Abstract

The Indian Health Service (IHS) Sanitation Facilities Construction (SFC) program starts and completes hundreds of construction projects each year. The projects provide essential public health infrastructure to Indian Country. The amount of time it takes the program to complete a project has risen steadily for the past several year. In 1993 the average SFC project was completed in 2.30 years. By 2007 the average project duration had grown to 4.36 years. This level of performance is unacceptable to program management.

Beginning in 2011 the Office of Management and Budget (OMB) will start evaluating SFC program performance based upon its average project duration. OMB set the standard the program must meet or exceed at 4.0 years. Effective organizational change and improvement is needed in order to provide critical infrastructure in a timely fashion and meet the new standard.

Benchmarking is an improvement process where one group seeking to improve is compared against another group that is considered a superior performer. Internal benchmarking draws this comparison between groups in the same organization. Often, individual operational units create new approaches in response to problems and challenges. Internal benchmarking is a process that facilitates identifying those innovations and spreading them to other parts of the organization.

This capstone project proposes to complete an internal benchmarking study within the SFC organization. The objective of the study is to identify unique processes and practices that positively impact project durations. The findings of the study will be made available to program senior management to consider in guiding future improvement decisions.

Purpose/Objective

The Indian Health Service (IHS) Sanitation Facilities Construction (SFC) program is responsible for completing hundreds of construction projects each year. Beginning in 2011, the Office of Management and Budget (OMB) will begin evaluating the program’s annual performance based upon the average duration of its completed projects. Unfortunately, the program’s average project duration has been steadily climbing since 1993. In order to successfully meet the OMB standard, the SFC program must quickly reverse this trend. The objective of this capstone project is to identify existing practices and/or processes within the program that are reversing negative performance trends. The findings will be made available to SFC program leadership to consider for wider implementation across the entire organization.

Background

The Organization

The Indian Health Service (IHS) is a federal agency whose mission is to raise the physical, mental, social, and spiritual health of American Indians and Alaska Natives to the highest level. The IHS Sanitation Facilities Construction (SFC) Program contributes to the mission by assisting Tribes with providing adequate sanitation facilities for their people, including water, wastewater, and solid waste facilities. This is accomplished annually through hundreds of individual projects distributed among approximately 557 federally recognized Indian Tribes. Effective project management and delivery is absolutely essential to the program’s success.

Current Performance Trend

One aspect of SFC project delivery performance has been steadily declining for years. Specifically, the length of time it takes to construct a SFC project, the project duration, has consistently risen. In addition, the total number of projects actively under management, the active project inventory, has also steadily increased. Simply put, the program consistently begins more new projects than it completes each year. Refer to Figure 1 to see the program’s performance trend over the past several years. This growing active project inventory (a leading work flow indicator) likely means the average project duration (a lagging work flow indicator) will continue to grow for sometime into the future.

Figure 1 – SFC Project Durations and Active Project Inventory *

*Unofficial data, not reviewed by the Indian Health Service for accuracy

Required Performance

All federal agencies must comply with the Government Performance and Reporting Act (GPRA). The act holds individual federal government programs accountable to meeting result oriented measures. The Office of Management and Budget (OMB) is responsible for assuring agencies uphold their GPRA obligations. SFC and OMB recently agreed that project duration will be used as a major measure of overall program effectiveness. The proposed standard, which goes into effect in 2011, requires SFC to accomplish a 4-yr average project duration. On its current trajectory, the program will eclipse an average duration of 4 years and not meet the proposed result measure. The program must implement effective changes that will improve performance.

Literature Review

Benchmarking and Organizational Change

Benchmarking is defined as the search for and implementation of best practices (Camp, 1995). It involves comparing the products, services, or processes of one group against another that is a best-in-class performer in the area of interest. Benchmarking is a way to access knowledge that supports continual organizational improvement.

