DR. CATHY MINCBERG MR. DAVID GUEDRY THE SAGE COMMISSION Operational Cost Savings and Increased Productivity Strategies in Houston ISD 1 1

The Problem The Scope  Seventh largest district in the country  50,000 job applicants a year  850 buses transporting 48,000 students  Largest restaurant and yard maintenance company in the county Ineffective and Inefficient  5,000 payroll problems each pay period  Processing work orders took months, if ever  Thousands of computers not networked  Excessive bus driver vacancies mean late arrivals for thousands  850+ teacher vacancies on the first day of school 2

History: How did a huge public school system dramatically improve effectiveness and efficiency? The Goal: to create a performance and data driven business system that supports schools with increasingly higher customer satisfaction and increased productivity. Key ingredients were leadership, expertise, metrics, customer service To consider outsourcing, it must:  Work better  Cost less  Take care of the people  Guarantee results One Solution: Borrow strategies and tools that have worked for decades in corporate America, including identifying functional, non-core areas that can be outsourced to a third party provider that will result in HISD meeting the identified goals - HR - Facilities management - Food Services - Develop Finance and Accounting System 3

The Tools Matrix management – The Major Projects Committee Metrics – Drucker modified Key performance indicators (KPI) with national standards Monitoring Outsourcing – management not employees Pay for performance - food service Incorporating vendors – part of the district team Customer service surveys Superintendent sponsorship Culture change – sustainability through KPIs 4

Maintenance Results and Metrics Maintenance  Outsourced management only to ServiceMaster  $34m savings over five years  60% increase in productivity  35% staff reduction through attrition  Retrained custodians, better supplies and equipment  Tripled number of work orders completed  Preventive maintenance program  Completely outsourced new school maintenance/grounds/custodial  Decentralized maintenance department to 4 zones 5

Food Service Results and Metrics Food Service  Outsourced management only to ARAMARK  Performance pay incentive program  Increase student participation by 55,000/day  $15m turnaround  Increased revenue by 40%  Increase customer satisfaction by 33%  Downsized kitchens through attrition  Increase labor productivity from 11 MPLH to 24 MPLH  Biweekly analysis of costs and productivity by kitchen  Restructured supervision of school kitchens 6

HR Results and Metrics Human Resources  87% reduction in teacher vacancies  Reduced the size of HR by 25% in one year through attrition, position elimination and reassignment  Installed PeopleSoft (with consulting support) to replace 40 legacy systems  Established a multi-faceted principal selection process  Reduce turnover rate for bus drivers and food service staff  Gave principals online access to all applicants  Expanded substitute pool to meet school needs  Reduced payroll issues by 96% 7

Technology Results and Metrics Technology  Used consulting support for specific projects while management stayed with the district  Built a state of the art $100m technology infrastructure in 300 locations  Successful SAP ($11m), PeopleSoft ($15m) and student information system ($3m) implementations  Built curriculum website and assessment analysis software  Built an employee and community web portal in 2002  Laptops for all teachers to connect to instructional resources  Secured $130m in E-rate funds 8

Transportation Results and Metrics Transportation  Buses fully staffed  Increase on-time arrivals to 98+%  Reduce accidents by 10%  Create transportation web tools for parents, schools and employees  Improved driver attendance – earning over $250,000 in incentives  Reduced number of bus routes by 200 while still serving the same number of students – saving $5m  No significant outsourcing 9 9

Police Results and Metrics Police  Became the first accredited school district police force in the nation  Conducted Crime Prevention through Environment Design at all secondary campuses  Reduced overall district crime rate  Earned top rating in 4 of 5 customer satisfaction ratings  Upgraded technology to interface with other criminal justice systems  No outsourcing 10

Contracts Maintenance  Preventative maintenance analysis and cycle  Equipment replacement  Work orders by emergency, day completion  Full custodial and plant maintenance for new schools  Grounds maintenance  No custodial supervision, only training  Control over all hiring, configuration and evaluation of work force  Customer surveys  Performance standard metrics  Performance commission - 5 year contract but yearly metric negotiations Food Service Metrics for performance – FRL participation, savings  Control over all hiring, configuration and evaluation of work force  Customer surveys  Performance commission - 5 year contract but yearly metric negotiations  Performance standard metrics 11

The Lessons Learned Sustainability  Superintendent sponsorship  Board buy-in  Expertise on-boarded as needed (i.e. SAP, PeopleSoft)  Replace obstructionists (i.e. food service, HR)  Outsource only the management, keep the employees (reduces opposition, allows for easier transitions if it fails)  Establish and publish comparable KPIs  Performance metrics – Annual surplus guarantee, customer satisfaction (teachers and students), student participation, increases in eligibility for free and reduced price meals, increased nutritional values, and productivity increases  Employee training – the service provider is committed to providing the employees forma training programs so as to increase productivity and provide the employees with a heightened sense of value to the district.  Hire department staff with training (i.e. HR trained not displaced principals)  Support outsourced management like it is your own  Give credit when possible outside the division  Partner within the district so they share your success  Update principals/district superintendents regularly  Publicize savings and results gently  Let employees feel the successes and see their part  After dramatic savings, no district-wide cuts 12