AHCCCS Virtual
Office Evaluation
Project
Final Report
May 21, 2007
1.0 Scope of Evaluation
Purpose: Evaluate results of the Virtual Office Business
Model implemented at AHCCCS in July 2005
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10/4/2015
Approach
Interview senior leaders of AHCCCS
Interview employees, supervisors and managers
Review AHCCCS documents relevant to Virtual
Office (VO) and Alternative Work Arrangement (AWA)
Identify “best practices” of value to AHCCCS
Analyze available results data
Make recommendations based on the above
2
Agenda
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Findings
 Summary
of Interviews
 Summary of Document Review
 Analysis of results data
 Summary of Preliminary Benchmarked Best
Practices
Recommendations
 Next Steps
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2.0 Summary of Interviews
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Focus
Recommendation to stop, to continue or to expand
Value to stakeholders (employees, AHCCCS, State of Arizona,
members, and partners)
Impacts
Challenges and risks
Recommendations
Thirty interviews were conducted with senior
leadership, managers, supervisors, and employees.
100% of those interviewed said the Virtual Office
“should be expanded” as opposed to “being continued
as is” or “being stopped’.
“Employees were concerned that AHCCCS might consider stopping VO”
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Summary of Interviews: Value to Stakeholders
The interviews identified the following benefits to the various stakeholders
AHCCCS Results
• Improved productivity
• Reduced absenteeism
• Reduced facilities
• Decreased costs
• Increased capacity for work
• Increased flexibility of workforce
• Increased level of talent
Members and Partners
• Improved service quality
• Reduced time for service
• Increased hours of availability
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Employees
• Reduced stress (e.g., being in traffic,
interruptions, office politics)
• Improved job satisfaction
• Feel respected by leaders
• Improved Quality of Life
• Performance-based compensation is valued
• VO valued as a benefit to offset very low
salaries
• Stipend offsets increased costs of working at
home
State of Arizona
• Reduced consumption of fuel
• Reduced pollution
• Reduced traffic on the roads
• Reduced cost of services
• Work opportunities for homebound
• Work opportunities for remote locations
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Summary of Interviews: Challenges and Risks
The interviews identified the following challenges and risks
Challenges
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Increased workload for
supervisors until processes are all
revised
Difficult to address performance
issues
Employees sometimes cannot
access subject matter experts for
information to do their job
Processes for accessing needed
information (e.g., contract
conditions) not
automated/accessible
Employees not always aware of
what is happening in the agency
(political and organizational
happenings)
No mechanism to network and
build relationships
Current time reporting is time
consuming
Some organizations/leaders have
not yet identified opportunities for
VO
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Risks
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Hiring people not suitable for Virtual Office
environment
Development of “virtual” employees as
supervisors and managers for the future
Culture is difficult to sustain without “visibility” of
role model leaders
Achievement of needed cultural changes:
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Focus is continuous improvement in results
Belief in value of a virtual organization to improve
performance
Coach for continuous improvement vs. manage
poor performance
Development of capabilities to coach for
continuous productivity improvement vs.
performance management
Move attitude towards measuring performance
from “identifying perfect measures” to
“managing performance to improve key
measures of success continuously” for all
positions
Continuous improvement and measurement of
core work processes
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3.0 Review of AHCCCS Documents
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State of AZ Guideline
AHCCCS Strategy
Virtual Office Strategy
Policies
Technology Plan
Communication and Training
Pilot Plan
Surveys
Results Process and Reports
Presentations
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Review of AHCCCS Documents: Findings
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State of AZ Guideline: State supports movement to
Alternative Work Arrangements (AWA) including VO
AHCCCS Strategy: Organization defined
comprehensive strategy which uses VO to realize its
purpose and to add value to all key stakeholders
Policies: A combination of state guidelines and
AHCCCS policies govern the VO Business Model
Pilot Plan: A structured and rational plan was used to
conduct and evaluate a pilot to determine if there is
value in a VO Business Model
Results Process and Reports: Measurable results
were identified, targets set, and data collected in areas
of productivity, quality and costs
Evaluation: A combination of approaches including
surveys, collection of results and data collect were
used to assess the pilot
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Review of AHCCCS Documents: Findings
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Communication and Training: Used to align and enable employees
moving to VO arrangement; the next opportunity is to support improved
performance management for the future
Presentations: Executive presentation have been used as a way to
communicate the opportunity, strategy, approach, and results
Technology Plan: Included addressing the needs for Virtual Office
requirements; consider moving to a focus on technology for a Virtual
Organization for the future
Documentation & Knowledge: Current documents are in a database;
develop Website to become the portal for the future for sharing
business knowledge
AHCCCS has used a strategic and
systematic approach to designing and
implementing their Virtual Office
Business Model
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4.0 Summary of Benchmarked Best Practices
Benchmarking can be used to identify
opportunities and define best
practices to bring into AHCCCS
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Fortune: Top 100 companies using AWA and VO (2006)
Jet Blue and Call Center Studies
Research Studies: Culture, Effective Teams, etc.
