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Luberda 5.2011 Memo RE: Patterson

Luberda 5.2011 Memo RE: Patterson

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City of Fr¿nklin

Date: To:

May 13,2011
Personnel Committee Finance Committee


Director of Finance and Treasurer Succession Planning, including amending the job description, authorizing advertising for a Director of Finance and Treasurer, and directing the Directo¡ of Administration to prepare a Job Description for a Chief Financial Officer and a related proposed employment agreement revision.


Introduction: The attached document from Cal Patterson addresses preparation for his retirement. In orde¡ to assist the City in the tansition to replacing this critical position, Cal has offered to switchto apart-time schedule that would enable the City to bring anew individual up to speed over a period of time, ensuring that the individual has significant access to the institutional knowledge of current Director of Finance and Treasurer, while being able to transition into the full duties envisioned by the Job Description. His proposal is attached and deøils his recommendation.
Organizations do not always have the time to perform detailed succession planning the process whereby an organization plans for and ensures that employees are recruited and developed to fill key roles in the organization. Cal's intent, referenced in his memo, provides some time for succession planning. Depending upon the preferred option of those discussed herein, however, one could recommend that the City would be better offto move forward quickly. That is the purpose of this memo, which addresses the issue broadly and makes a recommendation based on the best available information as compiled herein. If greater det¿il is desired by the Personnel Committee, the Finance Commitæe, orthe Common Council, the item canbe defened whilethe additional

information is gathered.

Hirine Process: As amatter of background and context, the following sûeps and dates roughly outlines the timeline associated with filling a deparhnent head Ievel position, using the current
scenario as an example. May 16 - Joint Personnel Committee and Finance Committee to consider altematives and present a recommendation to the Common Council. May 17 - Common Council authorizationto advertise per such reconmendation. May 17 to June 17 - Advertise, anticþating using professional sources such as GFOA and complete packets of candidates meeting the minimum qualifications distributed to a review committee or individuals as determined by ttre Mayor. Jr¡ne 17 to June 24-CompIete review of applications of candidates meeting minimun qualifications and selecting potential interview candidates. June 24 to July l0 - Schedule, hold, and furish interviews.

Juty 1 I to July 31 - Complete backgrorurd check on índividual(s). August 1 to August I - Contingent offer of employnent and complete discussion/negotiation on teünsi of employment or employment agreement. August 9 to August 2l - Complete Drug Screen and Physical. September 6 - Council Approve Employment agreement if neæded. 24 Weeks - Successflil Candidate provide notice to current employer. October 1-Sta¡tdate.
The above timeline is an aggressive timeline that does not build in much flexibility for potential detays. Such delays could easily creep into the process as a large number of applicants could require more than a week for the initial screenings, advertising deadlines could cause more time to errsrre each source provides two weeks for application completion, or multiple '1ied" candidates could require second interviews after the background check. The entire process could stmt over again if no zuccessful candidate is identified orthe successfirl candidate declines the posítion. The recommendations and discussion to follow take into consideration the potentiøl timeline above.

Althougb the Director of Finance and Treasrrer has offered a rscommsndation, there are alternative palhs that the City could also consider. Following is a brief description of each altemæive and some limited comments onthe positive and/or negative aspects of each option. Obviously each of the items could be investigated in much greater detail; if more investigation is desired, please provide such a directive.
41. tF,mêtives:

