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SO55 Improve Employee Suggestion Program

Summary

The State of California's Employee Suggestion Program does not provide adequate incentives to encourage employees to develop and submit suggestions for reducing government spending and/or improving services. The program should be changed to enhance these incentives, and to decrease the time for reviewing and approving employee suggestions. This would allow the state to capture savings more quickly and assist it with fostering a culture of continuous improvement among its workforce.

Background

The Employee Suggestion Program is part of the state Department of Personnel's (DPA) Merit Award Program, and is a formal process for rewarding employees who submit ideas that reduce or eliminate state expenditures and/or improve the safety or operation of state government. When an employee's suggestion is adopted, the employee receives a monetary award ranging from $50 to $50,000. Awards in excess of $5,000 require approval by the Merit Award Board and the Legislature. [1]

The Merit Award Program is managed by DPA. The State Merit Award Board, appointed by the director of DPA, consists of five members. One of the members is a representative from DPA, who also serves as the chairperson and the program administrator.

The Merit Award Board's primary responsibilities include:

  • Conducting Board meetings;
  • Conducting audits of the State departments and the Merit Award Program regarding compliance with DPA regulations;
  • Distributing promotional information to agency Merit Award administrators and to state employees;
  • Maintaining standard forms to be used for the award program;
  • Providing training for agency Merit Award administrators; and
  • Preparing annual legislative concurrent resolutions for awards exceeding $5,000. [2]

The Merit Award Board is responsible for "conducting meetings on a regular basis. Meetings are public and interested parties shall be given reasonable opportunity to be heard." [3] It has not conducted a board meeting since 2001. [4] Board member positions are vacant. [5] According to DPA, the board will meet later this year after the DPA director appoints members to these vacancies.

Employee suggestion program process

To participate in the employee suggestion program, employees submit completed suggestion forms to their department's Merit Award administrator, or to the DPA's Merit Award Program. An employee whose suggestion is not adopted may appeal within one year from the date of their department's denial. A written appeal must be accompanied by additional information not previously submitted. [6] DPA's Merit Award Program staff review these appeals, as well as the departments' decisions to ensure that the employee suggestions were thoroughly analyzed. [7] Despite this review, the Merit Award Board and departments routinely reject many employee suggestions because they may not result in savings, are repetitive, are part of the employee's job duties, or involve an area not within the scope of the merit award. It typically takes six to twenty-four months for the entire review process to be completed. [8] Therefore, implementation of the suggestions is sometimes delayed. In addition, the determination of funding for awards can delay implementation. The numbers of employee suggestions approved through the Merit Award Board are as follows: [9]

Exhibit 1
Improve Employee Merit Award System
Fiscal Year Number of
Suggestions
Submitted
Number of
Approved
Suggestions
Total Savings
1996-97 1,038 13 $1,446,075
1997-98 1,144 35 $1,049,995
1998-99 919 8 $2,293,275
1999-00 1,038 N/A $401,205
2000-01 582 20 $7,863,223
2001-02 659 N/A N/A
2002-03 791 N/A N/A
N/A = Not available
These data suggest that very few employee suggestions are ever adopted.

Employee suggestion programs in other states

Other states also administer employee suggestion programs. The award structures of other states' programs are similar to California's. California's cap of $50,000 for awards exceeds other states' caps, with the exception of New York. Kansas, for example, awards up to 10 percent of the documented cost savings for a maximum award of $37,500. [10] New York distinguishes between tangible and intangible benefits resulting from employee suggestions. Suggestions resulting in tangible benefits can be rewarded up to 10 percent of the first year's net savings, or 10 percent of other financial benefit to the state, up to a maximum of $50,000. Suggestions that result in intangible benefits may be eligible for an award of up to $5,000. [11]

Texas has an on-line employee suggestion program, the State Employee Incentive Program (SEIP). [12] SEIP provides on-demand updates in the evaluation process and automatic e-mail notification to submitters, evaluators and program coordinators on suggestion status. The government-domain source code produced to operate the SEIP online is freely available for adaptation by state government agencies interested in internet and intranet automation projects. [13]

The Texas Incentive and Productivity Commission administers the SEIP. The SEIP and the commission have been a good investment for Texas; they have saved the state more than $80 million, or a savings of $29 for every $1 invested in the SEIP. [14] With an online system, during a three-year period, the Texas SEIP experienced an estimated 45 percent increase in the number of employee suggestion submittals. One and a half percent of Texas state employees submitted ideas.

The Texas Incentive and Productivity Commission holds quarterly meetings to review, approve, and expedite suggestions resulting in savings. The Texas Incentive and Productivity Commission approved 120 ideas last year. [15] Texas's State Employee Incentive Program has approved 10 percent of employees' suggestions over the past twelve years. [16] In contrast, from July 1, 1998 through June 30, 2003, only 19 of the employee suggestions submitted to California's program were approved and implemented, on average each fiscal year, representing an acceptance rate of 2.4 percent. [17]

As seen in Exhibit 1 above, less than three-tenths of 1 percent of California employees submitted suggestions in 2002-03. A successful implementation of an online employee suggestion program should include:

  • a redesign of the suggestion form to make the form uniform for employees using an electronic or paper version of the form;
  • a designee of the Governor's office to serve as an executive sponsor for the project; and
  • a strong marketing campaign to boost the usage of an online system to increase the efficiencies of California's Employee Suggestion Program.