Benchmarking can take many forms. Competitive benchmarking involves studying products, processes, or business performance of competitors in the same industry. Process (or functional) benchmarking focuses on business processes that perform similar function; regardless of the industry it is used in. The subject of this project is internal benchmarking, a comparison of similar operations within a single organization.

Benchmarking can have one of two broad focuses. The first is strategic. Strategic benchmarking is used to determine how organizations compete and what strategies lead to a competitive advantage and market success (Evans, 2005). Examples include product performance, customer support levels, and adaptation of new technology. This type of benchmarking has a broad focus. The second potential focus of a benchmarking study is operational. This type of benchmarking concentrates on work processes (Camp, 1995). This approach has a narrower focus. The desired outcome of either benchmarking approach is changes that lead to improved performance.

Organizational Change Pitfalls

Schaffer and Thomson (1992) warn that organizations often divert too much effort in pursuit of change related activities. For example, implementing a total quality program and then expecting that the new program will lead to concrete financial results (Schaffer, 1992). In their opinion, activity centered changes are not effective because they are not keyed to specific outcomes and are typically too large and unfocused (Schaffer, 1992). Rather, they suggest results-driven improvements in order to pursue small “quick-wins”. Success is measured against concrete goals that can be measured. This focus on quick wins keeps change initiatives focused in areas that fuel bottom line results. Whether or not a proposed change is successful can be measured quickly, so large amounts of energy are not expended in unsuccessful initiatives (Schaffer, 1992). In this approach, management identifies the most urgently needed performance improvements and set out at once to improve them, bypassing all of the activities typically associated with change initiatives (Schaffer, 1992). In this way, long-term strategic objectives are tied to short-term improvement projects (Schaffer, 1992). This approach is consistent with the benchmarking process proposed by Camp. In his book, he suggests focusing energy on key processes and relying heavily upon specific measures in determining current performance and establishing future goals.

Internal Benchmarking

Pascale and Sternin (2005) advise senior executives looking for improved practices need look no further than their own organization. They theorize that somewhere, groups of people are all ready doing things differently and better. The idea is to find these “positive deviants”, encourage their work, and facilitate the spread of their ideas by letting them become the change leaders (Pascale, 2005). Positive deviants are typically at operational or mid-level management positions and are much more likely to convince their peers to change than senior leadership will be imposing change from above. Far too often, senior management is unaware that the solution to their most pressing problems has already been found. This view is largely consistent with the process of internal benchmarking. The process of internal benchmarking involves identifying internal practices that lead to superior performance (Camp, 1995). Once identified, these practices may be strategically spread to the rest of the organization.

Measuring Performance

The Goal, written by Goldratt provides a compelling performance measurement framework that has applicability to the SFC program and specifically this project. This book tells the story of a miraculous performance turnaround in a manufacturing plant. Initially, plant management evaluated performance with several measures, each focused on an individual step of the manufacturing process. With this approach, they were not able to improve their profitability. However, when they abandoned those local measures in favor of a few key global measures, they were able to improve substantially. The global measures are throughput (money generated by sales), inventory (all of the money the system has invested in purchasing things it intends to sell), and operational expense (all of the money the system spends in order to turn inventory into throughput) (Goldratt, 1986). These broad measures are an effective way to look at the overall performance of a manufacturing facility. Like a manufacturing process, the SFC project delivery process is a large number of sequential steps leading to a desired outcome. This project will use two of these measures will be used to evaluate SFC program performance, throughput and inventory.

Proposed Methodology

1. Decide what to benchmark.

This project will benchmark practices and/or processes determined to be the strongest contributors to improving project durations. A focus group comprised of SFC mid-level and senior management will be used to identify which activities are the most important to reducing project durations. The group will complete a pareto analysis. This analysis is based on the 80/20 principle. In this case, it is likely that improvement in 20% of activities will provide 80% of the potential improvement in project durations. The focus group activities will be channeled toward identifying which critical activities should be benchmarked. It is anticipated that the project will select three to five of the strongest contributors for benchmarking. Project processes will be the primary focus. A high level overview of the SFC project process is depicted in the flow chart below. A more detailed description is included in Appendix A.