1) Direct Replacement. This option is the most coÍrmon strategy followed as most commonly an individual announces their departure and the recnritnent is complete.d following the departtre. The new individual simply uses wh¿tever transition document wa^s pr€pared by their predecessor and moves forward learning on the job. Absent mutr¡al agreement with the incr¡urbent to provide for an overlapping transitionperioü this optionwould bethe standard default strategy. Importantly, it does not provide forthe development of the replacement andprovides limited ac,cess to guidance and mentoring into Franklin's current business operations. As such, there is an inherent inefficiency in sp€nding time and resources finding information on the current status of issues and
researching how that issuc carne to be at its current state. possible to hire an accotmting firm to serve in this role, am not aware of any municipality currently using an accorurting firm as their Finance although I Director. Contracting out senior level positions is often expensive, as exemplified by the $200 plus howly rate for labor attorneys, $195 per hour for actuary services, and approximately $185 per hour for the Auditor's Senior Manager in 2009. Use of such services is more typically reshicted to project specific tasks and not broa{ r'nspecifi.ed services, including lots of special projects and short-notice, quick-response analysis, as is t¡'pically expected of a departrrent head. Similarly, contracting out the service requires an altemative approach to supewision of other deparbnent employees. Although this can v'/ork, as ít does with Asssssing currently, it is not the best scenario as the supervisor is likely in adifferent location than the individuals being supervised" which doesn't provide for the best or most effrcient oversight. For these reasons, this stategy is not recommended- If greater research into this option is needed, please provide such a directive.

2) Contracting Out: It is theoretically


Se,parate the Treaswer and Finance Director positions. The City previously determined to consolidate these positions into the current position. A quick review of the following contmunities indicates that only Oak Creek retains tåe positions as separate positions: Wauwatosa" Greenfiel{ Brooldeld, Menomonee Falls, New Berlin, and Oak Creek. The Director of Finance and Treasurer

has provided the attached sheet that explains why he believes ttre positions should not be separated.

If the durties u¡ere once again separated into two different positions, the smaller staffsizes in each deparhnent could negativeþ imFact the inæmal contols. For these reasons, this stategy is not
recommended. If greater resea¡ch into this option is needed, please provide suoh a directive.
Retain the Incumbent in a part-dme position through an extended transition period: This is Ca['s recommendation. In this option, Cal would revert to approximately half-time. As is discussed further below, I recommend a shucture establishing Cal as a Chief Financial Officer, focusíng on Treasury duties, while a new Finance Director wor¡ld focus on getting fully up to speed with the Finance Department and all of its nuances and requirements. CaI would be aready tesource, routinely transferring his corporate knowledge as to process, resourc€s, etc., thereby making the new Director sigRificantly more effi.cient- Officiall¡ Cal, as Chief Financial Officer, would serve in a supervisory and mentoring role ensuring the individual had time to develop the full background and expertise to mâîage the job more like a veteran and less like a new hire. This preferred option will b€ discussed more fully below ín the recommendations sectíon.


5) Retain Incumbent as an hourl¡ as-needed contractor, This is similar to nr¡mber 4, but the access to Cal and the structure ofthe contact would be differont. As with any ofthe optíons that involve retaining the incumbent" it requires the mutual agreenent of the incumbent. A structwe ofthis nature would typically h¿ve less fixed and more va¡iable houts, which would not be as beneficial in the development of the incomingreplacement. Similarl¡ it would probably eliminate the abilþ to
retain the incumbent as an overall supervisor in a CFO-role as discussed above and only use Cal as an advisor or mentor. If focusing successionplanning on the development of the incoming replacement, the single chain of command provided with Cal remaining overall supervisory authority is probably beneficial. Compared to option 4o 'his option is not recommended. certain flurctional, tzke along time to put process-driven tasks with another govemmenL zuch an option would together. It would also likeþ not serve well for dealing with special projects and peak work loads, since both communities tikely have significantly ovedapping budget and audit timelines. For these reasons, tbis shategy is not recommended. If greater resea¡ch into this option is needed, please provide such a directive.

6) Intergovernmental Consolidation: Although it is possible to consolidate

zupervision to the DOA and hire a senior accountant. The DOA aheady has a broad span of control and more priorities and projects than can all be accomplished in the short term. hnportantly, the Governor's recent labor related changes has generated a voluminous hr¡man resources workload for the coming year or two. Savings also would not be significant as midlevel support, such as a Senior Accountant, would still be required. For these reasorxl this strategy ís not recommended. If greater research into this option is needed, please provide such a directive.

