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1995 General Excellence Optimas Award ProfileBRCity of Hampton, Virginia

December 1, 1995
When you think of government operations, what comes to mind? Poor service? Maybe. Inefficiencies? Probably. How about bureaucracy? Most definitely.

Indeed, the public sector has a not-so-shiny reputation. But one city government has spent the past decade trying to change this. And change it has. Using private-sector techniques, such as team-building, empowerment and total-quality principles, the City of Hampton, Virginia has transformed from a stereotypical paper-pushing governmental agency into a customer-focused, productive organization.

The transformation hasn't been easy for city workers. Reengineering the city has required workers to learn new skills, change the way they work and view their jobs differently. It has forced some workers—unable to adapt to the changes—to quit their jobs, and forced others out simply through reorganization. Some have outwardly criticized the city for its efforts. But all in all, with HR in the workers' corner, the gain has been worth the pain, not only for workers but also for the community in which they live.

City's woes prompt change.
The whole thing started in the early 1980s, a not-so-bright period for Hampton. This historical Southeastern seaport on the Chesapeake Bay was dying a slow death. Its population had stagnated, only growing by 1% during a 12-year period. Consequently, school enrollment was in a continuous decline, dropping from more than 32,000 students in the mid-70s to less than 19,000.

Even more daunting were the city's economic woes. It faced high real estate tax rates, large annual debt payments and a small commercial tax base. "We had no business parks per se here in Hampton for new businesses to come to or for our existing businesses to expand into," says Hampton's Mayor James Eason. "So we were losing businesses to surrounding communities."

It was these problems, and more specifically the attitude of the former political powers toward these problems, that motivated Eason in 1981 to run for the office of mayor the following year. On the school board at the time, Eason was appalled by the former mayor's comments about teachers such as: "If they don't like whatever their pay is, they're welcome to leave the city and seek employment elsewhere, because we're a declining city."

Eason calculated what the city would be like in three to five years if, as the former government suggested, nothing was done. Not liking what he saw, he ran for mayor in 1982 and won the election. By that summer, he began working on a strategy to revitalize the city. The timing was right, he says, because Reagan was close to seeking re-election and therefore pursuing a strong economy.

The major thrust toward action came two years later, however, when Eason appointed Robert O'Neill to the city manager position. O'Neill had been with the city previously, but had worked the past several years in the private sector, partly in consultant roles. He and the city council immediately began to strategize around Eason's newly formed mission for the city: To bring together the resources of businesses, neighborhoods, community groups and government to establish Hampton as the most livable city in Virginia. "The mayor and the council had a clear perception of what they wanted the community to be like," explains O'Neill. "Once we had that vision, the question became: 'What do we need to do now?'"

What they did was look at successful public and private organizations for common strategies. They found the organizations shared these traits: flexibility, clarity of purpose, and a willingness to share power with employees and customers. Most also tended to be customer-driven—focusing on results rather than activities—and investing substantial resources in the work force.

The mayor and council took these traits and developed a set of values to which the city would aspire. These are: responsiveness to citizens, quality, integrity, teamwork, professionalism and innovation. Admirable goals, but probably out of reach given the city's structure and systems. As was typical of many organizations at the time—especially government institutions—Hampton was hierarchical and top-down driven, with control of information and activities hoarded in the higher ranks. It consisted of 35 departments reporting to a city manager and three assistant city managers.

New goals require new structure.
For the city to accomplish its goals, the structure would need to change. But to what? "We realized our strengths were our department managers, so we began to look at ways to free up those managers to run their departments without a lot of supervision," says O'Neill. The emerging structure took the assistant city managers out of line authority and focused their efforts on long-term strategic issues identified earlier in the planning process: acquiring and developing certain lands, improving the physical appearance and image of the city, improving the tax rates, enhancing citizens' life quality, and working to re-engineer services within the school system, to integrate duplicate processes.

Each of these five issues encompasses a large number of projects. Just under quality of life, for example, the council created approximately 30 projects to be done between 1987 and 1991. These ranged from opening new library branches to building a new football field for the high school. They included turning the old landfill into a 27-hole golf course, opening a senior citizen recreation center and an adult day-care center, and laying the ground work for a youth coalition project that ultimately became a three-year effort involving 5,000 people.

With the assistant city managers involved in these projects, the department heads were given nearly total control of the day-to-day operations, including accountability for their budgets. They also became members of department-head teams that share resources and solve problems. "Direct service is handled almost completely by the departments without interference," says O'Neill.

Many projects within departments are assigned to task forces of employees. The city asked employees to become involved in most aspects of decision-making—either within their departments or across department lines—and gave them training to do so. At any given time, more than 100 employee problem-solving groups, task forces and committees are meeting, involving as many as 1,500 of the city's approximately 2,000 workers.

