February 2014, Vol. 26, No.2

Extra 1

Mesh of the titans

Integrating powerhouse utilities without sacrificing greatnesss

Tony Parrott and Cathy Bernardino Bailey

The economic downturn in the Greater Cincinnati area had both the city council and the board of county commissioners working to find ways to save money without sacrificing customer services. While many department integrations had been proposed during the 2010 and 2011 budget cycles, not a single one moved forward — even though everyone knew that major change is the only way to bring sustainable savings. Integration suggestions always were met with a “we can’t do that” mentality. The city council needed a success story, and they chose the Metropolitan Sewer District of Greater Cincinnati and Greater Cincinnati Water Works as their champions. If these two powerhouses could merge, then their success could become the new standard for governmental operations in Cincinnati.

The city council approved joint utility management of the Greater Cincinnati Water Works (GCWW), Metropolitan Sewer District of Greater Cincinnati (MSD), and Stormwater Management Utility (SMU) in October 2011. It was projected that a joint utility management model would lead to slower rate increases, improvement in service level, cost savings and efficiencies, and more opportunity for Cincinnati to continue to grow as a national leader in water resources management.

 

Compelling reasons to change

Many water-related trends were driving utilities to look at doing business differently. They included  

  • uncertain economic trends and financial instability,
  • aging infrastructure and increasing capital investment requirements,
  • shifting water demands,
  • changing workforce and a dynamic talent life cycle,
  • increasing/expanding water regulations, and
  • efficiency drivers and resource optimization.

 

With so many trends affecting public utilities, it is imperative to determine new ways to do business. Sharing services in a very formal and integrated way was determined to be the best “new way” of doing business in Greater Cincinnati. It is expected that there will be improved or new operational processes, increased collaboration, and new thinking surrounding ways to improve service delivery as a joint entity.

The three utilities took the time and energy to educate all employees on what a joint utility means and how it will affect day-to-day operations. Numerous informational meetings were held for employees to learn what this new opportunity provides for utilities and employees. These meetings enabled senior management to explain that adopting a shared services model was a response to economic challenges to all three utilities that are driving up rates, was about sustaining public operations of utility enterprise funds, and would help manage water resources in a complete water cycle approach. Questions were addressed with a common intranet site developed to communicate regularly with employees about the plan and changes.

The three utilities then followed an initial implementation road map that addressed immediate tasks and changes needed for success. Key steps identified in the road map included  

  • creating and implementing a joint utility communications plan,
  • making organizational structure changes,
  • conducting functional area assessments and “planning for change” workshops for each area,
  • physically relocating some sections/employees,
  • classifying job studies, and
  • creating and establishing joint utility policies.

     

The 100-day plan, organizational structure changes, and physical moves

To jump start initiatives and realize cost savings and efficiencies, GCWW, MSD, and SMU created a 100-day plan to assess certain functional areas to determine the degree of integration possible, to start joint utility efforts, and to build some early momentum for future integrations. Task teams comprised of more than 260 employees evaluated core functional areas to identify opportunities for cost savings and enhancements in the delivery of products and services. Recommendations from the 62 projects were reviewed and prioritized for implementation.

To mobilize and prepare for the suggested changes, several organizational changes were necessary. These changes provided the structure needed to begin realizing the more detailed, long-term changes planned for shared services.

A phased approach was best for implementing the integrated sections. The first phase involved changes to the communications, human resources, engineering, laboratory, and information technology functional areas; while the second phase focused on finance, accounting, and regulatory and safety compliance sections.

In September 2013, more than 300 of 1200 employees moved physically to integrate workgroups in key areas. Workgroups were moved so employees could begin to learn more about their new workmates and begin to prepare for improvements to work processes.