AT&T and IBM: 20 years of practice
American Express
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Increasing Number of VO Workers and Savings
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Nearly 27 million folks will be working from home offices
by year's end, according to research firm International
Data Corp.
These employees will save an average commute of 24.3
minutes each way, according to U.S. Census data
They will save money: less visits to the gas pump, less
to drop off at the dry cleaner, fewer takeout lunches.
Those working exclusively from home can often take tax
deductions.
Source: Money Magazine Online (September 19, 2006)
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More Companies Using Various Forms of VO
Fortune Magazine: Top 100
companies to work for (2006)
Of the 82 Best Companies
that allow employees to
telecommute or work at
home at least 20% of the
time, these 10 have the
highest percentage of
telecommuters.
http://money.cnn.com/magaz
ines/fortune/bestcompanies/
2007/benefits/telecommuting
.html
10/4/2015
Company
Best
Company
Ranking
% of people who
telecommute or
are VO regularly
11
90
Bain & Co
45
76
AstraZeneca
71
75
Bright Horizons
92
60
Genentech
2
57
Booz Allen Hamilton
63
54
Capital One Financial
84
35
BC Johnson & Son
7
34
American Fidelity
Assurance
47
26
Qualcomm
14
20
Cisco Systems
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Some Companies Have Used VO for Years
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AT&T and IBM: 20 years of practice
A range of alternative forms of Virtual Office or
Alternative Work Arrangements (AWA)
Annual increasing performance targets
Continuous improvement in processes
Turnover reduced 50%
Increased satisfaction with jobs and personal life
Comprehensive training for implementation and critical
capabilities
AT&T employees spread out over a geographical area limited their
exposure to Hurricane Katrina disaster. Those workers not affected by this
natural disaster picked up the areas for those that were affected and
productivity was not affected.
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New Call Center Trend:
Moving from Outsourcing to Home Offices
Jet Blue
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Role model of a “virtual business”
All call center employees work out of their homes
Standardization of equipment
Reduction/avoidance of real estate
Financial success due to virtual organization approach
Natural and manmade disasters do not impact sales and service
centers
Call center employees come into a meeting one day a month
Turnover rates in call centers are only 4% per year compared with
call center averages of 50 to 100% in many other companies
Farmers Insurance and Proctor and Gamble also
support call center employees working at home
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New Call Center Trend:
Moving from Outsourcing to Home Offices
Benefits from a research study by Nova Amber, LLC, a virtual
research firm
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A measurable reduction in capital and operational expenditures
Improved customer satisfaction
Faster time to market
Improved focus on company’s core business
Studies from IDC (sister company of Network World), Booz Allen
Hamilton, and Purdue University identify expansion in home
office workers for call center
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Traditional call center employees cost $31 per hour including overhead and
training; work at home employees cost an average of $21 per hour (IDC
Study)
Uses range from Jet Blue (100% virtual call centers) to 1-800-Flowers (uses
virtual workers for peak periods)
Average savings to teleworkers reported at $4000 per year
Improvement in productivity of up to 20% has been realized
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Companies Use Technology and Leadership
to Enable VO
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American Express Human Resources Technology Team
reorganized
Team scattered throughout the world
Vision: helping technology experts of American Express partner
with business leaders to grow the overall company
HR Technology Team goal: valuable technical support in a world of
virtual work
Leadership capability important to success
Mutual and individual accountability established
Groupware supported various work processes: videoconferencing,
chat rooms, e-mail, threaded discussions, document sharing,
project management
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Use Business Leadership Model to Enable
a Performance Improvement Focus
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Experts’ models can
identify approaches to
changing the culture,
building a focus on
measurement and
results, coaching people
for continuous
performance
improvement, building
virtual teams and a
virtual organinization