Human resources changes its structure—and role.
Once the new structure was in place, it became imperative to change the systems from ones that supported the previous structure to ones that would enhance teamwork, empowerment, quality and all the other elements tied in with the new values. That's when human resources came in. "The human resources group is the group we really charged with being responsible for bringing about the change," O'Neill says. "We changed them from being rules-driven, and basically the police of the internal organization, to being internal consultants."

But before it could help change the organization, HR had to change its own structure. As with the overall city government, the human resources department had been organized as a hierarchy—with a director overseeing specialized branches, such as recruitment and placement, employee relations, compensation and administration. Each branch had a branch chief, specialists and clerical workers. Work within the department was "very slow moving, with a lot of handoffs, long cycle times, and up-over-and-down communications," says Tharon Greene, director of HR.

To restructure, HR took a clue from O'Neill's restructuring and wiped out the mid-manager layer of supervision, collapsing the department into two self-directed work teams—a team of professionals and a team of technicians. Greene remained director and focuses on long-term goals. All five professional team members have been cross-trained, and each provides a full range of human resources services to as many as nine or ten diverse customer departments. For example, Margaret Schmitt, a five-year employee with Hampton's HR function, is responsible for employee relations, compensation, training and recruitment for parks and recreation, the city manager's office, the city council, the library, the finance department, the procurement office, the treasurer and the sheriff's department.

"As an organization, we're really questioning whether all this wonderful stuff is appreciated by the customers - if it's important to them."

The HR team disperses the customers so that each HR professional has a good mix of activities. Think about it. Running a city is like running a bunch of diverse businesses—from fire and police departments to a major coliseum, from libraries to health departments. As O'Neill says, "We're in the rock-n-roll business, the medical field and the energy industry." Obviously, each of these "businesses" requires different needs at different times. One may have mainly training issues at a given time, while another may be focused on team-building or quality improvement.

Also, different techniques are needed for handling the same situations in different types of businesses. For example, the city sent police officers through total quality management training and "they loved it. They went to class, got a manual, and learned what was in it. From the first day they walked into the academy, that was they way they handled learning," ONeill says. This method would never fly with the city's arts commission, however. "These people would look at us like we were out of our minds. That's just not the way they do things."

Because each of the different businesses offers the HR professionals different challenges, the team rotates them among the team members periodically. It's partly based on their own developmental needs. For example, Charlene Wilson, who has been on the team for less than a year, currently is assigned the customers who will give her the greatest HR entry-level experience. And Schmitt, who was a volunteer coordinator until joining the team, is handling some departments with a large number of organizational development issues, because this is an area in which she needs more experience.

The team surveys its customers twice a year, and the satisfaction ratings have increased markedly since the restructuring. In addition, Greene says HR's customers consistently tell O'Neill they're happy with HR's service, and feel the HR professionals are part of their department teams rather than outside servants, or worse, obstacles.

Teaching by example: HR facilitates movement to self-directed work teams.
With this new structure in place, HR has been able to be an important change leader within the city. Take its involvement with the permits function of the city, for example. Before the city's restructuring, the permits function was split into four separate departments: one for acquiring zoning permits, another for building permits, one for right-of-way permits, and still another for planning permits. This system wasn't conducive to the city's vision of providing quality customer service—citizens had to go to four different places, and stand in four different lines.

To bring the function up to speed, the city formed a team of workers from the four departments. Their goal—to create one central permitting department where citizens in need of permits could do one-stop shopping.

The team struggled for two years on the project. The problem was employees were attached to their department heads, and also to their particular functions. They were experts in zoning permits or building permits and hadn't really considered cross-training. If they had made the move to one building at this point, they still would have had four separate lines, just under one roof rather than four.

This wasn't good enough, so Mary Bunting, an assistant city manager, and Greene from HR, helped facilitate a different approach. Although through experience the HR professionals have learned there's no one right way to build teams—some work best just "doing it" while others need more structured planning—they have identified some key elements necessary for success. For one, they need good performance goals. O'Neill gave them these: Citizens should be able to get at least 90% of their permit needs taken care of by the new one-stop shop, and every employee should be able to do 90% of the permitting.

Another key element is the newly forming team must be able to take apart its work and put it back together in a way that's aligned with the performance goals. HR is helping facilitate this process for the permitting team. Using models, videos, flip charts and any other tools available, the team has evaluated all its processes, eliminated some and combined others. In July the four departments moved into one facility and took the leap. Since then, customer satisfaction ratings have been outstanding. "I like the fact that I can walk into one office and get my permits with little or no delay," Steve Jensen, a general contractor, told Hampton's internal newsletter editors. "The staff works together to provide consistent code interpretation so I don't waste time going from department to department or waiting for supervisors to resolve differences. The whole permit experience is now very customer oriented, and as a businessman, I appreciate that."

