Where Less is More Efficient

The idea first arose during the days of $4-a-gallon gasoline in the summer of 2008. But now, even with energy prices way down from their peak,...
by | September 2, 2009
 

The idea first arose during the days of $4-a-gallon gasoline in the summer of 2008. But now, even with energy prices way down from their peak, reduced work schedules or "furlough" programs keep popping up. In recent weeks, both Chicago and Rhode Island have saved money by shutting down non-essential services for a few days, and Utah has experimented with a four-day work week.

The current interest in reduced work schedules is easy to explain. With budgets drowning in red ink, cutting back on work schedules is an immediate way to reduce costs. But there are signs that the approach may have another, unexpected benefit: greater efficiency.

Atlanta's experience is worth noting.

Like many cities, Atlanta was facing a big projected revenue shortfall, between $60 million and $80 million. To generate savings, Mayor Shirley Franklin chose to institute a furlough program. Starting in December 2008, all municipal employees (except certain public safety workers) were shifted from 40 hours per week to 36 and began working four days per week, nine hours per day. Cost savings were generated through a commensurate 10 percent decrease in pay, as well as additional savings from decreased energy usage in municipal buildings.

Mayor Franklin did not have to negotiate these changes, Georgia being a state without public-employee unions. The schedule change was mandatory, meaning every city worker experienced a 10 percent reduction in salary. So how did employees react to the change?

"Employees love it," says David Edwards, a senior policy advisor to Mayor Franklin. "They really love having the three-day weekends." Employee commute time and gas usage has been reduced by 20 percent, and the increased leisure time of a steady stream of three-day weekends has been a major quality-of-life boost.

In addition to improved morale, it appears that the reduced work week may be cutting absenteeism. "One area we looked at closely was corrections," says Edwards. "We found a 40 percent decrease in absenteeism." With close to 450 employees working in Atlanta's city jails, the productivity benefits go hand in hand with improved quality of life for employees.

The biggest surprise with the Atlanta four-day work week program has been the unexpected boosts to productivity. "There has been a direct productivity boost in a lot of operations, particularly those that entail travel, setup and breakdown time, such as road repairs," says Edwards. For those jobs with one-hour transitions on each end, the four-hour weekly reduction in compensation translates into only two hours fewer of productive labor.

Moreover, productivity per hour seems to have increased. Atlanta's ATLStat performance measurement system shows that the decrease in work hours has not translated into lower outputs. "The 10 percent decrease in work time is not showing up on the outcome side," said Edwards. "There has been no increase in backlogs, and all the performance targets we use -- potholes filled, building permits issued, and that sort of thing -- are showing no decreases in output. Zero."

According to Edwards, when the program was first introduced, residents still came to City Hall or elsewhere seeking services on Fridays, only to be turned away. "Once people adjusted to the new hours, we really haven't seen any complaints from the public," says Edwards. In some cases, shorter business hours at City Hall prompt citizens to change their behaviors, renewing business licenses by mail or paying parking tickets on the Web rather than in person. Such transactions are generally less costly for the city to process.

The Atlanta program had its share of critics. The biggest concern of citizens had to do with a perception of cutbacks in public safety. The same budget shortfalls that prompted the furloughs had prompted cutbacks in public safety -- police patrols had been reduced and one fire station had been closed in December. In late June, with the support of Mayor Franklin, the city council voted 8-7 to increase city property taxes by more than 40 percent. In light of this tax hike, officials chose to discontinue the reduced work schedule.

The furlough programs were mostly ended at the beginning of July, and Atlanta's employees are back to the old nine-to-five.

As the nation's economic woes continue, however, various types of furloughs will continue to be a tool for public officials facing massive budget shortfalls.

John O'Leary (johnoleary@alum.mit.edu) is the executive editor of the Ash Institute's Better, Faster, Cheaper web site, and coauthor of the book "If We Can Put a Man on the Moon..." to be published by the Harvard Business School Press in Fall 2009.

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