Recommendations of the Texas Comptroller

Enhance State Employee Suggestion Systems

Summary

The State Employee Incentive Program (SEIP), administered by the Texas Incentive and Productivity Commission, rewards state employees for suggestions that save money, generate revenue, improve services, increase efficiency, or enhance the safety of state programs. Enhancements to the SEIP could increase its effectiveness and the savings it generates for the state.

Background

Today’s most successful organizations encourage their workers to suggest improvements freely and frequently, and reward them for innovative thinking. Most suggestion programs offer employees a monetary reward for approved ideas, yet many employees see the actual implementation of their suggestion as being just as important. Robin McDermott, director of training at Resource Engineering, states that the best employee suggestion plans encourage workers to “fix things they face every day, not [to suggest] huge bottom-line ideas that cost a lot and take a lot of management’s time to implement.”[1]

In programs like one at the US General Accounting Office (GAO), an employee with an idea may participate on the team that puts it into action. GAO helps Congress address a full range of national issues. Like many other governmental organizations, GAO faces a continual challenge in meeting increasing service demands with finite resources. To meet this challenge, government agencies must maximize their effectiveness, manage risks, and optimize employee productivity.

In 1999, GAO initiated several efforts to improve agency operations, including strengthened internal communications and an employee suggestion program. According to GAO Comptroller General David M. Walker, the “new employee suggestion program has already led to several recommendations that have enhanced the US General Accounting Office’s operations. World-class organizations like the GAO need to tap regularly into the ideas and ingenuity of their staff to continuously improve their economy, efficiency, and effectiveness.”[2] The Comptroller General’s Office within GAO operates the program, which is open to about 3,200 agency employees. High-level managerial support contributes to the program’s success.

Linda Kemp, the program’s administrator, immediately acknowledges employees who make suggestions, and typically responds to their proposals within a month after evaluations are completed. Since the program’s inception in October 1999, the agency has approved about 10 percent of 510 employee suggestions received. The comptroller general presents a plaque and $100 to employees with approved suggestions at a quarterly ceremony. GAO promotes the program through its weekly employee newsletter.[3]

Raytheon’s Missile Systems Division in Andover, Massachusetts has instituted a highly successful “Act Now!” suggestion program to reward employees for innovative ideas.

“Act Now” is actually two programs, the Employee Suggestion Program and the Cost Reduction Program. The Employee Suggestion Program rewards employees for the implementation of ideas not related directly to their own job expectations, while the Cost Reduction Program rewards them for job-related suggestions. In 1990, 64 percent of the company’s employees participated in the program, which produced an average savings of $2,500 per employee.[4]

State Employee Incentive Program

Texas’ State Employee Incentive Program (SEIP), administered by the Texas Incentive and Productivity Commission (TIPC), rewards state employees for suggestions that save money, generate revenue, improve services, increase efficiency, or enhance the safety of state programs. Authors of approved suggestions are eligible to receive cash awards of ten percent of the first-year net savings attributable to their suggestion, up to a maximum of $5,000.[5]

The 1999 Legislature made significant changes to TIPC’s enabling statute to increase state agency participation. Previously, TIPC received 100 percent of its funding from actual program savings. Agencies that saved money through TIPC programs, including the SEIP, transferred a percentage of the savings to TIPC. The new statute shifted TIPC’s funding source to general revenue, eliminating the funds transfer process and allowing agencies to keep more of the savings.

The changes also increased the award for group-authored suggestions to $5,000 per individual for a group of four or more, and authorized TIPC to award $50 for approved suggestions that improve service, efficiency, or safety but do not generate savings.[6]

Quality Teams

According to the Best Manufacturing Practices Center of Excellence, Lockheed Martin’s Government Electronic Systems Division created “incentive pools” in 1994 to encourage teamwork “by allowing all members of a work center or department and its associated design teams...to share the accumulated benefits of successful suggestions implemented during the year.”[7] Lockheed Martin awards employees 15 percent of the estimated labor and material savings resulting from “tangible” improvements, and up to $500 for “intangible” suggestions that improve cycle time, ergonomics, facilities, ESH (environmental, services or health) materials, and labor usage.[8]

TIPC’s administrative rules already allow quality teams to participate in the SEIP. The rule states that “an employee who is temporarily assigned by his or her agency to a team that is established for the purpose of developing process improvements in that agency is not considered ineligible solely because of participation on the team...”[9] By promoting team eligibility, TIPC could increase SEIP participation and encourage more teams to develop major improvements in their own agencies and across state government.

