time work prior to retiring. Create a long-term attrition planning goal for the gradual realignment of work and reduction of positions.

Health insurance reform requires help from extraordinary broker-consultants who serve as safari guides through the jungle of alternatives and options.

Perhaps consider merging separate categories of pay for time not worked such as sick leave, vacation, personal holidays and many other categories into a single paid time off category with controls, so that the cost of that one hour of vacation earned 20 years ago as a firefighter does not multiply many times over by the time a battalion chief retires later.

Reviewing organizational structures might reveal opportunities for long- term streamlining. Eight sworn ranks in the Fire Department below the rank of department head or fire-rescue chief might have piled up over time and are not really necessary. Each layer adds cost and escalates further the cost of the next hire rank. Are sworn law enforcement and fire-rescue employees really needed to do administrative work, such as budget preparation, HR, procurement, fleet maintenance and other functions? Perhaps these areas can be “civilianized” at a considerable savings. Perhaps separate street maintenance and park maintenance crews can be consolidated.

•Process Improvement

Start inside the HR system by taking a look at whether the organization has a model that is essentially a 19th century civil service model, which is neither flexible nor effective. Often such models torture the applicants, and make the directors in the agency as well as the current employees unhappy and frustrated. The same may be true of the procurement system, of how vehicles are maintained, and computer systems managed, and payroll changes made, and much more.

Process improvement can best begin by engaging an outside facilitator to help lead the creation of a self-examination of these processes. That should result in a strategic plan for improvement and a specific “How many— By when?” business plan for change.

Does the organization hold employees accountable to receive the training associated with liability reduction? Are there up-to-date policies banning sexual harassment or workplace violence for example? Is there proof in each person’s personnel file that they have attended the trainings? If not, a liability set of double-doors has just opened wide to a plaintiff’s attorney.

Rather than whacking the training budget, this is the time to enhance accountability training, especially for supervisors and managers. Is there careful stewardship of the Worker’s Compensation programs to ensure that the right benefits are paid to employees who are injured or become ill because of the job, but that those who are using or stretching the system are crashing into organizational walls of protection? Internally, is the organization getting the most bang for its risk insurance buck? Comparisons with other organizations and dynamic insurance marketing of the organization can be very valuable.

•Review and Improve Employee Selection Screening Methods

Some specific tips include reviewing the driving history of all current employees who may operate a vehicle regularly, such as every six months, just to be sure that people driving large vehicles with the government agency logos on them have not had their licenses suspended or revoked. Require that every employee immediately inform the organization if they are convicted, plead guilty, or plead no contest to any felony or misdemeanor, including DUI. Before hiring law enforcement or fire personnel, it is a good idea to have a forensic psychological evaluation included in the post-offer, pre-employment consideration. Setting in place protocols in advance for drug testing and threat assessments when behavior is particularly bad represent excellent strategies to prevent future costs.

These and other proactive methods are especially important when hiring persons whose work includes particularly high consequences of error for the organization. These include management personnel, safety personnel, childcare personnel, and others who may be involved in working with children and frail or infirm senior citizens.

•Major Interagency Initiatives

Often the most difficult for reasons of inertia, combined perhaps with ego, are major interagency initiatives. How many separate agencies need to exist in the same region performing the same functions? How many communication dispatch centers does it take? Does every city and county really need a separate HR department? How many fire departments must there be? What about an interagency training consortium since many of the training initiatives described in this article are common needs in multiple agencies. What about producing cooperative arrangements so that jurisdictions share recreation facilities?

Some of this might be perceived as giving up some operation, or particular location such as a fire station; however, stepping away from the tactical, and looking at a multi-jurisdictional approach with joint powers of authorities or cooperative agreements, may save the taxpayers considerable money, and even enhance service. These are brave and bold steps that will, no doubt, produce opposition from vested interests and from champions of inertia.

If the city or county manager, the executive staff members, and very importantly, the elected officials joined together in looking long-range, in cooperating and communicating with employees and citizens openly, honestly and with no surprises, it is possible to put programs and concepts in place which put off the day when a layoff letter ever has to be written. It is possible to install efficiencies and mitigate costs. HR is at the center of this process of optimism and innovation. Tactical HR, focusing on paperwork management, is not going to get the agency where it needs to be. However, when HR is a strong partner in strategic decision-making sitting next to the county manager or the mayor, serious opportunities for positive change can be seized.

Phil Rosenberg
The HR Doctor • http://www.hrdr.net/