Reshaping NYCHA's Central Support Functions

Transcription

1 August 15 Atefeh (Atti) Riazzi Acting General Manager New York City Housing Authority 250 Broadway, 12th Floor New York, NY Dear Atefeh, Reshaping NYCHA's Central Support Functions In March 2011, the New York City Housing Authority (NYCHA) engaged The Boston Consulting Group (BCG) to help reshape NYCHA's central support functions. BCG was to work in joint teams with NYCHA to identify opportunities and make recommendations for these functions to operate more efficiently and effectively. The in-scope functions included traditional administrative functions such as Finance, HR, and IT, as well as the administrative components of operational activities such as Operations' borough offices, Community Programs & Development administrative activities, and Capital Projects administrative activities. Ultimately, the goal was for NYCHA to do more with less in its support functions so that cost savings could be used to close NYCHA's budget gap and reinvest in frontline operations, which were not within the project scope 1. Working together over almost eleven months, the combined NYCHA-BCG project team identified over $70 million in annual central support cost savings that can be achieved over the next five years, with $13 million in annual run rate savings achieved going into The team also identified opportunities to increase annual revenues by approximately $55 million. NYCHA can achieve these savings by implementing a combination of business process improvements, IT systems enhancements, and organizational structure redesign, along with related capabilities and cultural change. Most of these changes will not be easy and will require investment. This document provides a summary of the NYCHA-BCG team's work, highlighting the key recommendations and how NYCHA will reap the value over the next several years. 1 Frontline operations are principally NYCHA staff based at individual NYCHA properties and borough offices, and include Property Managers, Caretakers, Maintenance Workers, Housing Assistants and Skilled Trades, among others. The vast majority of NYCHA's employee headcount and expenses are within frontline operations. As such, the NYCHA and BCG teams believe there are many opportunities to transform the business model to drive cost savings and efficiencies in the frontline; however, investments and resources are required to identify, size and ultimately realize these opportunities. The Boston Consulting Group, Inc. 430 Park Avenue New York, NY USA Tel Fax

2 Project Context and Objectives In the face of financial pressures and the need for better performance, Chairman Rhea and the NYCHA team have undertaken a broad transformation built around Plan NYCHA. One of the key needs for NYCHA's targeted transformation is achieving cost savings in central support functions so that resources can be strengthened in the field (helping to achieve Imperative 5 "Strengthen the Frontline"). To support this need, in March 2011, NYCHA engaged BCG to help reshape NYCHA's central support functions. BCG's primary objective was to help NYCHA "do more with less" by enhancing the efficiency and effectiveness of support functions in order to redirect resources to field operation activities. Specifically, the services BCG was contracted to perform were: Scope "Perform a comprehensive current state assessment of NYCHA s central services and borough office support functions" "Develop and recommend improvements based on its assessment with the goal of improving and enhancing the efficiency and effectiveness of NYCHA s current business model, while leveraging best practices of organizations such as leading public housing authorities, property management companies, and best-in-class private sector companies" "Provide strategic, tactical, and technical support to NYCHA in implementing its comprehensive business transformation plan" The original scope of the project was limited to "central support functions", which generally covered the activities of approximately 3,000 NYCHA employees. The in-scope functions included traditional administrative functions such as Finance, HR, and IT, as well as the administrative components of operational activities such as Operations' borough offices, Community Programs & Development administrative activities, and Capital Projects administrative activities. The direct scope did NOT include the other 9,000 NYCHA employees working in front-line operational activities. However, the scope did include the effect that the policies, business processes, procedures, information technology systems, etc. had on these front-line activities. Some areas of central support received more in-depth treatment than others, given the likely size of the cost savings opportunity and / or the complexity of the targeted analyses. For example, NYCHA spends over $150M on materials and services (non-construction) and operates a vast network of warehouses and storerooms. The team identified early opportunities for over $20M in savings and thus gave this area more in-depth treatment

