Right Sourcing: Balancing Public and Private Service Delivery

1. Right Sourcing: Balancing Public and Private Service Delivery 2012 GFOAz Winter Conference February 16, 2012

2. Agenda • What is it? • What services can be ‘right-sourced’ • Pros and Cons • When do you use it? • How do you do it? • Summary

3. What Is It? • One tool in the financial management toolbox: A combination of providing services through outsourcing, multi-sourcing, shared services, in-house staffing, and elimination to achieve the best balance of cost savings and customer service

4. What Is It? (con’t)

6. What services can be ‘right-sourced’? Accounts Payable IT Accounts Receivable Payroll Engineering Permitting Custodial/Janitorial Animal Control Police Fire Park Maintenance Recreation Water Operations Sewer Operations Refuse Disposal Transit These are just a few

7. What services can be ‘right-sourced’? (con’t) The list is endless Any combination of service delivery that works for your organization and your community

8. What services can be ‘right-sourced’? (con’t) Choosing to eliminate a service is always an option

9. Definitions • Outsourcing – contracting with an unrelated entity to provide a service • Multi-Sourcing – contracting with multiple vendors to provide different elements of a service • Shared services – aggregating service delivery across different organizational units • In-House – services provided only by employees of the organization

10. Pros of Outsourcing • Lower labor cost because of increased economics of scale • Tapping in to a knowledge base for better innovation • Frees management time, allowing more focus on core competencies while not being as concerned about outsourced routine activities • Increases speed and the quality of delivery of outsourced activities • Reduces cash outflow and optimizes resource utilization

11. Cons of Outsourcing • Possible loss of control over a business process • Problems related to quality and turnaround time • Sluggish response times coupled with slow issue resolutions • Shortcomings in performance vs. expectations • Lower than expected realization of benefits and results • An irate customer base

12. Pros of Multi-Sourcing • Lower risk by having multiple contracts • Economies of scale • Targeted expertise - Selecting different vendors for different components of the service • Usually applied for IT services

13. Cons of Multi-Sourcing • More management resources needed to oversee multiple vendors and monitor compliance • Blame game - finger pointing • Large vendors may be unable to provide innovation or your ‘niche’ solution

14. Pros of Shared Services • Economies of scale • Tapping into a knowledge base for better innovation • Reduced capital investment

15. Cons of Shared Services • Turf wars – clear lines of responsibility need to be identified • Loss of control • Possible delay in service delivery • Lower than expected realization of benefits and results

16. Pros of In-House Staffing • Control over business processes • Faster issue resolution • Greater influence over quality and response times

17. Cons of In-House Staffing • Increased labor costs • Management time used to monitor routine tasks • Possible lack of innovation – ‘We’ve always done it this way’

18. When Do You Use It? Whenever you need to do a faster cheaper better more efficient job than what you are doing now! *****ALL THE TIME*****

19. How Do You Do It? • Evaluate • Plan • Implement • Measure and Report • Feedback • Evaluate and Adjust

20. Evaluate • Organization’s Strategic Plan • Departmental Operational Plans • What matters to citizens • Fiscal Constraints • Everything is on the table

21. Evaluate (con’t) • Feasibility Study – • Cost/Benefit Analysis – including intangibles • Risks • ROI • Barriers • Cause and Effect Maps • Choose the best alternative for service delivery

22. Plan • Decide on : • Liability issues • Governance structure • Time periods • Service levels • Dispute Resolution • Performance metrics • Termination clauses • Develop timeline for implementation

23. Implement • Negotiate performance agreements to include measures and timelines • Transition from current to new • Monitor performance

24. Measure and Report • What gets measured gets done • Report on progress and compliance • Communicate results to all stakeholders, including the public

25. Feedback • Surveys • Focus groups • Town Hall • Interviews • Customer comment cards • Council • Other departments

26. Evaluate and Adjust • Evaluate based on feedback • Modify service delivery if necessary – Keep what is working and change what is not

27. Examples • Outsourcing • Multi-Sourcing • Shared Services • In-House

28. Summary • Any service – nothing is off the table • Evaluate, plan and implement • Measure, report, get feedback • Evaluate and adjust

30. Questions?

31. Resources A Performance Management Framework for State and Local Government: From Measurement and Reporting to Management and Improving, National Performance Management Advisory Commission, 2010 “Budgeting for Outcomes: Delivering Results Citizens Value at a Price They Are Willing to Pay” by David Osborne and Peter Hutchinson, Government Finance Review, GFOA, October 2004 Public Participation in Planning, Budgeting and Performance Management, GFOA Best Practice, 2009 Alternative Service Delivery: Shared Services, GFOA Best Practice, 2007 Managed Competition as a Service Delivery Option, GFOA Best Practice, 2006 Performance Management: Using Performance Measurement for Decision Making, GFOA Best Practice, 2002 and 2007 Building a Financially Resilient Government Through Long-Term Financial Planning, Shayne Kavanagh, GFOA White Paper, 2011 “Opinion: It's all about 'right-sourcing‘”, Simon Briskman, Silicon.com, October, 2005 “RightSourcing– Buzzword or Reality Settling In?”, NariKannan, Toolbox.com, April, 2004