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The Intersection Between Fee Levels, Staffing Levels and Organizational Outputs

Other articles have reviewed the importance of workload studies to determine appropriate staffing levels and to justify a Budget Change Proposal, how to use fee studies to determine appropriate fee schedules given the level of service required, and conducting process improvement projects to optimize business processes. Fee levels, staffing levels, and outputs are interrelated. This article will describe how pursuing changes in your organization in one area can affect the other two areas.

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The Venn diagram above visually represents how the relationship between fee levels, staffing levels and outputs.  

I describe three intersection points of the Venn diagram above assuming static demand elasticity for the products or services supported by the fees:

  1. Intersection of Fee Levels and Staffing Levels: Generally speaking, the more staff that are needed to work on business processes that support the fees, the higher the fee levels needed to support the higher number of staff. The reverse is also true – the fewer staff needed to work on processes that generate fee revenues, the lower the fee revenues needed to pay for fewer staff.
  2. Intersection of Fee Levels and Outputs: Higher fee levels can result in either additional staff to increase outputs, or greater investment in technological advancements or process improvement efforts to increase the efficiencies of existing staff which results in increased outputs.
  3. Intersection of Staffing Levels and Outputs: As with the preceding, additional staff results in more outputs, and the integration of technology or process improvement efforts increases the efficiency of existing staff which results in increased outputs.

Let’s use an example to demonstrate the relationship between the three elements. Take a professional licensing organization where one of the organization’s main responsibilities is reviewing applications of prospective licensees who are applying to become a licensed professional in that field. Let’s also assume that the process of reviewing and processing those applications is not very efficient – perhaps the process is still paper based instead of electronic and applicants do not complete the application correctly the first time and this requires a lot of back-and-forth communication between the application reviewer and the prospective licensee to correct these errors, thus adding to the overall processing time. These process inefficiencies have created an increasing backlog of applications because they are not being processed in a timely fashion – there are more applications being submitted than are being processed. The first and easiest step a department can take is evaluating process efficiencies. The organization could seek to improve their application process by decreasing the amount of time it takes for the existing staff to process applications. This could include eliminating unnecessary or redundant information that reviewers need to verify and/or consolidating or eliminating multiple or unnecessary steps. Another consideration could be to amend the application form to decrease the depth of analysis each evaluator must research and/or review. The result of the process improvement study could increase productivity to where the organization is able to process its workload within are reasonable amount of time without pursuing fee increases and/or increased expenditure authority to hire additional staff or implement technological improvements.

If after implementing process improvement initiatives your department is still unable to provide the appropriate level of service, you may need to conduct both a workload study to determine the optimal number of staff and a fee study to adjust your agency’s revenue to support those staff. Some of the components of a fee study and a workload study overlap(such as the Program Overview, Task and Metric List Development and the Work Allocation Time Study steps) and completing both studies at the same time can be more efficient than completing them separately.

You may also consider amending a regulation or statute if statute includes a timeline to respond that’s too tight or not attainable without increasing fees.

First, let’s address the workload study to assess the optimal number of staff needed to process the expected average number of license applications after implementing the process improvements identified above. Let’s assume the division includes 5 staff. Each staff member can process 10 applications per month, or a total of 50 applications per month for the division. The average number of license applications received per month is 70. The department has at least two primary choices: hire additional staff or increase technology to increase the efficiencies of existing staff.

Hiring more staff would not increase efficiencies but it would increase output. Each staff member would still process 10 applications per month. To process 70 applications, they would need 7 staff, which means that they would need to request authority to hire 2 more staff to the existing team of 5 to process the 70 applications per month as ongoing workload.

If the department chooses to invest in technology, it could increase the efficiencies of the staff. For example, when license applications are submitted manually the team of 5 staff can only process 50 applications per month because of the back and forth associated with incomplete applications or errors in the application.  If the division employed technology that requires applications to be submitted on line with the computer program blocking submission of an incomplete application, then the team of 5 staff can process 70 per month if we assume an increased efficiency of 40 percent. The same 5 staff are more efficient. The investment may only need one-time funds.

In both cases, the division experiences increased outputs of70 applications per month as consistent average workload.

Second, let’s address the backlog. The backlog should stop once the right number of staff are in place, or the technology has been implemented, to address relatively consistent ongoing workload. Ask yourself a few questions about unusual one-time situations that could cause backlog:

·      Are there periods of ebb and flow depending on seasonal changes?

·      Did the backlog result from an unpredictable economic condition, like high (or low) unemployment?

·      Did the backlog result from a rush to be first due to newly chaptered legislation, or a rush to not be left out due to sunsetting legislation?

·      Are there other conditions that impelled applicants to inundate the department that is not usual or constant?

To address the backlog, departments can use temporary help instead of hiring permanent positions that will be unproductive (and expensive)once the backlog is addressed. Temporary help can include: retired annuitants, interns, temporary redirection from another division that might be experiencing a lull, employees from a temp help agency, etc.

If the department chooses to hire additional staff, increase investment in technological improvements as one-time or ongoing, and/or hire temporary help, they would need to request position authority and expenditure authority through a Budget Change Proposal. If the costs of the Budget Change Proposal would oversubscribe the division’s fund and leave the fund without a prudent reserve, they may need to seek a fee increase, which also needs authority.

Departments should be creative and exhaust all alternatives prior to proposing to increase its fees to fund its operations. Fee increases must be fully justified to the Administration and the Legislature because they can create hardships on some, and can impose barriers to entry for certain professions.

There are a variety of factors that affect delivering required public services (fees, staffing, output levels) – it’s not often a simple matter. Reach out to me or CPS HR to discuss your specific needs.