Figure 2 - SFC Project Process

Pre-Planning

Planning

$FUND$

Pre-Design

MOA

Design

Construction

Close Out

Beneficial Use

Project Duration

While the focus will be on the project delivery process, other items will be given consideration. It is entirely possible that performance differences are attributed to quality of administrative support or staffing stability. The focus group will consider these contributors as well.

2. Identify whom to benchmark.

Benchmarking involves comparing one group seeking improvement against another group considered to be a best-in-class performer. Since this project is an internal benchmarking study, the potential subjects will come from within SFC. The program is divided into 31 local operational units called districts. The districts will be compared against one another to determine which the best performers are. Consideration was given to simply selecting the best performing districts based upon project durations. However, when looking at small operational units, the project duration metric can be misleading. For example, a district completing relatively few and recent projects would report strong project durations. However, a growing backlog of old projects would go undetected. Another example is a district with a declining work load. With fewer new projects, this district should more easily accomplish short project durations. Consequently, additional measures are needed to assure the high performers are correctly identified.

To identify the best performers, district will be evaluated based on their performance in two key measure, project initiation and active project inventory management. These measures are analogous to the measures applied to a manufacturing process in The Goal (see Literature Review). Project initiation is the amount of project work generated each year. Strong performance in this measure is indicated by the degree project work is increasing. The second measure is the active project inventory size. This is the amount of workload represented by all active projects. Strong performance in this measure is indicated by a reduction in the total inventory. Both measures are in staff-days as calculated by the SFC resources requirement methodology (RRM), a workload formula that is weighted for project size. A regression analysis was employed to determine the 10-yr trend for each district. The initial results are plotted in Figure 3. The origin of the plot is the overall national trend.

Figure 3

Further refinement of the data presented above will be completed before making final selections. However, based on this analysis, three districts will be selected as best-in-class. Three additional districts with performance ranging from poor to fair will also be selected for comparison with the high performers.

3. Plan and conduct the investigation.

The fine details of the investigation will be planned once the activities that will be benchmarked are identified. The investigation will likely rely upon either interviews, surveys, or a combination of both. The purpose of the investigation will be to determine how the high performing districts approach and carry out the target activities determined to have the most positive impact on project duration.

4. Determine the performance gap.

In order to determine the performance gap, three districts ranging with performance ranging from poor to fair average will undergo the same investigation. The purpose of this is to establish a reference point for comparison against the high performing districts. This will allow me to identify which target activities the high and average performers approach differently. These activities are likely the key ones to focus on for improvement across the organization. I will develop flow charts for these key activities and develop measures (if sufficient data is available) to quantitatively show the performance gap and provide a mechanism to manage these activities more closely in the future.

5. Communicate benchmark findings and gain acceptance.

The final paper prepared for this project will communicate the benchmark findings. It will be a tool for meeting the EM program requirements and communicating the results to senior SFC management. This will be the endpoint of the EM project, though hopefully the remaining benchmarking steps can be carried out by the SFC program in pursuit of improvement.

Expected Findings

The expected conclusion of this project is that there are project delivery innovations taking place within SFC in response to the new project durations measure. Potential innovations could be improved project planning processes, unique approaches to outsourcing of certain tasks, and strategies to maintain stable/experienced staff. Whatever the innovations that most contribute to improved project durations, the findings can be distributed for the benefit of the entire organization. Included in Appendix B is a draft outline of the results section of the final paper to be prepared at the conclusion of this project.