Promotional Campaigns

Proper promotion is important to the success of employee suggestion programs. USAA, a company with 23,000 employees, ranks publicity second only to communication on its list of factors that contribute to its program’s success.[10]

The six TIPC staff members serve more than 300,000 state employees, many of whom work outside Travis County.[11] Despite its small size, the agency has certified savings of more than $13 million due to SEIP over the last ten years.[12] An aggressive marketing campaign to promote SEIP could increase statewide participation and generate additional savings for the state, while allowing TIPC to reach more state employees.

Employee Awards

Experts have found that effective suggestion programs find creative and visible ways to recognize employees.[13] Although many employees seek cash awards, others prefer options such as additional leave. Agencies could grant employee incentive leave to reward not only employees making suggestions, but those involved in SEIP promotion, evaluation, and processing as well.

Merit Pay Awards for Employees

The present merit salary cap is set at 1.7 percent of agencies’ classified personnel budgets. Such caps may have the effect of limiting the amounts agencies feel they may award employees who generate good ideas. SEIP participation might be increased by allowing agencies to use a portion of the money they save through SEIP to reward deserving employees, particularly if such awards were not counted against agency merit salary caps.

Idea Fairs

Each year the Comptroller’s office sponsors an “Idea Fair,” usually a one-day event, to promote agencywide creativity and innovation by allowing divisions to demonstrate their accomplishments in process improvement, customer service, work quality, safety, or fiscal savings. The fair also provides the agency with an opportunity to solicit and generate employee ideas. An Idea Fair Committee plans and coordinates the fair’s events and obtains speakers for employee education and professional development training sessions. In addition, the agency presents peer-nominated outstanding employee awards.

The Comptroller’s office promotes the Idea Fair on an Intranet Web site that advertises upcoming events. The agency also accepts ideas and general comments online from employees in field offices and any employees who will not able to attend the fair.

Recommendations

A. The Texas Incentive and Productivity Commission (TIPC) should encourage agencies to use quality teams to develop process improvement suggestions.

B. State law should be amended to direct TIPC to establish a statewide marketing campaign for the State Employee Suggestion Program (SEIP).

A rider should be established to provide TIPC with an initial appropriation of $50,000 in general revenue for the marketing campaign. Once TIPC begins receiving additional funds from the new funding method described below, it would be required to reimburse the General Revenue Fund for the startup loan.

TIPC would use the $50,000 in general revenue to initiate a contract with a vendor to create a statewide SEIP marketing campaign. The campaign should encourage employees to submit ideas that produce tangible savings and promote the use of TIPC’s interactive Web site (www.seiponline.com) for the suggestion program. TIPC should include in the contract additional performance-based incentives contingent on savings generated by the campaign.

Employees who make suggestions that result in savings or increased revenue are eligible for 10 percent of the first-year net savings, up to $5,000. Currently, if 10 percent of the savings exceeds $5,000, the agency that pays the award can keep the difference. For example, if an employee submits a suggestion that saves his or her agency a net amount of $200,000, 10 percent of the savings would equal $20,000. The employee, however, can only receive $5,000 according to program rules, leaving a difference of $15,000. Under this proposal, agencies with approved suggestions would transfer to TIPC the difference between 10 percent of the first-year net savings and the maximum employee award of $5,000-$15,000 in the above example. The transfer would be performed when agencies certify the savings and pay the employee the award.

Under this funding method, about $199,000 in additional revenue would have been available to TIPC during fiscal 1999, and more than $276,000 would have been available in fiscal 2000 (Exhibit 1).

Exhibit 1

Proposed Funding Structure for SEIP Statewide Marketing Campaign

Based on Current State Employee Incentive Program Savings

Sources: Texas Incentive and Productivity Commission and Texas Comptroller of Public Accounts.

The funding for this contract could be placed in a pooled fund managed by the Comptroller’s office, with a specific amount appropriated to TIPC to finance the marketing campaign.

An increased marketing campaign is likely to double SEIP program savings (Exhibit 2). This illustration assumes that the marketing cost would total no more than $100,000 each year and be paid from savings that would flow from TIPC.

Exhibit 2

Projected Revenue from Proposed Funding Method*

Sources: Texas Incentive and Productivity Commission and Texas Comptroller of Public Accounts.

As Exhibit 2 shows, a projected excess of about $300,000 per year could be freed up to fund other legislative priorities.

