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Budget Process Improvements
– Part II
In Part 1,we discussed the first two one-time reductions that
involved the Art Gallery and Transit services. I will now discuss
the third potential area that Council needs to address – staff
reductions at city hall. I first raised the need for this in my
article,
Comparing Owen Sound Salaries and Benefits
last year.
I’ve examine Owen Sound’s workforce in the past by comparing Owen Sound’s salary
expense to that of other municipalities. My analysis can be reviewed in my Hub
Article
“Comparing Owen Sound Salaries and Benefits”. This review
included some municipalities that contracted out either Fire Services or Police
services. Although the results clearly indicated that Owen Sound was over
staffed, the inclusion of municipalities with contracted protective services
distorted the results. As a result I decided to revisit the study with
carefully selected municipalities and remove Protective Services' salaries and
benefits expense..
How I
Selected the Municipalities I selected these municipalities using
three criteria. First, I selected those with similar populations to Owen
Sound. Then I reduced this list by eliminating rural communities and finally
I reduced the list further by selecting only those municipalities with a
similar number of inhabited dwellings. To achieve this I used Statistics
Canada’s databases.
To begin my analysis, I reviewed the 2021 audit financial statements for
similarly sized municipalities and extracted the total that each municipality
paid in Salaries and Benefits. Since some municipalities contract for fire
and police services, I removed all protective services salaries from the data.
The graph below shows what each municipality paid in Salaries and Benefits for
all areas except for Protective Services in 2021. As you can see there are four municipalities with greater
populations than Owen Sound and three with lower populations. The average
salary expense for these municipalities, excluding protective services
salaries, was just about $9 million. Huntsville, Amherstburg and Owen Sound all
had a Salary Expense greater than the average.
Owen Sound spent $13 million on Salaries & Benefits,
excluding Protective Services salaries. To reduce Owen Sound’s expense to the
average of $9 million, an expense reduction of $4 million would be
required.
One Part of the Problem
As I mentioned above this data was acquired using each
municipality’s audit financial statements. These statements do not provide any
visibility into the number of employees in each municipality. However we can
get a feeling the portion of each municipality’s salary expense involving
management by looking at the numbers of managers with salaries greater than $100,000.
As shown above the average number of managers, in municipalities in the
study group, on the Ontario Sunshine List is 12.8. Amherstburg, Essex and
Owen Sound all have more that the average number of employees earning more than
$100,000 with Owen Sound having the greatest number at 19. This seems to
confirm that when it comes to managerial salary expense, Owen Sound leads the
pack, at least in this group of municipalities. An interesting side note is that the total number of
employees earning more than $100,000 in 2021 was 73. Therefore, 54 or 74%, of
Owen Sound’s employees earning more than $100,000, work in Protective Services.
Perhaps protective services will be examined for cost savings in a later study.
Verifying the Results These results strongly suggest that a portion of the
excessive salaries and benefits expense is due to the overstaffing of
managers. One method of verifying this would be simply to count the number of
managers in each of the comparative municipalities. Most municipalities post either their organization charts or
staff directories on their websites. Using this information along with their
budget books we can get an estimate of the number of managers employed at the
municipality. This information was only available on five
of the municipal websites. It’s important to note that these sources give us only
an estimate of the actual numbers since this information is often outdated. The
most reliable data was from those municipalities that had their current
organization charts on their websites. The results are
show in the graph below.
As shown above, it is estimated that Owen Sound employs approximately 29
managers based on information gleaned from the city staff directory and
confirmed by the 2021 budget book. In contrast, Strathroy, that has a
population that is slightly greater than Owen Sound, yet employs only 15
managers to manage its municipality. The fact that it appears that Owen Sound
needs 14 more managers suggests that the workforce is top-heavy and that the
management ranks needs to be downsized. Although this is at best, an estimate, of the number
of managers, it does correlate with data from more reliable sources such as the
Audited Financial Statements and the Ontario Sunshine List. However, all of
this data combined gives Council ample justification to begin the process of “right-sizing”
the management team and examine the entire workforce for areas that can be
downsized to bring Owen Sound’s Salary Expense more in line with similarly
sized municipalities. What is the Right Size
for the Management Team The average number of managers in Figure 4 above is 20.2.
So,
this should be the targeted size of the management team based on this
comparison. This would require a reduction of 9 managers. When we examine the Sunshine List comparison in Figure 3, we
see the average number managers were 13; which this should be the targeted size of
the management team. Since Owen Sound had 19 managers on this list we would
need a reduction of 6 managers. As a result it’s safe to say the Owen Sound management team
is overstaffed by 6 to 9 managers. Based on an average salary of $130,000 the annual
savings would be $780,000 to $1,170,000, not including one-time severance or early
retirement costs. The average salaries and benefits expense in the study group
was approximately $9 million. Owen Sound’s salaries and benefits in 2021 expense
was $13 million. If Owen Sound reduced its salaries and benefits expense to the
average in the study group it would realize an annual savings of $4 million. Based
on the results of the analysis of the manager data 25% of the reduction should
come from the management team leaving the non-management workforce to provide
$3 million in savings from staff reductions. |
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