Project Schedule

Activity	Start Date	End Date
1. Determine What to Benchmark
a. Draft focus group protocol	7/21/2008	8/4/2008
b. Conduct focus group meeting – (Note – need to coordinate with multiple staff members to determine date)	8/4/2008	9/8/2008
c. Organize and summarize data	9/8/2008	9/15/2008
d. Document benchmark selection in a tech memo	9/15/2008	9/22/2008
2. Identify Whom to Benchmark
a. Obtain raw data from SFC HQ	Started	Completed
b. Analyze data	Started	7/7/2008
c. Plot & Present Data	7/7/2008	7/14/2008
d. Document benchmark selection in a tech memo	7/14/2008	7/21/2008
3. Plan and Conduct the Investigation
a. Draft investigation protocol (for survey/interview, etc.)	9/22/2008	10/6/2008
b. Execute the investigation (three high performers, three sub-performers)	10/6/2008	10/27/2008
c. Analyze the data	10/27/2008	11/3/2008
d. Document the results in a tech memo	11/3/2008	11/10/2008
4. Identify the Performance Gap
a. Develop appropriate measures	11/10/2008	11/11/2008
b. Compare high performers to the sub-performers	11/11/2008	11/17/2008
5. Communicate Findings
a. Draft and complete final paper	11/17/2008	12/15/2008
b. Presentation	12/15/2008	12/19/2008

Notes: 1. I will be on vacation Aug 8 – Aug 17. I will be in Boise on or about Aug 15.

2. Need to establish schedule for regular communications with advisor on progress and to obtain feedback/guidance.

Bibliography

Babcock, Daniel L. Managing Engineering and Technology, Second Edition. Upper Saddle, NJ: Prentice Hall, Copyright Date Unknown.

Beer, Michael; Eisenstat, Russell A.; Spector, Bert. “Why Change Programs Don’t Produce Change.” Nov/Dec90, Vol. 68 Issue 6, p158-166. Viewed as reprinted in Harvard Business Review OnPoint Collection, What You Really Need to Know About Change, Product 1454.

Beer, Michael & Nohria, Nitin. “Cracking the Code of Change.” Harvard Business Review, May/Jun 2000, Vol. 78 Issue 3, p133-141.

Camp, Robert C. Business Process Benchmarking, Finding and Implementing Best Pratices. Milwaukee, WI: ASQC Quality Press, c1995.

Evans, James R. & Lindsay, William M. The Management and Control of Quality, Sixth Edition. Mason, OH: South-Western a part of the Thomson Corporation, c2005.

Goldratt, Eliyahu M. & Cox, Jeff. The Goal, A Process of Ongoing Improvement. New York : North River Press, c1986.

Harvard Business School Publishing Corporation (HBS1). Are You Change-Ready? Preparing for Organizational Change. Excerpted from Managing Change and Transition, 2003.

Harvard Business School Publishing Corporation (HBS2). Seven Steps to Change: A Systematic Approach. Excerpted from Managing Change and Transition, 2003.

Huy, Quy Nguyen. “In Praise of Middle Managers.” Harvard Business Review, Sep 2001, Vol. 79 Issue 8, p72-79.

Indian Health Service. GPRA FY 06 Through FY 08 Performance Measures Matrix. <http://www.ihs.gov/cio/crs/crs_gpra_reporting.asp> Visited 11/21/07.

Jacobs, David & Nord, Walter R. “The Human Side of Enterprise in Peril.” Academy of Management Review, April 2004, Vol. 29 Issue 2, p 293-296.

McGregor, Douglas. “The Human Side of Enterprise.” Reflections, Fall 2000, Vol. 2 Issue 1, p 6-15. Original publication: 1957

Mintzberg, Henry. “The Fall and Rise of Strategic Planning.” Harvard Business Review. Jan/Feb 1994, Vol. 72 Issue 1, p107-114, Added

Office of Management and Budget. Government Performance and Reporting Act of 1993. <http://www.whitehouse.gov/omb/mgmt-gpra/gplaw2m.html#h4>

Pascale, Richard & Sternin, Jerry. “Your Company’s Secret Change Agents.” Harvard Business Review, May 2005, Vol. 83 Issue 5, p72-81. Viewed as reprinted in Harvard Business Review OnPoint Collection, What You Really Need to Know About Change, Product 1454 (pg. 28-37).