Example: The Discipline
of Teams identifies a
model for creating a
performance and
accountability discipline
in teams (VO and nonVO)
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5.0
Summary of
Results
Impacts
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Impact of Virtual Office is Significant
AHCCCS
• Improved productivity (>10%)
• Reduced absenteeism (50%)
• Reduced facilities ($5000 per office)
• Increasing capacity (10% per year)
• Increased flexibility of workers
• Increased talent
Members and Partners
• Improved service quality
• Reduced time for service
• Increased hours of availability
Employees
• Reduced costs ($80/employee/week)
• Reduced commuting time (>280 hr/yr)
• Reduced turnover (>10%)
• Feel respected by leaders
• Reduced stress
• Value performance-based
compensation
State of Arizona and Environment
• Reduced fuel consumption (>250
gal/employee/yr)
• Reduced pollution (>4500 lb Carbon
Dioxide/yr)
• Public and environmental savings
(>$5200 per year per employee)
• Work opportunities for homebound
• Work opportunities for remote cities
Many areas of impact can be measured and tracked over time
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Example: Improvement in KIDSCARE Productivity
Group
No of
People
Aug-06
Mean
(Range)
Sept-06
Mean
(Range)
Oct-06
Mean
(Range)
Nov-06
Mean
(Range)
1.Moved VO
in Aug-06
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78.9%
(43-133%)
102.8%
(53-140%)
108.7%
(71-193%)
118.5%
(71-218%)
2.Moved VO
in Oct-06
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101.1%
112%
(51-163%)
(62-184%)
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Productivity numbers were not available for the month prior to going to a
Virtual Office environment
Productivity improved about 10% per month for the 4 month period
Continuous improvement in productivity realized for the 4 months
About 80% of the employees showed significant improvement over the 4
month period; 20% did not show significant improvement
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Example: Improvement in Productivity and
Quality for Adjudication Group
Claims/Week
Pre-VO
Claims/Week
Post-VO
Improvement
in Productivity
Person 1
665
831
25%
Person 2
1018
1063
Person 3
960
1101
Mean
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Error Rate
Post-VO
Improvement
in Quality
0.18%
0.02%
89%
4.4%
0.06%
0.01%
83%
14.7%
0.15%
0.01%
93%
14.7%
Error Rate
Pre-VO
88.3%
Data was only readily available on three people
Average improvement in productivity was over 14%
Average improvement in quality was 88%
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Example: Improvement in Productivity and
Quality for Comm Center Group
Productivity
Pre-VO
Productivity
Post-VO
Improvement
in Productivity
Person 1
75.92
98.08
29.2%
90.82
94.71
4.3%
Person 2
99.63
98.60
-1.0%
94.34
97.67
3.5%
Person 3
87.03
100.55
15.5%
89.95
87.29
-3.0%
Person 4
92.97
99.55
6.58%
99.82
99.52
-0.3%
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Quality
Pre-VO
Quality
Post-VO
Improvement
in Quality
Data was only readily available on four people
Average improvement in productivity was over 12%
Average improvement in quality was over 1%
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Example: Savings in Real Estate Costs
Annual Cost Savings for Closing 12th St Location: $303,000
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Rent: $252,000
Electricity: $48,000
Gas: $600
Water: $2,400
Dollars saved are essential to being able to fund the
needed improvements in the infrastructure to realize
further savings
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6.0 Recommendations to Expand Potential
Impact
Based on the value created by VO, the risks and challenges
identified, and the results of benchmarking, the following items
need to be addressed to continue to expand the impact of the VO
Project
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Define a strategy for the degree and nature of “Virtual Office”
or “Virtual Organization
Use a Business Case/Pilot Approach for Forecasting
Opportunities and Reporting Actual Results
Expand Virtual Office Implementation
Modify the Process for Collecting Business Impact and
Performance Results
Create a “Virtual” Structure to Continue to Share Best Practices
with the State
Continue with the Current High Level of Communication
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Recommendations to Expand Potential Impact
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Develop a Formal Talent Management Process
Modify Staffing Process to Select for Attitudes and Skills for
VO Environment
Partner with State Agencies to Increase Diversity Including
Homebound and Remote Locations
Continue to Improve Learning and Development
Create a Learning Architecture for a “Virtual Organization”
Continue to Enhance Technology Training and Support