7) Assign

The pdmary options, therefore, are to re,place Cal with aneìv individualhaving Cal's same authority or to purzue a part-time option as zuggested and offered by the Director of Finance and Treasurer. Simply replacing a person after they leave employment is a normal, organizational occtrrrence. After all, nobody is irreplaceable. The simple matter of fact, however, is, if given the opportunity, an organization can look beyond reaotive management of simply filling a vacancy to proactive nanagement and planning for long-term success in filling the vacancy. In doing so, the Cþ can consider what is the impac-t upon the organization and what is the potential risk to the

organiz¿1i6n dwing the replacement process and the weeks, monttrs, or years following the

replacement. The risks with extemal candidaæs are higher simFly based upon the unfamiliarity of zuch candidates. Cal's predecessor, for example, was only here 11 months. Retaining Cal in a superuisory and mentoring role, signifi.cantly mitigates that risk.

Although certain departments, such as Police and Fire, have a culture of intemål promotion and the City has a policy to encourage such interral promotions, there are not any anticipated qualified candidates for this senior position- As sucb many organiz¡ti6ns would typically pursue an extemal candidate by default due to the lack of an internal candidate who might be home-grown and nurtured to prepare them for the leadership role. The altemative offered by the Director of Finance and Treasurer effectiveþ gives the City the opportmity to develop an inte¡ral candidate, as is consistent with our personnel policies. It enables the City to identiff a potential successor; bring that person on-board; nurh¡re, train, and deveþ the individual; and then put the individual fully in

Providing for the succession in this Íranner eliminates c€rtain risks associated with a new external candidate. Although the hiring process is intended to identifr the best candidate, it is not fool proof. Placing an individuat in a structure where Cal remains in a supervisory, CFO role enables the City to field test the individual to ensure they are actually the appropriate choice in the long run. This reduces the organizational risks associated with selecting a bad candídate. Natu¡ally, as noted above, nobody is irreplaceable and the City could find an individual who could step in on day one with years of municipal experience and never miss a beat; btrt there is no guarantee of that. The proposed structure provides a level ofguarantee to or insurance for the frnancial operations ofthe City, which ís discussed in greater detail below.

Additionally, I do not believe that the impact on the applicant pool will be signifi.cant. There may be some potential candidates with lots of experience who detennine that the job is not for them because ihey don't want to report to anybody. Conversely, up and coming professional candidates, so to speaþ nigþt be very well suiæd to this developmental process. Additionally, this process may make it easier to cornider a shong general finance candidate who is lacking inmunicipal experience. Conceptually, therefore, the very best candidate may be less likely to consider âpp$ng, but ow overall options and numbers tikely increase. It is, however, not possible to say with certainty rdhat will happen because, at this point" the potential applicant pool remains an unknown. It is possible to strike gold with the perfect candidate, but I believe it is fair to say that, statistically, the odds of this happening are less than the odds of finding a strong candidate who can be trained and mentored to become the perfect candídæe. This is what successionpl¡nning is all about. The odds of getting a stong replacement in the long-run are increased because you develop the s6ong replacement, while at the same lime the risks associated with what turns out to be a weak candidate are reduced because ofthe experienced supervisor continuing to provide that support and
assurance. Costs:

As noted in Cal's repor! there is an added cost to the proposed stn¡cture. Cal estimafed a net impact for this yoar of approximately $13,000, which cor¡ld be less giventhe potential October start insæad of the September start he anticipated. Cal estimated firll-year costs to be approximately $23,000. I would estimate the costs could be slightly higher depending upon the experience of the