Exhibit 3
Projected TIPC Savings *

Sources: Texas Incentive and Productivity Commission and Texas Comptroller of Public Accounts.

*“TIPC Projected Certified Savings” are based on the TIPC Legislative Appropriations Request. The “Total Projected Savings (with Marketing Campaign)” is anticipated to double the projected certified savings. The total projected savings minus TIPC projected certified savings would equal the potential savings attributable to the marketing campaign.

C. State law should be amended to authorize state agencies and universities to grant employee incentive leave for up to three days as a reward for SEIP participation.

This authorization could be established by a rider to the state general appropriations bill. TIPC would adopt rules for the conditions governing employee incentive leave.

D. State law should authorize agencies to grant one-time merit pay awards to deserving employees from a portion of agency SEIP savings.

Funds generated through agency participation in the SEIP could be used for one-time merit pay awards beyond agencies’ established merit salary caps. The state should allow participating agencies to decide which SEIP-certified savings to apply to documented meritorious performance as one-time merit pay awards. This change could improve morale, reduce employee turnover, and improve state government performance.

E. TIPC should promote Idea Fairs at other state agencies.

TIPC should encourage state agencies to host Idea Fairs. TIPC training sessions devoted to idea development and creative brainstorming, followed up by orientation and training on its Web-based idea submission system, would help ensure that employees submit high-quality ideas.

Fiscal Impact

These recommendations should increase SEIP program participation, which in turn should result in additional savings and increased revenue for the State. The amount and timing of these savings and revenue, however, cannot be estimated.

An appropriation rider should be established to allow TIPC to begin with $50,000 in general revenue the first year of the 2002-03 biennium for a statewide marketing campaign to increase program participation.

TIPC would be required to repay the $50,000 appropriation in fiscal 2003; therefore, there would be no loss to the General Revenue Fund for the biennium. Since the success of the program cannot be determined at this time, the appropriation for 2003 and subsequent years should be contingent upon the success of the previous year’s marketing program. An appropriation rider for “usage and reimbursement of General Revenue” would allow TIPC to use general revenue funds in fiscal 2002 pending the receipt of funds from the SEIP, as detailed in the above recommendations.

Endnotes

[1] “Make Your Worker’s Suggestions Pay Off,” Investor’s Business Daily (March 9, 2000), p. 1.

[2] “Prepared Statement of David M. Walker, comptroller general of the United States General Accounting Office, before the Senate Appropriations Committee Subcommittee on the Legislative Branch,” Federal News Service (February 29, 2000), p. 6.

[3] Telephone interview with Linda Kemp, administrator, United States General Accounting Office, Washington, DC, July 27, 2000.

[4] Best Manufacturing Practices Center of Excellence, “Best Practice: Act Now! Suggestion Program,” December 17, 1999 (http://www.bmpcoe.org/bestpractices/internal/rayms/rayms_31.html). (Internet document.)

[5] Texas Incentive and Productivity Commission, “Employee Involvement” (http://www.tipc.state.tx.us/overview/ei.htm). (Internet document.)

[6] Texas Incentive and Productivity Commission, “SEIP” (http://www.tipc.state.tx.us/seip.htm.). (Internet document.)

[7] Best Manufacturing Practices Center of Excellence, “Information: Employee Suggestion Program,” December 17, 1999 (http://www.bmpcoe.org./bestpractices/external/Imges/Imges_89.html). (Internet document.)

[8] Telephone interview with John McGowan, senior manufacturing engineer and suggestion administrator, Lockheed Martin - Naval Electronics & Surveillance Systems, Moorestown, New Jersey, September 6, 2000.

[9] T.A.C., Part 13, §273.9.

[10] Telephone interview with Pauline G. Jenson, senior service representative, USAA, San Antonio, Texas, June 26, 2000.

[11] Texas State Auditor’s Office, “A Quarterly Report of Full-Time Equivalent State Employees for the Quarter Ending May 31, 2000,” Austin, Texas, July 2000 (http://www.sao.state.tx.us/Reports/report.cfm?report=2000/00-713). (Internet document.)

[12] E-mail communication from Ed Bloom, executive director of the Texas Incentive and Productivity Commission, October 18, 2000.

[13] “Employee Initiative Rewards Everybody,” Sacramento Business Journal (March 24, 2000), p. 30.

e-Texas is an initiative of Carole Keeton Rylander, Texas Comptroller of Public Accounts
Post Office Box 13528, Capitol Station
Austin, Texas

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