The City of Charlotte, North Carolina.

Editor's Note: In an effort to provide more articles of a practical nature to our readers, Public Personnel Management recently interviewed this recipient of the 1994 IPMA Agency Award for Excellence. The complete answers to our questions regarding the programs and projects that earned the City

1. In 1992, the City eliminated 272 employees with no layoffs by implementing a hiring freeze and establishing a "positions bank."

a) Describe employee reactions to the changes and how the City responded.

The employee reaction to the changes were varied. Some employees expressed anxieties about positions being eliminated and even having a hiring freeze. Conversely, many employees reacted positively because there were more opportunities for advancement as we looked internally to fill as many positions as possible. With the City Manager's strong posture of no layoffs, employees anxieties were decreased. Human Resources staff spent additional time with employees who had concerns to answer their questions and we worked hard to find positions for employees being displaced as quickly as possible, thereby lessening the employees' concerns.

b) Do you foresee any further City downsizing or rightsizing ventures in the next five years?

Yes. We currently are involved with an initiative called "Restructuring Government". As part of this process we have identified over 100 vacant positions to be eliminated during the next fiscal year. Also, we are significantly involved in a number of competition/privatization efforts and anticipate additional positions will be eliminated through this process.

2. You use gainsharing, the sharing of an organization's cost savings with the employees who produce budget surpluses. You mention that "a gainsharing approach to rewarding employees is unusual in the public sector." a) How have you adapted gainsharing to the public sector?

We have not specifically adapted our program for the public sector. We adopted a modified gainsharing approach called business plan gainsharing. Under business plan gainsharing cost savings drive the amount of the incentive pool (a City-wide savings goal must be met for any payout to occur), but employees must also meet specific business unit targets in their departments to fully share in the incentive payout. For this year, these targets are limited in number (typically 2-3), specific, quantifiable and tied to the department's business plans and core values. Typical targets might include customer satisfaction indices, safety goals and productivity (cost per service) measures. This approach to gainsharing sends a message to employees that, while cost savings and efficiency is a primary goal, there are other issues that are important to organizational success. An important point is that unless these are savings, there is no payout. Also, only a part of the savings is paid to employees. A significant part of the savings is "paid to the taxpayers" (retained in the General Fund).

One gainsharing approach we have used is dividing the incentive pool equally among all employees, with each employee receiving half of this share for their role in meeting the savings goal. The remainder of their share is paid out based on achievement of their business unit targets, with each employee in the business unit receiving an equal dollar payout based on this achievement. We believe that equal dollar payouts send a powerful message that we are all in this together, from the City Manager to our lowest paid employee; we are a team, and we must all work together to succeed.

b) What do you think the future of gainsharing is for the public sector?

In its traditional form, gainsharing is a highly viable approach to rewarding efficiency and cost savings, whether in the private or public sector. It appears that the reason it is not more widely used in the public sector is an unwillingness on the part of many governing bodies to commit to such a program, whether through mistrust or concern for political ramifications. In Charlotte, our City Council unanimously adopted the plan because they had the foresight to see the need to motivate and reward employees for cost savings, and return a portion of the savings to the taxpayer. As more governing bodies see the need to do more with less, we may see more use of gainsharing in the public sector.

3. To control rising health care costs and focus on preventive care, you are implementing a fully managed care program. This represents a major change for the City's employees and retirees. a) How have you facilitated the adjustment?

The plan has been extremely successful in terms of cost control, and a primary reason for this is acceptance of the plan by employees and retirees. We believe this acceptance is largely a result of employees and retirees realizing the plan will help control costs while offering a reasonable level of health care. Its success is also due to employee involvement in both the plan design phase and the implementation phase. An employee focus group was actively involved in reviewing specifications for plan design (resulting in selection of the Point of Service model) and reviewing bids which were submitted by prospective providers. These issues were studied from the standpoint of how well employees would react to the decisions. Members of the employee focus group also joined with Human Resources staff in making site visits to potential providers, with particular emphasis being placed on how employees would feel about working with those providers. The input of the focus group had substantial impact in determining the managed care provider with which to contract.

There was also substantial involvement of employees in the plan implementation phase. The Human Resources Department and the managed care provider designed an educational session which all employees were expected to attend. Before the format and content of the session were finalized, it was thoroughly reviewed by another group of employees. The session focused on the purposes of managed care, steps to follow in selection of a primary care physician, and the schedule of benefits in our plan.

The adjustment to managed care has not been facilitated without some pain. Employees and retirees were not used to the more restrictive nature of managed care. We have attempted to work through problems on a case by case basis and have tried to be flexible in making some decisions about how claims will be processed.

4. With your rightsizing, total quality management (TQM) and broadbanding changes, employees must adjust to new work units, a new goal-oriented, continuous improvement approach and new responsibilities. Beyond your change/stress management classes, customer service orientations and Workteam Basics training, please describe any re-training or cross-training efforts.

As the new change messages were being introduced and employees were adjusting to a new culture, most of the training efforts were global in approach and resulted in Human Resources staff and members of the City-wide training team scheduling all levels of City employees for "one size fits all" classes. This served to ensure that all employees were exposed to the basics of what and why things had changed, and how they would likely be affected. In the two years since introducing these new concepts, both Human Resources and the Training Team are now using a more selective approach by offering related training on an "as needed basis". City-wide classes are offered through a catalogue approach where employees from anywhere in the organization are able to register for classes that they and/or their supervisor believe will be helpful to them. Classes include: "Making Management-By-Results Work For You", "First Things First", "Career Anchors, Discovering Your Real Career Values", and "What Am I Supposed To Do Now?" The training team has also developed specialized programs to meet requests from various departments/work units, including conducting an assessment tool to help a department determine how ready they were for teams and a program to help groups focus on customer service with reduced staff. The training team staff has now moved to the point of beginning the development of a comprehensive, strategic training plan.

