City of Houston: Workforce Analytics Provides Real-Time Intelligence to Improve Operations and Reduce Costs

CASE STUDY

City of Houston: Workforce Analytics Provides Real-Time

Intelligence to Improve Operations and Reduce Costs

Sponsored by: Kronos

Ruthbea Yesner Clarke

May 2014

SITUATION OVERVIEW: MANAGING YOUR CITY'S GREATEST ASSET

IN A TIME OF FLAT BUDGETS

Although the economies in the United States and the rest of the world are slowly rebounding, cities are still under intense pressure to reduce operating costs and improve productivity. Most state and local departments are resource constrained and thus actively seeking ways to meet the ever-increasing expectations of citizens for effective government services and programs. Cities are facing the following key challenges, which impact investment in workforce analytics solutions:

 Reducing cost of operations: Cities in the United States have largely flat operating budgets, and many are struggling to make up for previous years' budget shortfalls and curtailed services. As a result, cities are taking a closer look at their workforce expenditures, which are their largest controllable line-item expense. Lack of insight into operations in real time or near real time, duplicative/fragmented workforce applications, overtime mismanagement or abuse, pension padding, lack of monitoring for vacation and sick day accrual, and inconsistent employee

performance management can result in significant cost overruns and have significant ramifications on the ability of a manager to predict and manage staffing needs, control payroll costs, manage productivity and waste, and ensure compliance with the Fair Labor Standards Act (FLSA).  Improving service levels to meet citizen expectations: While cities are dealing with tighter

operational budgets, they must also address the growing expectations of citizens who are looking for new and improved services from their local government. Citizens, local businesses, and community groups require quick and highly responsive services from their local

government departments, including public safety; public works; 311 centers; and permitting, licensing, and inspections. In a world where services in the private sector can be accessed immediately on a 24 x 7 basis, it is becoming more important for cities to maintain employee productivity and responsiveness to satisfy citizens. Cities must be able to staff up or down according to the need to respond to events and emergencies as quickly as possible. The solution to these challenges is a focus on data-driven decision making, or "managing in the moment." As technologies like Big Data analytics, mobile devices and applications, and cloud computing mature, the opportunities for city managers to access real-time information anywhere and anytime are becoming a reality. For workforce management, this means that decisions about

approving overtime, increasing or decreasing staffing levels, approving sick time, and/or managing vacation accruals can be based on immediate information, taken in historical context and with visibility down to the department and employee levels. In today's technological environment, it is possible to

manage staffing schedules for optimal service delivery to citizens, control payroll costs to stay within budget, support effective management practices, and ensure FLSA compliance, without overtaxing lean IT departments.

The city of Houston demonstrates the benefits of taking a data-driven approach to managing one of its greatest assets — its employees.

THE CITY OF HOUSTON: A STRATEGIC FOCUS ON BIG DATA ANALYTICS

The city of Houston, Texas, has a population of 2.1 million people and is the fourth largest city in the United States. In 2013, Houston was the top job creator among U.S. cities following the economic downturn, according to the U.S. Bureau of Labor Statistics, and appeared on the Forbes list of Best Places for Business and Careers. The city has 23,000 employees and a strong mandate to provide its citizens and businesses with sustainable, high-quality services in a fiscally responsible manner.

However, while the city is doing remarkably well today, the recession of 2007–2009 hit Houston as hard as it did all U.S. cities. City leaders were forced to trim budgets and make many difficult decisions in terms of layoffs. In going through this decision-making process, city managers realized that they did not have the information about personnel costs, labor costs, and schedules that they needed to make key budget decisions.

Laying the Foundation for Workforce Analytics

Don Pagel, former deputy director, Mayor's Office, led the effort to solve critical issues related to workforce management, including the following:

 Controlling labor costs: In conjunction with reducing operational costs, the city needs to control labor costs by reducing overpayments, minimizing manual processes and increasing data collection accuracy, reducing overtime and overscheduling, and putting information in the hands of managers so they can effectively manage their employees. These labor costs also include pension obligations and controlling inflated pensions to retirees because of possible pension padding. Because pensions are based on the compensation of an employee's final year of service, there can be instances of employees trying to increase their pensions by working more overtime prior to retirement. While not illegal, pension padding can significantly increase the pension obligation of cities and is a concern for the city of Houston.