individuat hircd. Cal's current position is a range 1 1, while Cal anticipated a new position title in range 10 and used the midpoint. The differsnce at the midpoint is approximateþ $5,800.
As noted above, I believe the City is organizationally better offto hire the new indivídual into the existing job title of Diresto¡ of Finance and Treasurer, which would thenremain aftInge 11. The salary mnges overlap zufficiently so that Cal's estim¿te could remain accurate. (A copy of the Satary Ranges of Non-Represented Employees is attached for yow convenience.) Nonetheless, I believe it is possible thaf depending upon the qualiñcations of the individual, a starting salary could be anywhere between $85,000 and $95,000. During the summer, I will have Dana prepare a morÊ comprehensive review of neighboring community Finance Dírector salarieso so that we are in a stong position to address the matter in advance of discussions with any particular individual. Agaiq I would recommend being prepared to consider a cost that is slightþ higher than that noted by Cal, but given the impact of this position on the organization as a whole, such costs probably merit consideration.
The perspective of insurance referenced on the prior page is a valid consideration when considering the potential costs. For example, the City pays $406,110 per year for workers compensation insurance to insure against large claims that could stem from a worþlace injury. The City pays 936,622 per year in automobile physical property insurance to insure agaínst loss to the City's vehicles and equipment valued at $6,746,005. We also pay $237,438 per year for various othor liability and insurance coverage to protect the City from loss and guard agaìnst risk. The added cost above, which is a short-temr cost associated only with the tansition period, is insurance against risk to the $36,000,000 in operating, capital, and utilþ fïnancial operations. Financial operations are the backbone of much of the City's operations. Some add€d costs during a transition period could be considered a wise investment to reduce risks to this critical administrative structure. The risk reduction is key, as a mistake by a Departrnent Head in the financial a¡ea could easily lead to losses

ofhr:ndreds ofthousands of dollars ormore. Miscellaneous: Process. Approvals. and Authorízations.

1) Job Descriptions: It would be possible to develop two new job descriptions, which could be used dwing this t¡ansitional, developmental period, as \ilasi suggested in Cai's memo. The Municipal Code of Ordinanc€s, however, contemplates a Director of Finance and Treasr¡rer. So, changingtitles could also require ordinance modification, The ordinance, however, does not specit the job description for the Director of Finance and Treasurer, so I recommend simply aurending the "Reports to:" portion ofthe current job description (a copy of which is attached for your convenience) to the following st¿tement:
"Reports to: Mayor, exceptwhenthe positionof Chief Financial Officer (CFO) is filled, ín which instance the Director of Finance & Treasurer reports to the Chief Financial Officer who shall supervise, oversee, and mentor this position and may delegate, move, andi/or assign duties, tasks, and authorities of this position between this position and the CFO position.

A separate CFO job description could then

be put in place that identifies the position as a ûemporary, part-time position, contemplates its eventual elimination, and addresses the relationshiF with the Director of Finance and Treasurer. This job descríption would be prepared for the next


Leaving the cunent job title otherwise unchanged would be a shong sign to the incoming replacement of the City's intent to develop them into the full role, following a transition period. It would also give them some assurance that a firrther action of the Common Council would not be mandatory following the eventual elimination of the CFO posítion.
CFO role, the Cify and Cal must terms of employment Cal's current contract has a section that contemplated a mutuall.y agree to the potential transition out of a full¡ime position. The section is as fofows:

2) Mutual Agreement: In order for Cal to tansitionto apart-time

7. REDUCTION IN HOURS In the eventth¿tthe Employee and Employer mutually agree to areduction in the hours and responsibilities of the Employee the bí-weekly base salary of the Employee would be reduced. That reduotion would be to an amount based upon the percentage of the hours to be worked bi-weekly divided by the eighty (80) hours in a bi-weekly pay period. Dwing this period üe Employer would continue to be responsible forthe full health benefits."
"section Given this language it is possible to move forward without amending the contract itselfl but it is still necessary to mutually agree, presumably in some u¡rittenform, to the reduction in hours and responsibilities. On March 14,2011, Cat did provide the City a unilateral offer to extend the autòmatically renewable date in his current contract to June 8ü, 2011. Given the proposal now under consideration, it would not be unreasonable to amend the contract to provide for greater detail in addressing the transition period, to discuss an expectation as to the term ofthe transition perio4 and to clariff compensation issues, such as altering the automatic annual increase to be consistent with the recent paüem of contract settlernents that applied to all other employees. Therefore, if the City desires to pursue the recommended strategy, I propose that I be directed to work with Cal to prepare a negotiafed, revised contract (or options) for the Common Council's considemtion. Given ã general agreement is already in his current contrac! I would like to anticipate that Cal and the City wóol¿ reach mutually agreeable terms and, therefore, recommend moving forward with the hiring process dwing the period leading up to June 8. plÊpared by Cal that identifies many of the duties he ourrently performs. He also identifi.es how, as CFO, he would generally allocate duties betweenhimself and anewDirector of Finance and Trcasurer. (Note

3) Duties: Attached for supplemental information is a listing, entitled "Duties Analysis,

used in creating two sepaxâte position descriptions, which option is not recommçnded.)

