Updated: Sep 15, 2020
Will I calculate service costs based on a single unit of service? Yes, but I don’t like to. It’s often hard to make the case for including the estimated units of service in a “Fee Study” (Study) as it increases our costs and the customer is trying to obtain a Study at the lowest possible price. “Of course, the consultant wants to do more so that they can charge more.” If not explicitly said, I still feel the vibes. Yet, I would like to suggest that this “chopped down” Study is no different than buying a city vehicle without lights and brakes. It works but its value is limited.
It may seem like heresy but there is no absolute number that represents the cost of a service. The reality is a range of costs based on the assumptions made by the consultant/analyst. When the Study is updated on a regular basis, the city and consultant/analyst have the opportunity to refine the calculations to narrow the range of possible costs. However, this refinement is only possible when a Study accounts for 100% of the time of staff performing fee services.
There are different ways to obtain service time. The first approach was Frederick Taylor’s stopwatch time study. This was a great start but very labor intensive (i.e. expensive); and, the Hawthorne Effect, based on a seminal study of labor at a Western Electric plant, showed that the mere act of studying employees increased their productivity.
The approach used by RCS is to interview supervisory personnel on the time a task should take for each position that they supervise. This number becomes the initial time in an iterative process that involves staff review of the results. The validation of this time estimate comes from calculating the total time that would be spent over all the estimated annual units of service summed across all of the services performed by each position. This total time is then compared with the total work-hours that the position has available in a fiscal year.
If the position has more calculated hours of work than exists in the year, either the estimated time – no matter how carefully estimated – is too high, or the estimated number of units are too high. On the other hand, if the total calculated work-hours are significantly below the available work-hours, then either (1) there are services not accounted for, (2) the estimated time for the services was too low, (3) the estimated annual units are too low, or (4) the position has insufficient work to perform.
Once service time is validated, the result can be used by the supervisor as a performance standard for the experienced employee. The standard accomplishes two goals: (1) alerts the employee to management expectations that a certain amount of time is the “norm,” and (2) alerts the supervisor when an employee’s performance has improved enough for the next step increase.
This second goal is often “lost” on supervisors. The issue can be quantified as: “The cost to the city should be the same no matter which employee does the work. An employee at Step 1 of a payroll range will take longer. As their time for doing the service decreases, they should receive a step increase that keeps the cost to the city constant.”
Currently, the most common criteria used for initiating a step increase is “time in grade” or a subjective evaluation of the employee’s performance. However, the costing process can make the managerial evaluation objective.