Workers in the department have grown attached to the new arrangement too. Explains Sharon Bass, a 25-year permits employee: "Even though I knew pieces of the process that zoning, pubic works and planning did, I couldn't help the contractors with all their permit questions. Now, with the cross-training we've been doing, I'm better able to handle customers'questions and not have to pass them on to someone else."

Team formation and development such as this, as well as team training, take up a major portion of HR's time in Hampton. Currently, approximately 10% of the city's 2,000 employees work in teams. Some of these teams have been in existence for ten years, some for three to four years; others are still in the formation process.

The parks department is one area in which self-directed teams have been operating for several years. Originally, the change wasn't easy. Supervisors who drove around in their pick-up trucks, checking to see if their workers were cutting the grass as instructed, had to relinquish control to the team; they had to move into the roles of long-term strategic planners. Team members, on the other hand, had to take on more responsibility for ensuring whole projects were completed, (maintaining the grounds around the library, for example) rather than just doing their one piece, (such as mowing the grass). They had to be cross-trained on equipment and taught to be team players.

As with many of the new teams, there was some resistance by both supervisors and parks employees to the new arrangement. However, according to HR, moving to teams was a necessity in this case. Budget cuts were forcing downsizing, making it necessary to restructure to get work done. Now, three or four years into the process, the system is working well and workers admit they like being more in control of their work.

Part of what has made this team successful is that they're all working off the same page. In a recent training session, the instructor, associated with the Virginia State Department of Education, asked the 23 parks employees to write their mission statements on a piece of paper. He expected the answers to run the gamut. He was amazed when all 23 workers wrote: "To make Hampton the most livable city in Virginia."

Another team that has embraced this concept and has made major strides is the automated refuse collection department. It used to be that as a trash collector finished his or her route, he or she would return to the station and wait around for co-workers to return, ridiculing them for being so slow. On top of that, according to Wanda Hardy, a supervisor in the automated refuse collection department, many of the workers, not thrilled by their jobs, would call in sick "just because they didn't feel like working," not caring they were making extra work for their peers.

Today, however, as workers finish their rounds, they radio to co-workers, find out their destinations, and pitch in to finish every route. And, few people call in sick when they aren't. Hardy, who worked her way up the ranks, credits this both to new automated equipment, as well as a new attitude brought on from team spirit. She constantly preaches to the workers that no one wins unless everyone wins, a credo being echoed throughout the city and supported by HR systems.

The city removes barriers to success.
For the new structure to work, evaluation, compensation, and rewards and recognition programs had to be changed to better align with the city's mission and values.

"Those had to change to reinforce the results we wanted and to send the message to workers that we were committed to these results," O'Neill says.

One of the first things HR did after the restructuring was put department heads on performance contracts tied to the organization's new mission. The contracts spell out each department's goals, its critical success factors and its strategies. Department heads report on their progress with the city manager twice a year, and their pay is based on accomplishments. They can receive base pay increases and bonuses for outstanding performance.

Greene, for example, received a base pay increase and bonus for her extraordinary work in helping to put together a major conference in Hampton. She provided City Manager O'Neill with revenue figures generated from the conference, including hotel stays and food purchased, and O'Neill calculated her pay based on this. Even such activities as chairing a task force can earn city managers bonuses because of the extra time and commitment needed.

Employees are evaluated annually on performance using appraisal systems developed by teams of employees and managers. Human resources helps the teams develop and implement their new systems. The only stipulation is that each new plan must tie into the city's performance goals. One important lesson the city has learned through the restructuring process is, because of the myriad businesses it runs, one-size-doesn't-fit-all in terms of such work-related systems as performance appraisals. For example, you can't use the same criteria for judging a coliseum worker's productivity and service as you would for a librarian. What should be consistent, however, is the values behind those appraisal systems, such as delivering high quality service.

In some areas, such as compensation, the city needed an organizationwide system that would work for all businesses and support the city's new mission and values. In fact, during a series of Quality Forums conducted by the city and attended by nearly 250 employees, the overriding recommendation made was to change the compensation system. The system in place at the time more often rewarded longevity than performance. As a consequence, the city's limited compensation dollars were going to employees who already were being paid above market rates, rather than being spent on recruiting well-qualified new employees or rewarding for high performance. The old system also focused on internal classification rather than the marketplace and failed to effectively reward varying levels of performance. Another major problem with the system was it didn't support team work structures.

With the help of Washington, D.C.-based Wyatt Company and the involvement of more than 100 employees, the HR department overhauled the city's compensation system and implemented a market-driven system that now takes into account the strategic value of jobs as defined by the city manager. The city eliminated the position-classification function, and allows the city manager to pay around the market. It also allows for unbundling pay grades, which gives flexibility to develop pay ranges for specific jobs without focusing on the politics of internal rankings. The new pay system allows control of base-pay growth by moving employees through the pay ranges based strictly on performance. When the employee reaches a point slightly above the market rate, all future increases are variable and don't compound into base pay until the pay range is adjusted based on market growth.

