Seidewitz Sensible Government Plan

By Scott V. Seidewitz

The Seidewitz Sensible Government Plan will improve the quality of government services and save $11 million in administrative expenses from the city budget. Supported by business, labor, and anti-spending groups, the plan uses private sector restructuring practices to streamline the city bureaucracy through management-labor cooperation.

· Make the Assistant City Manager responsible for streamlining the city's bureaucracy rather than helping people get around it. · Cut middle management staffing by 10% and senior management staffing by 4% by the year 2002. · Establish staff reduction and cost savings goals for each city department. · Establish a system of labor-management committees to deliver savings through work process redesign. · Develop revised mission statements for every city department and establish measurable performance goals for every city program. · Replace management by bureaucratic hierarchy with team-based management.

Why The City Government Must Become More Efficient

The residents of the City of Cincinnati are overtaxed, need a growing level of services, and have to deal with an increasingly inefficient and bureaucratic city government. Something has to change.

Between the city earnings tax and city property tax, residents of the City of Cincinnati are among the most highly taxed in the region. As a result, one of the hottest topics of political debate is a property tax rollback. Unfortunately, politicians fail to point out that there are not resources to pay for this rollback. For 1999, the city has budgeted for general fund expenses to exceed revenues by $14 million . The only thing keeping the city in the black is the reserve of past surpluses. By 2004, the city expects continued operating deficits to completely deplete these reserves .

At the same time, the need for government services continues to increase. The city has just committed to provide $5 million per year for 20 years to the Cincinnati Public Schools. Beginning in 2000, the city will need to spend over $1 million per year to cover health care for families who lost Medicaid benefits due to Welfare reform . In addition, infrastructure projects such as Fort Washington Way and the riverfront continue to place growing demands on the city's budget.

Compounding the situation, city spending and the city bureaucracy have been growing out of control. For most of the 1990's, city operating expenses have grown at almost twice the rate of inflation . Concurrently, City Hall has added layers of management - in 1999 alone, the city increased its senior management staff by 8% . This has increased the size of the bureaucracy, slowed decision-making, and made government less responsive to its citizens. The situation has gotten so bad that City Council recently created a new Assistant City Manager position to help businesses navigate through the city's bureaucracy.

To provide tax relief, improve government services, and stay financially sound, the city government needs to rethink the way it does business. Fortunately, the private sector provides a model.

The Solution

In the past decade, the U.S. private sector has reinvented itself. Businesses have dramatically cut costs by reducing the size of middle management, cutting layers of bureaucracy and pushing decision-making down to employees who are closest to the customer. As a result, corporate earnings have surged, productivity has increased, and customer service has improved. America is again the undisputed economic leader of the world. Right here in Cincinnati, Procter & Gamble improved earnings by over $1 billion by streamlining and flattening its organization.

The city government can significantly cut costs, increase productivity, and improve government services by following the lead of the private sector and streamlining its bureaucracy. To accomplish this requires three strategies, modeled after successes in the private sector: · Cut layers of bureaucracy; · Push decision-making down; and · Broaden management-labor cooperation.

The Plan

To implement these three strategies by the year 2002 will require the following initiatives:

1. Make the Assistant City Manager responsible for streamlining the city's bureaucracy, not helping people get around it. We should not accept a city bureaucracy that is so unwieldy that people need help getting around it. Instead, the city should give the new Assistant City Manager full authority to restructure the way the city does business. To help with this responsibility, the Office of Internal Audit should report directly to the Assistant City Manager.

2. Cut the ranks of middle management by 10% and senior management by 4%. To cut out layers of the bureaucracy and force government departments to rethink the way they do business, the city should reduce the ranks of middle management by 10%, or 120 full time equivalent positions . This reduction can be achieved by the year 2002 through attrition and early retirement. Once completed, this reduction will save the city approximately $6.6 million per year . This policy will have the added benefit of providing a pool of qualified managers for the private sector, which is experiencing a severe skilled labor shortage.

The city can further reduce its bureaucracy by eliminated some of the 17 new senior management positions it added in 1999. While some of these positions were warranted, an 8% increase in senior management was clearly excessive. This is especially true in a year when non-management staffing was cut by 2% . Half of these new senior management positions should be eliminated by 2002. This will save the city an additional $700,000 per year .

3. Establish staff reduction and cost savings goals for each city department. Some city departments, such as the Water Works , have already instituted effective cost savings. Other departments have not. The Assistant City Manager, working with the Office of Internal Audit, should establish departmental staff and cost reduction goals that reflect the current level of efficiency of each department. Taken together, departmental goals should deliver the overall management staff reduction goals outlined above.

In addition, departmental goals should deliver a 20% reduction in overtime and a ½% reduction in non-personnel operating expenses. This will save the city an additional $3.8 million per year .

4. Establish a system of labor-management committees to deliver savings goals through work process redesign. To deliver the departmental staff reduction and cost saving goals, the city should expand its existing system of labor-management committees (LMCs) to all departments. The LMCs will have responsibility for redesigning organizations and work processes. By ensuring input from both management and employees, LMCs will produce the greatest efficiency and productivity gains.

5. Develop revised mission statements for every city department and establish measurable performance goals for every city program. For redesigned organizations to deliver quality services to the citizens of Cincinnati, employees must have a clear understanding of what is expected of them. Thus, departmental management, working in cooperation with the LMCs, should review and revise (or fundamentally rethink) all departmental missions. They should also establish measurable annual performance goals to which every city department and program will be held accountable.

6. Replace management by bureaucratic hierarchy with team-based management. To empower employees to deliver performance goals and quality customer service, the city should replace traditional bureaucratic hierarchies with team-based management. This has been done effectively in the Cincinnati Water Works, where teams of employees with decision-making authority and clear accountability have delivered impressive improvements in customer service. This should be expanded throughout the city.

The Results

$11.1 million in annual cost savings for the city government by 2002: · $7.3 million in management salary and benefits savings · $2.0 million in overtime expense savings · $1.8 million in non-salary expense savings

Significant improvements in the speed and quality of government services: · 10% reduction in the size of the bureaucracy · Greater management-labor cooperation · Clear goals and clear accountability for every city program

Evidence it Will Work

1. It's worked in the private sector. Over the past ten years, U.S. companies have reinvented themselves, cutting layers of middle management, pushing decision-making down, and encouraging management-labor cooperation. As a result, corporate earnings have surged and productivity and quality have increased.

While examples abound, the most relevant one is probably right here in Cincinnati. Procter & Gamble's "Strengthening Global Effectiveness" (SGE) restructuring produced over $1 billion in cost savings over five years by cutting middle layers of management and pushing decision-making down . Similarly, Saturn has achieved the highest quality and efficiency standards of any GM plants through extensive use of management-labor cooperation. Applying the same principles of team-based management and management-labor cooperation will produce similar results in the public sector.

2. It's worked in the public sector. During the 1990's, many local and state governments have tried to "reinvent" themselves to increase efficiency and improve service quality. The most common strategy, privatization, has met with spotty results. This is because high oversight and transaction costs frequently offset savings achieved through privatization.

However, governments that have followed the private sector model of downsizing their bureaucracies, pushing decision-making down, and promoting labor-management cooperation have achieved significantly greater success. While there are many examples, perhaps the best is next door in Indianapolis. Through employee-led work process redesign, the Indianapolis City Government's Fleet Services reduced operating expenditures by 29% over five years . This was a significantly greater saving than projected through a proposed privatization plan . The City of Cincinnati can achieve similar savings by making cuts in the bureaucracy a catalyst for employee-led processes redesign.