 Minimizing compliance risk: Pagel knew that the city had likely committed compliance

infringements: for example, part-time workers being scheduled for full-time work hours without benefits and even accruing overtime and vacation time that was not logged and was being given away. Pagel wanted to ensure that the city was in compliance with federal, state, and local labor laws and that managers were supported in their enforcement of policies.

 Improving workforce productivity: Beyond controlling costs, city employees are the front line in providing everyday services to citizens and businesses that enable Houston to be a city that continues to attract investment. Using workforce management solutions improves front- and back-office productivity by automating processes, reducing errors, and forecasting and scheduling staffing levels. Analytics further enables the city to monitor productivity in real time and address issues immediately, such as approving overtime in the case of a crisis.

Like many cities, Houston had made substantial investments in an ERP system for finance and human resources management. One of the challenges with this solution was that few managers had access to the workforce information because the cost of each software license was prohibitive. In addition, the city found that users needed a lot of training to understand how to use the system.

In 2010, as the city looked to extend the value of these investments, it implemented the Kronos Workforce Central solution. The city used a cloud-based platform to access the software for several reasons. First, the IT department had been significantly downsized during the recession and did not feel it could support another in-house solution. Second, the IT department was also undergoing its own system consolidations and did not want to add another ERP system, along with the accompanying maintenance and support it would require. And finally, a cloud model allowed the city to give Workforce Central visibility to all users who needed it, adding functionality to and integrating with its existing ERP system.

The Workforce Central solution is used for time and attendance, employee scheduling, and absence management solutions for all city employees across all city departments — including administration and regulatory affairs, airports, convention and entertainment facilities, finance, fire, health and human

services, and police, among others. It provides a great deal of transactional data and process automation, reducing paperwork and increasing productivity and compliance, and gives supervisors and their

managers much more visibility into the behavior of their employees. Overall, the Workforce Central solution has improved accuracy and reduced inefficiencies related to time and attendance, employee scheduling, and absence management and enabled the city to save an estimated $7.2 million annually.

In addition to this success, the city had experienced success in accounts receivables using a Big Data analytics strategy. In an effort to control costs and increase revenue, the city took a more detailed look into its account receivables and discovered that it had $1.5 billion in overdue collections. Because the accounts receivables functionality was siloed across the city in multiple systems, which limited visibility into the magnitude of its bad debt, the city moved toward a consolidated data warehouse solution with an analytics layer. Success in this project pushed the city to adopt a citywide Big Data strategy called Big Data in the City.

Pagel quickly saw that the solutions provided for the accounts receivables operations could also be used with a Big Data analytics initiative in workforce management. He began to consider using analytics for workforce agility and allowing all levels of workers to react quickly to changing conditions. He also started to think about workforce corrections that could happen in the moment and how the transactional data being collected in the Workforce Central suite could be combined with historical data and become a Big Data in the City initiative.

The Next Step: The Benefits of Kronos Workforce Central

Analytics Module

Houston had more than seven systems that were generating simple reports from a data warehouse. None of the data was live, and oftentimes the data was stale by the time it reached users. Pagel had a vision for operational excellence in which employees would log information via devices in the field and department leads would be able to "manage in the moment" using real-time data that would be accessible anywhere and anytime. Given his satisfaction with Workforce Central, the addition of the Kronos analytics module was a natural next step to implementing his vision.

Pagel worked for over a year to gather historical labor data prior to launching the Kronos analytics module to accurately measure the ROI and soft benefits of the implementation. Though it launched only in early 2014, Pagel said the city has already seen real benefits and expects to realize more in the future. The key benefits that the city of Houston is experiencing from the Kronos solution are:

 Comprehensive overtime and leave reporting: Houston has significant overtime expenditures; for example, the police department has a $40 million overtime budget, and the public works department has a $20 million overtime budget. Controlling these budgets is a huge benefit for the entire city in that the money saved can be used for other services for citizens. Pagel expects that the ability to constantly monitor how departments and individual employees are performing against expected overtime benchmarks will allow the city to realize an 8-10% reduction in overtime.