In addition, workers who receive outstanding ratings in their reviews may be awarded a bonus that equals up to 2% of their pay. O'Neill allocates a pool of money each year from which these bonuses are drawn. The objective is to reward for sustained high-level performance.

To support the formation of self-directed work teams, the city developed a model for paying employees who work on these teams. The model provides an integrated approach to team-performance planning, training, customer- and staff-performance feedback and rewards. Team members receive equal percentage increases for what they accomplish collectively. Customer satisfaction ratings and budget performance also are factors in the team pay increase. The system provides for cash bonuses for individual team members who initiate outstanding work above and beyond expectations for the team. The team-compensation system was applied in human resources first, and currently is in various stages of application throughout the organization.

Just as the team-based pay system helps reinforce teamwork, a bonus program reinforces quality service. Each year Hampton, through an outside marketing firm, conducts a citizen-satisfaction survey. If satisfaction ratings exceed 80%, all employees receive a bonus. A base amount is established annually for full-time employees; part-time and hourly workers receive half the amount.

Workers can receive additional bonuses through a citywide program called The Achievement Program. The initiative's intent is to reward employees for innovation and productivity improvements. The way it does this is by requiring each department—with the help of its employees—to develop its own alternative reward system. The only guideline is departments must share 10% of annual savings resulting from their employees' suggestions. And there are no limitations on the specific type of nonmonetary rewards the departments can give out. Office equipment, training, time off, money (in addition to the above 10%), dinners, theater tickets and parking spaces have all been given as awards. The Achievement Program has generated more than $4 million in savings since 1987—with more than $250,000 in cash bonuses having been awarded to employees so far.

An old city gets a new lease on life.
Programs such as these have motivated city workers to go above and beyond their job duties. Not only do they serve on problem-solving teams, task forces and committees, most also have volunteered for community projects. In 1993, for example, nearly 1,400 employees participated in such activities as fundraising to renovate an antique carousel and open a $30 million air and space museum—revitalizing the downtown area. Current internal and external activities include running festival events, streamlining operations, redesigning benefit programs, beautifying city buildings and tutoring co-workers. Groups are formed at the direction of management or arise spontaneously through employee initiative.

Results of these on- and off-the-job efforts have been substantial. New businesses, including the world headquarters of Lucas Industries and a Radisson Hotel complex—which was a joint business/ government endeavor—have improved the city's commercial tax base. Today, Hampton has one of the lowest tax rates in the area and low debt service, despite the fact Hampton has one of the smallest work forces vs. citizens-served of any city in the state.

The city also has received accolades from such noted management experts as Tom Peters, David Osborne and Ted Gaebler. They credit Hampton as being "a city possessing exemplary management principles." But do the citizens recognize their government's improvements? They have consistently rated city workers' service well above average since the city began surveying them. Greene admits, however, the city's efforts are much more appreciated outside the city than within. Some of the city's activities, in fact, have created controversy and discontent among its citizenry, such as its partnership with private enterprise in building the Radisson Hotel complex.

At least some citizens are seeing the big picture, however. A reporter for the Daily Press—a community newspaper—in response to Personnel Journal's Optimas Award to the city, wrote on February 8th: "Not everyone will be happy with every decision the city makes, but citizens should take pride in the fact that their local government is a recognized leader in finding better ways to serve its citizens."

And the city consistently is searching for those better ways. A primary emphasis now, says Mayor Eason, is to involve the members of the community at greater lengths than before to ensure the city is serving their needs. "We've been thinking we've done a good job because we built four new recreation centers around the community, when the fact of the matter is that in one of those areas a recreation center isn't their top priority. Maybe it's a day-care center or an after-school program. So now we're trying to get the neighborhoods involved and let the city be a facilitator, so we really can focus on their needs."

Greene goes on to say: "As an organization, we're really questioning whether all this wonderful stuff is appreciated by the customers—if it's important to them. We're running around doing all these wonderful things with the little bit of resources we have, but if those resources are going into the wrong investments, and people still aren't moving here—or worse, the people paying the bills are leaving—then we have problems. We may meet our goal of being the most livable city in Virginia, but maybe only for people on public assistance."

The fact that the city is even asking these questions is a sign it's on the right track. And because it has put a system in place to help it meet these customer-service goals, it's likely things will only get better in Hampton. At the very least, the words poor service, inefficiency and bureaucracy no longer fit to describe the city. And that, by itself, is a major breakthrough.

Personnel Journal , December 1995, Vol. 74, No. 12, pp. 38-46.