 

First and next steps

Once the rubber hit the road with the physical moves, the real nitty-gritty work began. The naysayers inside and outside could no longer deny the changes. Since September, the joint structure has accomplished the following:  

  • clearly defined roles and responsibilities for the integrated functional areas and began work on increasing the accountability of employees;
  • created a change management plan to implement the necessary changes;
  • implemented consistent policies and practices established by the integrated human resources section;
  • developed a new invoice review and approval process for prompt payment of invoices;
  • developed a strategic approach to filling positions across the three utilities;
  • performed cultural assessments and workshops to help the shared services areas collaborate and work together successfully by better understanding who they are, how the integrated function needs to operate, and the best plan to get there; and
  • implemented joint utility cost allocation policies.

 

Communication! Communication! Communication!

The most critical lessons from this process to date involve communications, employee engagement, and cultural assessments. Regardless of the vision and planning for integrating shared services, the success lies with the employees and strong communication.

In the first year of the joint utility efforts, communication occurred throughout the process via town hall meetings at key milestones, regularly via the joint utility newsletter, and often by task team updates via e-mail and postings to the joint utility intranet site.

But it can’t stop there. Communication needs to occur more often and regularly until the joint utility concept is in the DNA of the processes and employees. That will take several years.

Effective communication requires intensive effort from senior leaders and staff at a time when they may be faced with other pressing day-to-day challenges. Often the skill of effective communication requires training because many managers have never received guidance on good interpersonal communication practices. They may be uncomfortable about communicating tough messages to their employees and may be very good at the hard facts and figures but not so good with the soft people issues.

The joint utility will embark on a communication plan that includes regular fact sheets, frequently asked questions, road shows to staff meetings and other meetings, and manager talking points. In a time of uncertainty, these tools provide some information that can reassure, educate, and clarify the details of change for the employees.


 

Involvement + empowerment = ownership

During this type of change, employees are involved — as they were in the 100-day task teams. Their involvement improved operations and streamlined processes. Moving forward, employees need to remain involved in new task teams to complete assessments as well as to implement approved recommendations.

Along with being involved, employees need to be empowered. Empowerment will allow employees to  

  • have input about the changes occurring around them,
  • share ideas and suggestions openly about their work and the organization,
  • share their great ideas to improve productivity and reduce costs,
  • create a feeling of true customer service that will ultimately yield customer loyalty, and
  • challenge the status quo, which is critical when making changes.


     

Culture eats strategy for lunch

The biggest obstacle to integration is the clash of the titans. The “we versus they” mentality must be broken down as much as possible. Because of the uncertainties with change, employees often lose enthusiasm for their work and the organization; morale and organizational pride decrease.

Both MSD and GCWW are excellent utilities in their own right. Neither wanted that status to be compromised. Management of the human side of integrating shared services is the real key to maximizing success.

GCWW, MSD, and SMU are working closely with an expert to conduct functional area cultural assessments and planning sessions. Workshops are conducted to engage leaders in planning for the future of an integrated functional area. The workshops enable the employees to engage and better understand where they stand, how the functional area needs to operate, and the best plan to get there.

The leaders in the functional areas produce feedback and understanding of the key issues, clear expectations of what’s expected, and shared understanding of the new organizational structure, including strengths, weaknesses, opportunities, and threats.

They also assess targets for the future with things such as agreement on a mission, vision, and team operating principles; measurable improvements in trust and how the team will make decisions; and a list of issues to resolve to ensure success. The team leaders also map the plan to get there with agreement on roles and areas of responsibility, what success looks like, and an understanding of the high-level plan for the leadership pipeline.

The outcomes from this workshop then cascade throughout the functional area as messages and operating principles. Additional workshops then share this information with other employees to enable input and buy-in to the changes.

Integrating work areas has allowed for a reduction in positions. To date, joint utility implementation efforts have identified $5 million in cost savings in the 2014 budget due to retirements and not filling vacant but funded positions. This is equivalent to a cumulative savings of $50 million over 10 years.

 Additional positions will continue to be reviewed and strategically filled when needed. This initial calculation just focused on savings identified from not filling certain positions; as improvements to processes are implemented, additional cost savings will be identified. The three utilities are on track and within reach of their shared services goal of savings between $68 million and $105 million over 10 years. 

Tony Parrott is executive director and Cathy Bernardino Bailey is transition manager for the City of Cincinnati Departments of Water and Sewers.