In addition, Human Resources has reorganized and created a Consulting Unit responsible for assisting our key businesses with a wide-range of Human Resource issues. One important function has been to hold small-group training sessions concerning broadbanding and the new performance management system (MBR). We also continually schedule broadbanding discussions with various work units and management teams, help key businesses develop departmental pay policies, resolve pay issues and answer questions.

5. You have undergone several changes in HR automation, both in-house and through consultants. A Position Control System tracks full-time and part-time budgeted positions; an Automated Personnel Payroll System handles pay changes and other personal transactions entered online at the department level and a new compensation management software package incorporates market data and merit budgeting. a) How have you handled security and access issues?

Our in-house position control system, automated personnel payroll systems (APPS) and the compensation management software package have each been put on the LAN and made available to all key businesses. The security of the systems is such that each key business only has access to the data that pertains to their employees/positions. Within each key business, the specific individuals that need access to the system were identified and passwords were assigned. The positions selected for access varied by key businesses and also by system. Typically departmental payroll clerks and administrative officers were assigned passwords for access to the position control and APPS systems. The compensation management software is much more restricted and typically limited to top level departmental management. Specific individuals in Human Resources have access to City-wide data in all three systems.

b) What advice can you give other agencies as they develop their own personnel information systems and work with consultants?

It made sense to us that if key businesses were required to manage their human resources and control compensation costs, they needed easy access to a wide variety of personnel data so that they could make sound business decisions. As personnel functions are decentralized, our advise would be to also analyze the processes, guidelines and tools from the perspective of departmental management. Additionally, the value of these new tools and processes must be "sold" to management. It is important that the shift in administrative/management responsibility be seen by departmental managers as supporting their goals and increasing their opportunities for success. This requires good up-front communication concerning the advantages that the changes will bring to departments; frequent training efforts will ensure that departmental personnel are ready and able to assume the added management responsibilities that go with decentralization.

6. Many public agencies are considering broadbanding -compressing pay bands for more flexibility. One of the major concerns in this area is escalating salary costs. a) What problems, if any, have you encountered?

First, we believe that broadbanding is more than compressing pay bands for more flexibility. It is a major cultural change in management philosophy and accountability; it reflects buy-in from our employees that success will come from good performance, attaining new skills which add value to the organization and assuming additional/more complex job duties.

To control salary costs, we provide each department with a merit budget (4% in FY95). The department head is then held accountable by the City Manager to hold to this budget. We also provide a limited amount of funds to each department for career development. Career development funds are used for promotions, reclassification (department heads make these decisions and, if desired, Human Resources will provide assistance), pay for certifications/licenses, pay for additional skills or added value, and equity or market adjustments.

One of the difficulties we have identified has been breaking the paradigm which some managers and many employees still have that good work needs to be recognized by promotion or reclassification. Under broadbanding, we encourage lateral growth. Employees can be rewarded financially without being promoted or reclassified. Rewards may be lump sums instead of base pay increases.

Another difficulty was how to provide managers with the tools to make market sensitive pay decisions and to stay within their merit budgets.

b) How have you resolved them?

We are continuing to work with employees and managers on the culture change which broadbanding requires to be effective. To facilitate this process, we are using the internal HR consulting group mentioned earlier.

To provide managers with immediate information to make pay decisions, we purchased William M. Mercer, Inc.'s CompMaster compensation management software. We have made a number of modifications to this program to adapt it to our needs under broadbanding. Each department has LAN access to this system with up-to-date information on all employees in the department, City-wide information on all jobs, and a range of market data for most City jobs. This software package also contains a powerful budget analysis tool which allows managers to design and cost merit matrices based on each employee's market index/pay position in relation to market and last performance rating.

7. Within the last two years, your Human Resources Department has been reduced by approximately 25 percent, to a total of 18 full- and part-time staff. How have you successfully completed numerous HR advances on a timely basis with a limited staff?

We have made major changes in the City HR decision making process and in the roles of the staff of the Human Resources Department. City departments are now delegated the authority to make certain detailed decisions which were formerly made by the HR staff. This has allowed the HR staff to concentrate more on policy issues and to serve in much more of a "consultant" role, rather than in the role of "administrator". Depending on the specific job, each HR staff member provides some form of a consulting service.

In addition and as previously mentioned as part of the departmental reorganization, the creation of the consulting services unit resulted in four professional employees being responsible for assisting key businesses with a wide range of HR issues. This "one stop shopping" approach has enabled each consultant to be involved with the full scope of departmental operations of their assigned key businesses and is therefore able to provide a continuum of services in the areas of recruitment, compensation, performance management and employee relations. This has reduced the downtime resulting from departments calling several HR specialists to identify the best person to help with a request and from time spent in HR when several divisions are working on a portion of the same request or problem.

We are also able to produce results with limited staff because we have put our available technology to effective use by continuing to master various computer software programs, communicating with less paper through E-mail and phone-mail, and being more flexible/fluid between departmental specialty areas. A significant difference has resulted from having fewer employees to provide clerical support and working within a flatter and more flexible departmental organization.