3 Project Approach From the beginning of the project, the BCG leadership team emphasized that true transformation requires that the senior leadership team and key managers work "shoulder-to-shoulder" with the consultants on all phases of the project. More than 120 NYCHA employees, including all senior executives and members of the Board, were actively involved in the project. This joint approach allowed the team to quickly develop a fact base about how NYCHA support functions were operating, identify potential opportunities for improvements, analyze the pros and cons of various future state options, and forge agreement across the management team on the path forward. The project was organized into five phases: Review of current state review the current central support operating model across three dimensions: organization, business processes, and information technology support. Conduct benchmarking study of operating models for support functions in other Public Housing Agencies and in private management companies. Operating model design based on project findings, design the target operating model for support functions to achieve greater efficiency and effectiveness; make recommendations for change, and articulate the key initiatives needed to drive that change, with the goal of implementation within three to five years. Implementation planning define the projects needed to implement recommendations and underlying initiatives. Begin to build high-level project plans by identifying the relevant stakeholders, key activities, targeted timeline, and required capabilities to support implementation. Sequence the launch of projects, moving forward on the highest priority projects immediately. Operationalize plan further detail project plans to move forward on the relevant key activities build project teams, expand on new job roles required and related job descriptions, further specify organizational changes and process improvement decisions, etc. Establish an Enterprise Program Management Office (EPMO) and institute Rigorous Program Management (RPM TM ) discipline, which includes the tracking and managing of the completion of major milestones and the achievement of promised impacts (financial, customer service, performance levels, etc.). Execution support work with project managers and executive sponsors to develop project charters, define deliverables and impacts, create roadmaps, identify interdependencies with other projects, update status each week, identify issues, and work with the senior team to resolve issues and priorities. BCG resources to coach NYCHA EPMO staff to enable them to do these activities effectively. During the first three phases, the joint team focused on diagnosis and analysis, with some high-level implementation planning. The last two phases, the team focused on launching the multi-year implementation program

4 To identify opportunities, the joint NYCHA/BCG team used multiple approaches, including benchmarking (of property management companies as well as other Public Housing Authorities), process mapping, interviews, study of time spent on different activities, and analyses of relevant policies and regulations. The team focused on opportunities to improve business processes; enhance information technology support for business processes and decision making; redesigning parts of the organization; and upgrading capabilities. The team also looked at required changes in NYCHA culture. For example, making individual performance management and employee development a more prominent and effective program. In designing recommendations, the joint team decided what changes needed to be made to the operating model for NYCHA's support functions and what value these changes would have. For example, the team analyzed whether major changes should be made to the supply chain for maintenance and repair parts. An example of one of the key design issues was: should NYCHA stop stocking certain types of parts at the Long Island City central warehouse and instead rely on vendors to supply these parts "just-in-time" based on actual maintenance work order requirements? Hundreds of analyses and decisions like this were made during this phase. Implementation planning focused on how to move from the current state to the target operating model. The team organized the proposed effort into a series of more than 50 projects, encompassing the NYCHA-BCG project recommendations as well as other Plan NYCHA targeted initiatives. The project team then worked with senior management to prioritize projects, form teams, and develop clear implementation plans and timelines. The NYCHA-BCG team particularly focused on the institutionalization of an Enterprise Program Management Office (EPMO) and the building of project management capabilities to support successful execution of recommendations over the next 5 years. Project Structure BCG employed a project structure involving a Steering Committee consisting of the NYCHA Senior leadership team, and the senior BCG team. The project was co-led day-to-day by NYCHA and BCG Project Managers, making up the project team. Under this project team were the many individual workstreams, which consisted of both NYCHA and BCG colleagues, who were responsible for the daily work, discussions, analyses, and deliverables creation. The NYCHA Board was provided periodic progress updates throughout the engagement

5 Key Findings and Recommendations Based on its diagnostics, the joint NYCHA-BCG team identified key opportunities to improve organizational design and performance, enhance IT systems, and improve business processes. Some of the most important recommendations include: Institute a leaner, property-centric property management model, employing best practices and structures of property management companies NYCHA should shift from more centralized management of its developments, with a large borough office infrastructure, to a model with lean regional oversight and more empowered property managers. o Borough office redesign centralize borough functions and activities to reduce redundant activities - including the elimination of shadow functions; standardize and leverage best practices; and increase operating efficiencies across boroughs by achieving scale benefits for manual processes. At the same time, decentralize property-level ownership and decision-making by making property managers the single point of accountability for property performance. o Property Management Demonstration Project design and implement a project to test alternative in-house and outsourced models; study the applicability of private property management company practices and identify best practices (e.g., business processes, roles, performance measures, and information systems) to adapt to improve efficiency and service levels. Decentralize maintenance & repair (M&R) staff, shifting more resources and accountability to the property-level, and focus on core functions move M&R workforce management from borough offices to the developments, where practical. Make property managers and the property-level maintenance staff more accountable for making timely repairs. Clarify property-level Maintenance Worker responsibilities and support increased capabilities such that they perform a greater percentage of repair work and reduce the need for above-property specialist labor. Give property managers more power and information to decide when to use borough-level M&R resources (e.g., painting) versus third party contractors. Modify select M&R policies and introduce mobile technology to facilitate more efficient, faster delivery of services by the right staff. Transform Community Programs and Development into an orchestrator of core services move away from being a high-overhead (37% for NYCHA versus 15% for best-in-class) direct provider of a wide range of services to an orchestrator of direct service providers. Optimize the program portfolio to ensure the highest value is delivered in the most cost-effective way; as part of this effort, explore the possibility of having other agencies operate the community centers, ideally through a separate - 5 -