The "pending projects" important projects that have section at the end of thc document is important in that it identifies remained on a'to-do" list of the Finance Departuelrt. These tasks effectively provide some flexibility in workload that will be considered as the recommended plan moves forward, approrred. In other words, the exact demands on Cal in this part-time role will be impacted by the siecific person uttimateþ hired. That person's specific abilities, work habits, and background will impact the degree to whic,h and speed with which the transition of duties occurs. If they occur moñe qui-ckly, Cal may find that he can address some of tho currently un-met project needs. Set up in this to -u¡nst and with this expectation, the City canensure that it continues to get the fifl value, so speak, from a part-time CFO, while ensuring the insurance protection to financial system remains in place withthis succession plan.


of the duties listed under Trea-sury would more typically be Finance Drector tasks if this listing were to be


4) Mentoring: A key component ofthis zuccession plan is an expectation that Cal is supervising and mentoring the person with the goal and intent of eventually transferring all of ihe duties to the new individual. úrother words, as is considered good management, the expectation is that Cal

would guide the new individual to accomplish the necessary tasks, focusing on what needs to be accomplished, not necessarily how it needs to be accomplished. Ultimately, the accomplishments job and the process will be the responsibilify of the new individual, so allowing them to make the their own (within the obvious professional standards) is part of the uansition process' Cal and I with and understands the need to focus on supervisinf and have discuised this and he "on"*,that the new person will ultimately be in charge, and not with the mentoring with an eye on the fact intent of trying to force the individual to necessarily simply do things Cal's way, so to speak. I do not have a concern that this will be a problem, but I believed it was worth mentioning that Cal and I have discussed the matter.

Plan: Cal proposes that after the transition plan and following the moneys allocated to funding his part-time costs be used to hire a Deputy his full retfuement, that Finance Director, so that the un-met project needs discussed above can continue to be addressed. Cal has requested additional personnel in the past and continues to believe that the Finance Department and the City would be well served with additional professional support in the Finatrce Deparbnent. This does appear to be a valid consideration, but I believe it is a consideration fot the future, I do not believe that it is necessary to commit to such a position at this time. The scenario should be evaluated as the City anticipates the next phase of the succession plan at the time of Cal's frrll retirement. At that point the City will know the exact capabilities and abilities of the new Director of Finance anúTreasurer and the Cþ can evaluate its City-wide workload, staffing needs, and fiscal resorrces. As such, I don't believe any action is required on that component of Cal's


The Future

- After the Transition

proposal at this time.

ACTION STEPS: ln the event the Persorurel Committee / Finance Committee / Common Council concurs with the above recommendations, the following action steps would be required.
Recommend approval / approve amending the Job Description for Ðirector of Finance and Treasurer changing the "Reports to" requirement as noted above.


Z) 3)

Recommend authorization / authorize Human Resources to advertise for a Director Finance and Treasurer.


Recommend directing ldirectthe Ðirector of Adminishation to submit to the June 7, 207I, io*-on Council meeting aievised employment agreement(s) between the City of Franklin and Calvin Patterson and a proposed job description of Chief Financial Officer

The above review and recommendation attempted to be thorough while very quickly compiling some guidance in addressing Cal's recommendation and offer. This was done quickly to attempt to address Cal's desire for the transition to part-time to occur in August, if this stmtegy is the one prefeled by the City. If additional information is needed, it can be prepared. Please recognize, ^ho*.rr"r, that the time line noted above assumed the City moves forward with advertising shortly afterthe May iTth Common Council meeting.

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