Recommendation


    The Governor should direct the Department of Personnel Administration (DPA), or its successor, to:
  • Propose legislation to eliminate the Merit Award Board's oversight of the Employee Suggestion Program;
  • Appoint a designee to serve as an executive sponsor of the project;
  • Delegate approval for employee suggestions to departments;
  • Increase the amount of an award approved by departments from $5,000 to $50,000;
  • Eliminate the necessity for a concurrent resolution from the Legislature to approve monetary awards exceeding $5,000; and
  • Develop, coordinate, and actively market an on-line employee suggestion system similar to the Texas on-line State Employee Incentive Program (SEIP).
  • The marketing effort would include redesigning the current employee suggestion submission form. The source code produced to operate the SEIP Online is freely available to other states. [18] The merit award administrator at DPA, or this position's successor, could continue to collect award information on a statewide basis.

    Audits of the merit award program can be included as a review item in any traditional, ongoing audits of state departments conducted by the Bureau of State Audits.

Fiscal Impact

An increase in employee suggestions, and their implementation, could significantly benefit the state. The online system would assist existing DPA staff, department merit award coordinators and state employees with expediting the entire process. Savings would incur from the increase in the number of suggestions submitted, approved, and implemented. First year savings is estimated at $1,707,425 assuming 25 approved suggestions averaging $68,297 each in savings. [19]

General Fund
(dollars in thousands)
Fiscal Year Savings Costs Net Savings (Costs) Change in PYs
2004-05 $853 $0 $853 0
2005-06 $1,024 $0 $1,024 0
2006-07 $1,366 $0 $1,366 0
2007-08 $1,878 $0 $1,878 0
2008-09 $2,561 $0 $2,561 0
Note: The dollars and PYs for each year in the above chart reflect the total change for that year from 2003-04 expenditures, revenues and PY's<

Other Fund
(dollars in thousands)
Fiscal Year Savings Costs Net Savings (Costs) Change in PYs
2004-05 $854 $0 $854 0
2005-06 $1,024 $0 $1,024 0
2006-07 $1,366 $0 $1,366 0
2007-08 $1,878 $0 $1,878 0
2008-09 $2,561 $0 $2,561 0
Note: The dollars and PYs for each year in the above chart reflect the total change for that year from 2003-04 expenditures, revenues and PY's

Endnotes

[1] Department of Personnel Administration, "Employee Suggestion Program," http://www.dpa.ca.gov/benefits/merit/suggestmain.shtm (last visited June 9, 2004).
[2] Department of Personnel Administration, "Merit Award Program Guide Book" (Sacramento, CA), p. 5.
[3] California DPA, "Merit Award Program Guide Book," p. 3.
[4] Interviews with Marilyn Moran, Statewide Merit Award coordinator, Department of Personnel Administration, Sacramento, California (April 7, 2004 and May 27, 2004).
[5] Interview with Sue Kane, deputy division chief, Benefits Division, Department of Personnel Administration, Sacramento, California (May 14, 2004).
[6] Department of Personnel Administration, "Merit Award Program Guide Book," p. 12.
[7] Department of Personnel Administration, "Merit Award Program Guide Book," p. 5.
[8] Interviews with Marilyn Moran.
[9] Interview with Sue Kane.
[10] Kansas Department of Administration, "State Employee Suggestion Program," http://da.state.ks.us/suggest.htm (last visited June 9, 2004).
[11] New York State Department of Civil Service, "Employment Suggestion Program," http://www.cs.state.ny.us/esp/home.htm (last visited June 9, 2004).
[12] Interview with Elizabeth Vargas, SEIP coordinator, Information Services Division, Texas Comptroller of Accounts, Austin, Texas (May 11, 2004).
[13] Texas Incentive and Productivity Commission, "SEIP On-Line Story," http://www.tipc.state.tx.us/seip/online_story.htm (last visited June 9, 2004).
[14] Texas Incentive and Productivity Commission, "Texas Incentive and Productivity Commission," http://www.tipc.state.tx.us/overview.htm (last visited June 9, 2004).
[15] Interview with Michael Dobbs, Program coordinator, Texas Incentive and Productivity Commission, Austin, Texas (May 19, 2004).
[16] Texas Incentive and Productivity Commission, "SEIP Accomplishments," http://www.tipc.state.tx.us/seip/seipstats.htm (last visited June 9, 2004).
[17] Interview with Sue Kane.
[18] State of Texas, Texas Incentive and Productivity Commission, "SEIP On-Line Story."
[19] From Fiscal Year 1996-1997 through Fiscal Year 2000-2001, the total adjusted savings from approved suggestions in California was $5,190,550. This averages $68,297 in savings for each approved suggestion, and is the figure used in the estimates. In addition, a ten percent increase in submitted suggestions each year is assumed based on the Texas experience.