6 funding source. Streamline NYCHA staffing ratios and make greater use of strategic partnerships. Move Leased Housing (Section 8) to a more customer-friendly, efficient service model compliant with HUD performance measures implement a more customerfriendly, self-service model (with a target for 90% usage of internet-based services) to replace the paper-driven, mail-in processes. Reengineer business processes to become far more efficient, effective, and compliant with HUD quality targets. For instance, redesign the Inspections process to improve scheduling/route planning to reduce missed appointments and provide more real-time feedback on the Landlord portal on inspection outcomes and required next steps. Seek savings in Housing Assistance Payments through better fraud detection and more sophisticated rent reasonableness analysis. Finally, through the formation of a cross-functional team, prioritize and resolve key agency risks such as inconsistent or inadequate reporting or print/scan issues that impact customer service and regulatory compliance. Reengineer public housing application processes reduce the long wait times (target of 60 days versus the current 100 days), complicated requirements, and limited visibility applicants currently have into the status of their applications. Reduce the number of different priority codes to reduce the % of applicants who are rejected during the process because their priority code status has changed in the interim. Introduce online self-service capabilities with reduced documentation requirements for applicants and greater visibility into their waitlist status. Increase the number of applicant interviewees who actually lease a NYCHA apartment from 27% to over 60%, thereby improving customer service while realizing savings. Consolidate procurement activities and overhaul the supply chain centralize procurement and supply chain activity into a consolidated organization led by a Chief Procurement Officer, with a "Just-in-Time" based, streamlined supply chain model. o Move to strategic sourcing leverage NYCHA's buying power by buying from fewer suppliers (target less than 200 versus 1,400 currently) and apply more rigorous strategic sourcing processes/tools to all of NYCHA's external spend on goods and services. Develop clearer requests for proposals, which should be more attractive to suppliers, therefore encouraging them to offer better pricing. o Create a consolidated organization and redesign processes centralize procurement activity fragmented across NYCHA (with over $400M of spend largely spread across GSD, CPD, SCO, and the boroughs) into a consolidated organization handling all materials and services procurement. Streamline processes and introduce new tools to speed up procurement cycle times while delivering more value (for example, reducing the RFP process to 5-6 months from up to 20 months)

7 o Supply chain transformation use "Just-in-Time" (JIT) inventory techniques to buy goods only when needed while assuring availability where and when supplies are needed to increase the productivity of maintenance resources. Reduce the number of items kept in the central warehouse by two-thirds and drastically reduce the number of storerooms used to store material at the developments. Better integrate the maintenance management system with the inventory management system to "close the loop" between determining material requirements for work orders, obtaining the materials needed and charging them to the work orders directly, and tracking the installation of various parts and appliances in apartment units. Implement a perpetual inventory system for the store rooms that will ensure inventory levels remain accurate. Transform the Information Technology organization into a business change driver move IT away from its traditional position as an "order taker", which responds to multiple, uncoordinated requests from the other NYCHA divisions, to a "business change driver." In order to be a true "partner" with the business areas, establish new roles in IT, including business relationship managers, enterprise architects, product/service managers and vendor relationship managers. Develop new ways of working with the other divisions (e.g., developing business cases with clear, positive "Return on Investment" (ROI) for all projects, making investment decisions via an IT governance board with IT and business representatives, and managing IT-enabled business investment projects in an integrated way). Rationalize facilities and fleet management [Facilities Planning, General Services, & Security] develop a real estate plan to lease unused office space (15 to 50% of "corporate" space is unused), improve fleet utilization (currently 35%) and improve the efficiency of fleet management (potentially outsourcing), and move nonessential functions to vendors (e.g., printing). Initial views suggest NYCHA should also explore generating additional revenues by improving occupancy, rent rates, and rent collection at its commercial storefront properties. Focus Human Resources on being a lean partner focused on talent management [HR] transform HR from being a compliance-oriented, transactional organization to a customer service-oriented business partner to attract, develop, and retain top talent. HR should work in partnership with lines of business to address evolving business needs and invest in strategic capabilities as necessary (e.g., Workforce Planning team). The department should reduce inefficient processes through select outsourcing / partnerships, automation, and a review of services offered. And NYCHA should work to implement a more robust and inclusive NYCHA employee performance management system to incent high performance and deal with low performance (e.g., coaching, training, job moves, separation)