Continue to Bring in Applications to Support Creating a Virtual
Organization Infrastructure
Continue Process Projects Essential to Doing the Work
Expand Approaches to Rewards and Recognition
Use High Performing Studies to Achieve the Next Level of
Performance
Re-evaluate Current Ratio of Employees to Supervisors in VO
Organizations
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7.0 Next Steps to Implement Recommendations
Revise and communicate the Virtual Office strategy to the entire organization
through a series of top down meetings
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Virtual Office or Virtual Organization is the AHCCCS model
Expectations to move to a form of Virtual Office
How the strategy is enabled through this organizational business model
Measurement focuses on identifying the few key measures
The need for continuous improvement as a survival strategy
Different models for going virtual (VO, hotelling, mobile worker, telecommuter, etc.)
Create tool for leaders to help expand Virtual Office by helping them in
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Identifying groups with potential to move & provide various AWA models
Identifying how to develop performance measures for staff and operations positions,
Developing the business case to forecast opportunities and impact AND report actual results
Forecasting productivity and quality improvements for the following year
Modify the process for collecting business impact and performance results
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Collect actual results as well as normalized results
Report year over year improvements
Include productivity, quality, absenteeism, turnover and costs
Establish a state-wide group of resources to support all agencies
Design a Talent Management Process
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Identify capabilities for leaders, managers and supervisors
Develop a talent management and development process integrated with performance
management
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Next Steps to Implement these Recommendations
Modify staffing process to ensure selecting for right attitudes and capabilities
for the future and increase diversity of the workforce
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Define future capabilities
Revise staffing interview process
Partner with other state agencies to increase diversity remote, disabled, and older workers
Develop the Learning Architecture Model to be the basis for Learning and
Development in the organization
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Blend of content on the intranet, live virtual classes with Microsoft Meeting
Development of skills through application projects and experiences
Create one-page picture of the approach, expectations, and eLearning system
Design workshops needed to realize recommendations (Coaching for
Continuous Improvement, Using Measures for Continuous Performance
Improvement, Working in the Virtual Office, Managing in the Virtual Office)
Identify groupware that can be used to support communications, knowledge
sharing
Expand approaches to rewards and recognition
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Identify a range of rewards and motivational approaches
Create rewards and recognition document and tools
Complete internal best practices (high performing groups) study
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Identify specific best practices within AHCCCS in high performing groups and individuals
Identify practices to be moved to other groups to continue to improve performance
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8.0 In Conclusion
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AHCCCS took a strategic and systematic approach to the trial and
evaluation of VO as a key move to improving the performance of the
organization for the long term
The pilot and rollout have demonstrated VO can add significant value to
their stakeholders and improve performance of the Agency
Productivity improvement ranged from 10 to 40%
Error rates reduced up to 90%
As a result of this project the organization has built various best practices
There is an opportunity to systemize the knowledge and best practices to
ensure continued improvement in performance and value creation
There is an opportunity to further improve performance and create value by
expanding VO within the Agency and to other agencies in Arizona
There is an opportunity to collect actual impact on results with a business
case/pilot approach to data collection
There are various enhancements needed in the various components of the
organization to enable the full benefits of Virtual Office and other Alternative
Work Arrangements … or to move ultimately to a Virtual Organization Model
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AHCCCS Virtual Office Evaluation Project