Review of City of Palo Alto Utilities Department Organization Assessment

304 Pages·2014·3.91 MB·English

by  Ratchye, Jane

City of Palo Alto
(ID # 4558)
Finance Committee Staff Report

Report Type: Action Items Meeting Date: 3/18/2014
Summary Title: City of Palo Alto Utilities Department Organization
Assessment
Title: Review of City of Palo Alto Utilities Department Organization
Assessment
From: City Manager
Lead Department: Administrative Services

Recommendation
Consider the attached report on Leidos’s “Organization Assessment” of the City of Palo Alto
Utilities Department (CPAU) (Attachment A). Staff proposes that the Finance Committee
comment, approve and forward to the City Council a motion to include the recommendations
included in the Utilities Organization Assessment.

Background
In past Budget hearings, the Finance Committee asked staff to review the Utilities organization
to see if there were efficiencies that could be achieved and whether the department was
staffed appropriately.

Staff requested that an independent consultant be utilized for this organizational assessment,
since an in-depth knowledge of the industry would be required to give a balanced assessment
of the organizational needs and priorities of the Utilities organization.

SAIC Energy, Environment & Infrastructure, LLC was selected to conduct the assessment. Since
the beginning of their work, they have been reorganized and renamed Leidos. The objectives of
this organizational assessment were twofold. The first was to review the services CPAU
provides to determine optimal staffing levels. The second objective was to evaluate the current
trends and challenges in the utilities industry (i.e., electric, gas, water, wastewater collection,
fiber), and to ensure that CPAU is appropriately positioned to meet those challenges.
They addressed the following questions in their study:

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 How are CPAU’s current services valued by customers?
 Is CPAU positioned correctly to use state-of-the-art technology applications to serve its
customers?
 What level of leadership should CPAU take with regard to environmental sustainability
and green technologies?
 What are the current CPAU efficiencies and inefficiencies?
 Are operating costs appropriate?
 Are current staffing levels optimal to support current services?
 If additional services were desired, what additional resources would be needed to
deliver them?
 Which services should be provided internally and which externally?

In its report, Leidos concluded that CPAU is appropriately organized and effective, performing
as well as or better than comparable utilities. Yet there are opportunities to improve
operations, and the City and CPAU should develop a workforce management plan; implement
an enterprise work management system; review and update performance tracking metrics; and
consider additional outsourcing, particularly of project management functions.

More detailed results of the review are presented below.

Discussion
Leidos reviewed CPAU’s performance against more than 20 best practices for electric, water,
gas, fiber and wastewater collection services, concluding that CPAU operations reflect best
practices in 14 categories, is making good progress towards meeting best practices in eight
categories and needs significant work to meet best practices in only three categories.

At the highest level of consideration are five indicators that CPAU is performing very well:
1) With the exception of water rates, rates for utility services are competitive
2) Service reliability is very good
3) Customer satisfaction is improving
4) The utilities are in excellent financial condition
5) The utilities are effectively achieving the City’s environmental and social goals.

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Under the current management and structure each of the utilities is performing as well or
better than comparable utilities. A particularly significant indicator of this effectiveness is the
Utilities’ positive financial health.

Current Staffing Levels are Sufficient for Current Needs but Unfilled Open Positions Are
Impacting Performance
Leidos finds no evidence that supports recommending significant staffing or organizational
changes. However, there is evidence that the electric utility’s outage restoration performance is
impacting customer satisfaction. The 2012 Customer Satisfaction Survey indicated that while
customers experienced fewer outages, they were less satisfied with the time that it has taken
to restore service. This is very likely a result of six open Lineperson/Cable Splicer positions --
over half of the 12 budgeted positions.

While no evidence suggests that current authorized staffing levels are in excess of current
needs, the ability to meet future needs could be very different if attrition due to retirements
and employees leaving for better opportunities is realized as expected. Based on current City
projections, more than half of the current Utilities workforce will be eligible for retirement by
2015. The utilities currently have 20 open positions out of 236 budgeted full-time positions –
nearly ten percent of the workforce. Among the need for highly skilled workers are six open
positions for electrical workers (Lineperson/Cable Splicer) which is more than half of the 12
budgeted positions and 3 of 8 budgeted positions for Senior Engineers.

Workforce challenges that CPAU faces include:
 Recruiting, developing and retaining employees in a competitive employment
environment in which other utilities offer more to prospective employees, especially
utility workers and engineers who are in high demand at utilities throughout the state
and country.
 Ensuring that there is an effective succession plan to maintain the capability of the
organization given the potential attrition of managers and staff due to retirement over
the next five years
 Maintaining a safe work environment while being responsive to customer expectations,
and
 Retaining open positions long enough to find employees to fill them, especially with
intense scrutiny over the justification for every position.

The Utilities Effectively Use Outside Resources to Supplement Capabilities
One strategy that CPAU management employs to address staffing constraints is to use outside
contract resources to provide temporary labor to address peak workloads and provide

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expertise that staff cannot. One critical area where outside contractors are relied upon is
qualified electrical workers to supplement existing crews to provide electric distribution
infrastructure construction and maintenance. Other examples include:
 Outside legal services
 Engineering and planning consulting services
 Leveraging NCPA and CMUA regulatory and legislative support
 Operations, maintenance, inspection and construction support
 Information technology project implementation support

Customer Satisfaction and Services Valued by the Community
Along with utilities across the nation, during the protracted economic downturn, CPAU
experienced a decline in customer satisfaction from 2008 to 2011. However, in the most recent
customer satisfaction survey, CPAU residential customer satisfaction exceeded that of all other
California utilities.