8 Focus Finance on core capabilities and strategic business partnerships, with a "bottom-up" budget process that more effectively involves property managers [Finance, Operations] outsource or automate manual or non-core processes (e.g., payroll, parking administration, utilities payments processing) to streamline the organization. Build more strategic, analytical capabilities to better partner with business areas and strengthen including currently understaffed areas (e.g., General Ledger). Lead the redesign of the budget process to allow top-down direction and bottoms-up needs assessment, supporting the empowerment of property managers with greater accountability. Build the required property-level capabilities. Turn the Capital Projects Division into a proactive asset manager [CPD] significantly overhaul the operating model of CPD, including establishing a single decision maker who is accountable for each project, eliminating redundant oversight mechanisms and shadow functions, and outsourcing most design efforts. CPD should also carefully track the performance of project teams and properties by creating tools such as a performance management dashboard. NYCHA should also transform its long-term capital planning process (e.g., start the capital planning process much earlier based on NYCHA strategic priorities) and create a strategy for short-term spend and obligation of funds. Taken together, the recommendations will help transform NYCHA to a new enterprise operating model supported by best-in-class support functions that operate at lower cost and with greater effectiveness. Cost Savings and Value Delivered The team's recommendations are estimated to deliver approximately $70 million in annual cost savings and approximately $55 million in annual HAP efficiencies and revenue by The NYCHA-BCG teams projected achieving run-rate savings of $13 million in time to begin The cost savings are largely driven by better leveraging of NYCHA's procurement spend and restructuring of the central office support functions. The revenues are largely driven by identifying and fixing "leaks" in rent collection (for a list of the initiatives proposed to achieve these impacts see the appendix). In addition to the financial impacts, significant improvements to service quality and organizational effectiveness will improve many aspects of customer and employee experiences. For example, tenants and landlords will have more reliable, user-friendly customer service access points, streamlined processes and reduced burden (e.g., eliminated document requirements), and faster work order turnaround. NYCHA employees will have more efficient processes and policies, which will increase employee productivity and achieve greater employee engagement

9 Coming out of the work with BCG, NYCHA redid their 5 year operating plan, incorporating many of the initiatives, generating $35M salary and fringe savings by Specifically, NYCHA will be able to save approximately $2 million each year by using a new contingent labor contract (mostly for information technology roles) now in place. A request for proposal for the purchase of MRO (maintenance, repair, and operations parts and materials) items resulted in a number of proposals from vendors. Preliminary contract analyses indicate that NYCHA will be able to use 20 to 30 % fewer MRO suppliers than it uses today and save $2 million to $3 million annually. In addition, the NYCHA-BCG teams have prioritized the next wave of opportunities, targeting further savings. Significant operational and customer service improvements have been made, particularly in Leased Housing. The Risk Mitigation Team completed its major milestones by the end of the 2011, addressing many of the critical agency risks. Examples include: VMS Reporting: Developed a series of inter-related automated reports to fulfill HUD VMS reporting requirements; received positive feedback received from HUD in December, 2011 return audit. HUD Reporting Rate: Increased HUD Reporting Rate to 95% by year-end, achieving a critical reporting milestone that enabled the agency to remain in good standing with HUD. Printing: Addressed numerous system defects that prevented the timely mailing of forms. Scanning: Reduced document intake time from up to four weeks to less than two days, on average. Terminations: Re-designed and re-activated termination process to improve compliance with local requirements; changes include new forms, business rules, and Spanish-language translations. Operational backlogs: Addressed backlogs in numerous areas, including unclassified documents, inspection self-certifications, inspections, lease renewals, annual reviews and fatal errors. Inspections: Re-designed scheduling to simplify and improve efficiency; made bar-coded selfcertification forms available on the web to improve landlord customer service. Port-in billing: Reconciled port-in billing across systems. Quality assurance: Completed 2010 and 2011 mock RIM audits; developed detailed guidelines and checklists for recertification team