Schaffer, Robert H. & Thomson Harvey A. “Successful Change Programs Begin With Results.” Harvard Business Review, Jan/Feb92, Vol. 70 Issue 1, p80-89

Schein, Edgar H. “In Defense of Theory Y.” Organizational Dynamics, Summer 1975, Vol.4 Issue 1, p 17-30.

Schein, Edgar H. “What You Need to Know About Organizational Culture.” Training & Development Journal, Jan 1986, Vol. 40 Issue 1, p30-33.

Schein, Edgar H. “Three Cultures of Management: The Key to Organizational Learning.” Sloan Management Review, Fall 1996, Vol. 38 Issue 1, p9-20.

Sirkin, Harold L.; Keenan, Perry; Jackson, Alan. “The Hard Side of Change Management.” Harvard Business Review, Oct 2005, Vol. 83 Issue 10, p108-118.

Strategic Plan and Action Summary. Indian Health Service Sanitation Facilities Construction Program. June 2007.

Appendix A – SFC High Level Project Process

Sanitation Facilities Construction Project Process

Sanitation Facilities Construction Program

High Level Project Process Description

1. Pre-Planning – This work includes consulting with tribes to gather data on infrastructure needs, defining projects to meet those needs, developing a project schematic plan (on a map level), and a cost estimate. Projects are prioritized and selected for funding based upon the pre-planning work.

2. Planning – A project summary is prepared that describes the project in sufficient detail such that signatories to the Memorandum of Agreement (MOA) understand the nature and scope of the project. The MOA is the official agreement between the Government and the Tribe that allows the project to proceed. The execution of the MOA is the official beginning of the project for purposes of calculating the project duration.

3. Pre-Design – Typical activities include community meetings, soil testing, surveying, and archeological surveys. Deliverables include conceptual drawings, cost estimates, and identification of rights-of way.

4. Design – Typical activities include applying for permits, design calculations, filing legal documents (ie. easements/rights-or-way) and preparing plans and specifications. Deliverables include bidding documents, design approvals, and issued permits.

5. Construction – Activities include construction management, quality control testing, inspection, and operator training. Deliverables include project as-builts, operation and maintenance manuals, and trained operators. Beneficial use of the facility is considered the end point for purposes of determining the project duration. This is true even when some of the construction related deliverables need to be provided.

6. Close Out – This includes transfer of ownership of government constructed facilities to the tribe and publishing a final report that documents project activities.

.

Pre-Planning

Planning

$FUND$

Pre-Design

MOA

Design

Construction

Close Out

Beneficial Use

Project Duration

Appendix B – Draft Outline of Final Paper Results

1. Focus Group Results
1. Describe the approach used to identify activities.
2. Describe the approach used to rank the impact of activities on project duration.
3. List the activities in order the focus group believed they positively impact project duration.
4. Include tools used (fishbone diagram, decision matrices, etc.)
5. Describe which activities were selected for benchmarking and why.
2. District Performance Analysis Results
1. Summarize the data analysis and which districts emerged as high performers. District names will be anonymous in the paper (ie. District 1, 2, 3, etc.)
3. Investigation
1. Describe how the investigation was carried out (ie. interviews, surveys, etc.)
2. Key Activity #1

i. Describe each high performing district’s approach.

3. Key Activity #2 etc…..
4. Conclusions

i. Discuss what key activities are carried out in a similar fashion and which ones provided confounding information.

4. Performance Gap
1. Key Activity #1

i. Describe each average district’s approach.

2. Key Activity #2 etc…..
3. Performance Gap Summary

i. What do high performing and average districts do differently?

ii. Develop detailed process map for the key activities that high performers and average performers differ on.

iii. Develop quantitative measures for these activities (if feasible)

5. Conclusions and Recommendations
1. Make recommendations on what activities the SFC program should focus improvement efforts on and what changes should be made.