Recommendations
As a result of Leidos’s best practices review of CPAU it recommended the following priorities for
City and CPAU consideration:

Workforce Management Plan
Faced with many unfilled positions, the potential for numerous retirements in the next few
years and a competitive job market that offers incentives for CPAU staff to leave for higher
paying jobs, CPAU should consider workforce management as its highest priority. Three key
tactics that should be implemented as soon as possible are:

1. Develop a Workload Forecast – CPAU should develop a workload forecast that predicts
the number, type and experience level of staff that will be required to accomplish
strategic plan goals and capital improvement plans over the next five years.
2. Develop a Staff Recruiting, Development and Retention Plan -- The utility should work
with City and governance to address recruiting, developing and retaining staff.
Recruiting strategies should extend beyond the current capabilities of City Human
Resources division to include significant use of professional recruiters and recruiting
networks. A compensation survey should be conducted to develop an understanding of
what compensation levels are required to be competitive in the market for skilled utility
professionals and compensation levels adjusted accordingly. To retain existing
employees, CPAU and the City should ensure that current staff are being competitively

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compensated, that benefits are competitive and that training and staff development
opportunities are sufficient to retain staff.
3. Develop a Succession Plan -- To address the need to plan for the succession of key
management positions, CPAU should complete its ‘working-draft’ succession plan. The
current draft succession plan is a good start but needs to be expanded to include all key
supervisory and management positions.

Implement a Work Management System
In order to determine whether the utilities are ‘optimally staffed’, the City and utilities should
implement an enterprise work management system. This could be a new system or could be
accomplished by activating enterprise work management capabilities of the existing SAP
system. Enterprise work management provides workload forecasting, tracking and performance
measurement for all personnel, allowing CPAU to track and management its workforce.

Review and Update Performance Tracking
If the City and the utility are truly committed to making performance measurement an effective
management tool, it is absolutely necessary to ensure that the identification of key
performance indicators becomes a formal business process with dedicated resources to ensure
implementation. Absent this allocation and commitment of resources, it is very likely that
other priorities will surface and performance measurement and tracking will suffer. The City
should incorporate monitoring and reporting the success of implementation of any actions
taken in its balanced scorecard system (BSC) and update performance on the regular Strategic
Planning Performance update schedule to the City Council.

While CPAU currently tracks about 20 performance metrics, Leidos recommended that CPAU
reconsider its metrics, selecting a manageable number that best indicate desired performance
and then measure and report those metrics frequently and transparently.

Consider Additional Outsourcing to Address Workforce Constraints
In addition to the outside services currently used by the Utilities, the industry regularly
outsources services including meter testing, calibration and reading; water system operations;
call center services; customer billing; information technology services; risk management; and
energy marketing and operations.

One outsourcing decision that could have a very significant positive impact would be project
management. There are many professional project management firms that can stand-up a
project management office for CPAU, provide project management tools, business processes

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and training and provide staff to assist with project management. This would relieve workload
from engineering which would allow them to focus on project delivery.

Bringing in outside help to temporarily fill other positions needs to be considered where it is
feasible. While there may be many willing workers to fill positions on a temporary basis, it is
not always easy to find the right combination of experience, capabilities, cost, and availability
to effectively support CPAU’s needs. Bringing in outside help often exacerbates the problem of
limited workforce because of the burden placed on existing workers who will be further taxed
to supervise, train and oversee outside services.

Detailed Staffing and Organizational Opportunities
Attachment B Table ES-3 lists suggested staffing and organizational recommendations,
including staffing and cost impacts (if applicable and known).

Next Steps
After the Finance Committee’s review and comments, staff will continue with implementation
of many of the recommendations. Please see Attachment B: City of Palo Alto Utilities Response
to Leidos Organizational Assessment for a list of follow-up actions planned by CPAU.

Resource Impact
Staff will continue to evaluate the recommendations that are in progress including a work
management system, enhancements to Utilities customer website, and Smart Grid projects.
When recommendations for each of these projects are developed, the resource impact of
implementing the projects will be determined and submitted to Council as part of the
recommendations and requests for contract approvals, if appropriate.
Attachments:
 Attachment A: City of Palo Alto Utilities Department Organization Assessment,
December 2013 (PDF)
 Attachment B: City of Palo Alto Utilities Response to Leidos Organizational Assessment
(DOCX)

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City of Palo Alto Utilities Department
Organization Assessment

City of Palo Alto, California
December 2013

City of Palo Alto Utilities Department
Organization Assessment

City of Palo Alto, California
December 2013
This report has been prepared for the use of the client for the specific purposes identified in the
report. The conclusions, observations and recommendations contained herein attributed to
Leidos constitute the opinions of Leidos. To the extent that statements, information and
opinions provided by the client or others have been used in the preparation of this report, Leidos
has relied upon the same to be accurate, and for which no assurances are intended and no
representations or warranties are made. Leidos makes no certification and gives no
assurances except as explicitly set forth in this report.

© 2013 Leidos, Inc.
All rights reserved.