City officials also benefited from some very specific payroll capabilities that reduced the number of paper forms in the leave management process and automated leave requests and the scheduling function.

Another benefit of the system was a 26% increase in logged paid time off. This was not due to an increase in use of time off; rather, it was the result of previous time off that had not been logged in to the system. The city found that time-off requests submitted using paper forms were often not making it to the timekeepers for entry into the system. This resulted in

employees receiving comp time that was not reported properly against their vacation accruals. Though unintentional, this oversight was in violation of a state clause that prohibits gifting of public funds and put the city at risk of being noncompliant. In addition, it allowed employees to accrue large amounts of time off up to their cap. Given that the cap could be up to a year in paid time off, this put the city at risk of having to pay employees a large lump sum after they retired or left their jobs.

 Pension spiking detection: More accurate overtime budgets and the ability to drill down to the individual employee level enable the city to detect possible pension spiking. By monitoring changes in overtime for employees nearing retirement, the city has better information to determine if there is pension padding and managers can take early steps to address the problem. Reductions in overtime in these cases will potentially have a long-term effect on reducing pension obligations.

 Fraud and abuse detection and prevention: From pension padding to inaccurate leave and vacation logs to tardiness or unlogged break times to high levels of unexcused absences, improved accuracy in data collection and the ability to view the data in real time allow for early detection of fraudulent activity and the ability to act quickly to prevent future abuse.

 Citywide transparency and accountability: Two powerful aspects of the module are the ability to see timely, real-time data and the ability to drill down into data from a high level to detailed department- or employee-level views to identify the root causes of problems. For real-time data collection, the module has a number of functions that support the critical aspect of time card management. First, the solution allows employees to punch in outside of the city network, from home or on the road. Employees can access the system from any browser or use a mobile app on an iPad that has GPS tracking. This capability improves the accuracy and promptness of time card submissions. Second, the system allows for visibility into supervisors who may not be approving time cards in a timely manner. The function allows managers to see which supervisors are late with or missing time card approvals for employees. In addition, managers and supervisors can see which employees are late or not returning in a timely manner from breaks and address these issues to improve productivity.

The tool is also built so that each level of leadership can watch its direct reports, which helps ensure that employees at all levels are being supported and enables citywide transparency and accountability. This "managing in the moment" capability comes from the two different

dashboards that Kronos built for the city of Houston. First, the midlevel manager dashboard allows first-line supervisors to monitor their departments, while the executive dashboard gives C-level executives and the mayor the high-level view to look at all city departments and compare and contrast their performance in specific key measures. For example, a C-level executive can look across departments at an area like absenteeism, overtime spending, or worker timeliness. For departments that are over budget on overtime, the department manager can drill down into specific functions and even identify the employees who may be accruing the most overtime. The overtime could be justified by an event like a water main break or many workers coming down with the flu, or it could be a result of scheduling mismanagement or pension padding. The important point is that using the analytics software quickly makes issues visible to and

transparent for everyone involved. Using a tablet, an executive can highlight a chart detailing that a department is close to exceeding its overtime budget and, using image capture, send an email to the appropriate manager with a picture of the chart and ask for an explanation. This allows problems to be noticed, communicated, and resolved quickly.