10 Other areas of progress include: In Operations, the teams have progressed borough redesign by shifting activities from boroughs to either the property-level or a centralized operations unit o Launched 5th borough, which will test streamlined regional management and shift ownership for key activities (e.g., budgeting) to property level o Consolidated borough support functions into a Centralized Business Services unit to leverage best practices and reduce redundancies The Operations teams are also ready to launch the Property Management Demonstration Project with structured in-house and outsourced models to test new practices o Drafted RFP for the Demonstration Project o Designed models to test practices along lines of private property management companies, including key M&R policy / process changes ATAD transitioned toward a redesigned, more efficient department, realizing savings through its early restructuring. ATAD has also designed a credit check pilot for launch in early March and designed initial priority consolidation /simplification Teams working on procurement and supply chain projects have instituted an expedited RFP process, reducing cycle time by 7 15 mos (shortened RFP process from months to 3-5 months). They have also set a vision and plan for the proposed more efficient supply chain structure, including the design of inventory management pilots and definition of tracking metrics NYCHA-BCG teams working on Capital Projects made progress on several fronts o Instituted a dashboard to support accountability and tracking, including the development of metrics to track the performance of both people and projects o Launched phased rollout of the newly-designed CPD operating model (including staffing, process changes, project selection) to deliver projects on-time and on-budget o Developed high-level capital planning process, including defining a framework for developing a capital plan aligned with NYCHA's strategic priorities and identifying organizational and process changes to reduce time to obligate o Finalized approach and roadmap for short-term obligation of funds, including a proposed framework for filtering projects and an initial recommended near-term list

11 Implementation and the Path Forward BCG worked with NYCHA to establish a clear implementation plan to ensure that the full value of the recommended initiatives is delivered. The joint team prioritized and sequenced the implementation of these initiatives to build momentum and to ensure that the most critical and foundational recommendations are implemented first. The Enterprise Program Management Office (EPMO) was established to ensure the initiatives are successfully implemented and the full value of the team's recommendations is realized. BCG resources trained the EPMO staff and the project managers to build required program and project management capabilities.. The EPMO is responsible for driving the overall program to ensure that the cost savings and revenue increases are actually accomplished. The EPMO reports directly to the General Manager and works closely with the senior management team. EPMO staff helps identify interdependencies between projects and departments, manage cross-department collaboration, and support stakeholder engagement. Tools have been instituted to track progress on a weekly basis across all initiatives and to measure enterprise-wide performance. Related to performance in achieving the targeted impacts, NYCHA-BCG teams have defined and agreed upon enterprise-level and department-level metrics for an executive dashboard to track organization success (i.e., NYCHA has begun moving toward establishing a metrics management system to support keeping its teams on track). This EPMO will serve as a critical tool to help guide NYCHA along its journey. NYCHA's transformation is not a short-term effort and its scope goes beyond the identified NYCHA-BCG project recommendations. NYCHA's transformation and related change efforts will need to be managed and the organization will face ongoing challenges over the next 5 years. This change will require: Consistent and intense effort across the organization with diverse, interagency teams set up while doing their day job Culture change and getting through some bumps and business disruption Ongoing stakeholder engagement and support Investment in capabilities and staff (e.g., training) which is accounted for in the cost savings estimates and expected future state

12 Importantly, NYCHA-BCG project recommendations and Plan NYCHA proposals were built together with NYCHA employees so that they could be owned by NYCHA and be based in reality. BCG has worked with the NYCHA EPMO and senior executives to help them prepare for this effort and all NYCHA team members have worked energetically and with a commitment to achieve change. NYCHA staff will and are identifying further opportunities beyond the $70M. In particular, they are investing significant activity to improve front-line operations (e.g., improving overtime, adapting learns from the Property Management Demonstration Project), an area which has great potential but was out-of-scope of the NYCHA-BCG project. The work of these teams and the joint NYCHA-BCG teams are already starting to bear fruit. With its EPMO capabilities, roadmaps, and project teams, NYCHA now has not just the ideas but the infrastructure to see its transformation through. Regards, Allison Bailey, Pappudu Sriram, BCG Senior Partner and Managing Director BCG Partner and Managing Director Phone Phone bailey.allison@bcg.com sriram.pappudu@bcg.com