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AGENDA #5b MEMORANDUM TO: Mayor and Town Council FROM: W. Calvin Horton, Town Manager
SUBJECT: Response to Proposal to Receive Employee Suggestions for Budget Reductions DATE: June 12, 2000 BACKGROUND At the April 24, 2000 meeting, a Council member requested that the Manager solicit suggestions from Town employees on ways to reduce the budget (see Attachment 1). The Council member’s proposal included a provision to give cash incentives to employees, such as a bonus or percentage of the savings, for suggestions that were adopted and succeeded in reducing the budget. The Council has authorized two extensive efforts to receive employee suggestions since 1994. Pursuant to the Council’s direction in August 1994, the Manager requested employee ideas for changes in Town services. The Manager received 974 suggestions through a series of more than 30 meetings and numerous written reports. The suggestions included: reducing paperwork; establishing fines for excessive fire alarms; privatizing Town garbage collection; and providing more money for salaries and raises (see Attachment 6). In 1997, the Manager repeated the process by requesting suggestions from Town employees on how to improve Town services. After eliminating duplicates and items that were not clear enough to evaluate, the Manager reported on the remaining 450 suggestions in December 1998. Of the 450 suggestions, 111 items remained for completion or reconsideration as of June 1999. These suggestions also covered many areas, including: posting job openings on the Town web site; providing improved brush collection; offering employees a Town wellness program; and improving supervisory personnel training (see Attachment 5). DISCUSSION
To further understand how such a monetary incentive program would work, we have studied the North Carolina State Employee Incentive Bonus Program (SEIBP) as an example. State System The State rewards eligible employees and employee teams with monetary and non-monetary prizes for suggestions that result in “improved practices.” An employee or team is responsible for suggesting a change, specifying the actions required for implementation, determining the cost of implementation, and estimating the savings. Agency coordinators process the suggestion, provide information to employees, and handle disputes. A subject matter expert is assigned by the State to evaluate the suggestion for feasibility. If the subject matter expert recommends the change, the agency has the final decision regarding implementation. An explanation of the State Employee Incentive Program is listed in Attachments 2-4. Monetary awards are determined as a percentage of the actual fiscal year savings, minus implementation costs for the change. For suggestions that improve State practices, but do not result in financial savings, paid leave is awarded. The State has a review committee that determines awards. State Results In October of last year, the first award recipients under the newly implemented incentive program were recognized. In all, 14 projects were selected, totaling $1.3 million in savings to the State. The following are three of the selected projects: · Employees in the Ferry Division suggested and performed in-house steel fabrication work that totaled $641,596 in savings to the State Department of Transportation. The team, consisting of 89 employees, split a $100,000 award, the maximum for a team. · A team from the State Department of Corrections submitted a method for overseeing accurate billing for inmate medical treatment. The Department of Corrections saved $466,601, and each of the four team-members received the maximum award of $20,000. · An employee from UNC Hospitals suggested moving from wax paper cups to plastic cups and saved the Hospitals $12,901. That employee received a $2,580 award. Of all departments benefiting from the State program, the Department of Transportation achieved the largest savings from employee suggestions. Suggestions to the Department totaled $708,333 in savings, which amounted to a .0008% savings in the Department’s budget. Local Analysis
Town employees have offered many suggestions during the past two brainstorming efforts and regularly offer work improvement suggestions through a variety of other means throughout the year. We believe that the key advantage to a monetary system is that some employees, in search of a financial reward, would make suggestions when they would not ordinarily have done so. We also believe that the key disadvantage to a monetary system is that it could create a culture where employees withhold ideas unless they receive a direct financial reward. Previous brainstorming programs to receive employee suggestions occurred without promises of financial benefit. Employees already regularly make suggestions for work improvements without specific payment for the ideas. We believe that paying employees for their suggestions would discourage idea-sharing among Town staff, rather than encourage the free flow of suggestions for improvement. However, if the Council wishes us to explore creation of a monetary incentive system for employee suggestions, we could do so during the first half of the coming fiscal year and report to the Council by January.
CONCLUSION Brainstorming projects continue to produce useful ideas that benefit Town services and activities. We intend to continue the use of this organization-wide process from time to time in the future. We also will continue to solicit, receive, evaluate, and implement employee suggestions identified throughout the year in departmental committees, shift meetings, the Council’s budget forums, operation critiques, and other formal and informal means. We believe that introducing a more formal, competitive, financial-reward system is unnecessary and could promote an environment in which employees would withhold their suggestions until they receive a monetary reward.
ATTACHMENTS
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