Essential Guidance

The implementation of the Kronos analytics module in the city of Houston offers insight into some of the challenges and lessons learned that may help other cities as they consider similar solutions. According to Pagel, the city's rollout of the module was smooth, on time, and on budget, and many of the challenges that were encountered were related to more sensitive cultural and political aspects of managing a government workforce. Key points to guide your city include:

 Employ four key practices to find budget: A key concern for most champions of analytics solutions is how to get budget approval and convince city managers, mayors, and the city council of the value of workforce analytics. Pagel was smart in that he had budgeted for an additional analytics module in the project when he originally proposed the Workforce Central purchase. This is the first key practice; if you are looking at a workforce automation suite, include a labor analytics piece in your budget, even if it is not purchased immediately, so that you don't have to justify a new application. If you are trying to find the budget for a new project, the other three practices involve showing the proof of value using the ROI, cloud delivery, and a demo to help justify the business case for investment. As Pagel said, the ROI is "incredible." One reason for such a high ROI is cloud computing and being able to manage an

enterprisewide solution with significantly lower costs than hosting the application in-house. Also, real-time access to performance metrics will demonstrate how much can be saved in overtime, leave time abuse, clock rounding, and so forth when these issues are monitored and corrected quickly. A demonstration of the dashboard and drilldown capabilities is a powerful way to show leaders what is possible.

 Prepare to uncover skeletons in the closet: Once an analytics application is up and running, managers should prepare for new and possibly unfavorable information to be uncovered. They might have new visibility into supervisor practices that violate regulations, such as using part-time employees like full-part-time employees or incenting workers by offering comp part-time or not submitting time-off requests. They may find that well-liked and experienced workers are clock rounding or abusing overtime. They may discover that some supervisors are not effective managers and need a lot of support to deal with problem employees. When the city of Houston first implemented Workforce Central, many employees who thought they were salaried were

shocked to discover that they were hourly employees. In all of these situations, it is important to remember that uncovering these issues is one of the main reasons for the analytics implementation. Better intelligence leads to better decision making and more informed solutions to address problems. Directors can plan for which departments might have the most need for change by looking at those departments with the most hourly employees, such as public works, the police department, and waste management. In the case of Houston, the solution was implemented first with its animal control and 311 call center departments because they both had a high percentage of hourly employees.

 Budget for change management: The very fact that issues will be uncovered highlights the need for strong organizational change management services to help directors, supervisors, and employees adjust to new cultural norms as the systems increase transparency and impose more structure on labor practices. For example, many employees in certain

departments may expect overtime hours as part of their pay and be disgruntled if overtime is more tightly controlled. Many department heads may not want to reduce overtime budgets, not only because of employee expectations but also because they want to keep their overall budget intact, as a smaller budget can feel like a loss of power or status. This is an important nuance for project champions to understand when trying to gain consensus among

stakeholders and departments. According to Pagel, to mitigate these potential hurdles, officials need to adjust the business case to demonstrate just enough to justify the project. Everything else that is achieved above and beyond the business case is theirs to enjoy and reallocate as they see fit. Certain departments may need more change management expertise than others; police and fire departments, for example, might be considered for more change management services and may require more buy-in from leaders with high levels of trust with workers. Overall, many directors will be excited to see the information offered to them by these analytics

modules. Most city leaders will understand intuitively how this software could make significant changes and deliver ROI across the city to all departments. Ultimately, a solution like the Kronos analytics module can contribute millions of dollars in savings for a city, eliminate waste and bad behaviors, and improve productivity and services for citizens and businesses. While not exceeding overtime budgets can make a significant impact, even minor reductions in overtime can mean other city services may get desperately needed funds for projects. Pagel advises other governments considering a similar

investment to have a methodology in place to track and quantify the benefits and ROI. For instance, his team is tracking metrics such as reduction in total hours, increase in leave time, reduction in comp time, and reduction in overtime.

The Kronos solution enables transparency and accountability and provides the information required for decision makers to justify hard decisions. How the information is used to transform a city's operations is up to the leaders themselves.

Methodology

The basis for this case study is IDC Government Insights' ongoing Smart Cities research, which examines the trends and challenges associated with workforce management processes in local government and the deployment of software tools designed to improve those processes. Our research includes interviews with software vendors and other technology suppliers to local governments, as well as their partners and customers, to understand the key attributes and benefits of workforce

management systems. In addition, specific to this case study, IDC Government Insights conducted an in-depth interview with Don Pagel, former deputy director of the Mayor's Office for the city of Houston.

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