Create an Employee Relations Ombudsman for State Agencies

The state should provide an employee relations ombudsman located in a centralized personnel office to coordinate activities and help agencies establish mediation services and employee assistance programs.

State government s greatest resource is its employees. The state spends about 17 percent of its budget on those who provide services to Texas taxpayers. 1 However, two problems face the state concerning its employees which have not been adequately addressed. One is turnover. The state s turnover rate is 13 percent per year, but it has reached as high as 30 percent during better economic times. 2 Turnover has several causes, including low morale caused by an uncomfortable work environment with unresolved personnel conflicts. Another reason is employee personal problems such as drug abuse and family concerns. Currently, turnover costs the state $600 million a year, based on costs of retraining, recruiting, hiring and productivity. 3

The second problem is lawsuits involving personnel issues, which cost the state court time, legal fees, settlements and judgments. The problems that balloon into costly lawsuits often begin as smaller problems that were neglected. Conservative figures show that the state paid more than $1 million for only 20 personnel disputes in fiscal 1992. 4 Whi le such costly cases are often last straw attempts by employees to be heard, these cases put the state at considerable risk. After attempting to resolve a problem at the agency level an employee will turn to lawsuits to get the agency s attention. Since employee conflicts will never disappear, it makes sense to solve the problem in the most effective way at the earliest point in order to reduce the damage.

A third problem is employee productivity, which drops when employees cannot resolve problems and spend work time distracted and seeking resolution. Although sometimes difficult to quantify, the effects of low productivity on an agency can be disastrous.

Two employee relations programs address these personnel problems mediation and employee assistance programs.

Alternative dispute resolution (ADR) encompasses all formal methods of resolving conflict before costly litigation, settlements, and judgments are necessary. One type of ADR is mediation, which is an increasingly popular and effective met hod of resolving disputes. There are at least 12 private and non-profit mediation centers throughout the state which provide services for a nominal fee. In fiscal 1991, 80 percent of all employee/employer disputes reported in the state s ADR centers were resolved. 5 Mediation is a process in which an impartial and neutral person, the mediator, facilitates communication between individuals in order to assist those individuals in actively resolving their own disputes. In addition to resolving the primary dis pute between the parties, mediation may explore ways to avoid future conflict and repair damaged relationships. 6

Mediation, used in the instance of employee complaints, is considered an early intervention technique for lawsuits. When mediation is used there is no pending litigation and, for the most part, the damage done is minimal.

The cost of mediation varies, but most services are offered for $10-$30 per dispute. This cost is minimal compared to the cost of a lawyer or a hearing.

Currently, there are at least seven states with legislation concerning alternative dispute resolution options for public employees. 7 Many states have established agencies to offer ADR services to agencies for several kinds of disputes including those involving employees. The one area all agencies need mediation service is personnel.

In a 1991 review of Oklahoma s personnel function, the Council of State Government s Interstate Consulting Service made seven recommendations regarding mediation and strengthening Oklahoma s current program by suggesting a statewide initiative coordinated through the Office of Personnel Management. According to some states, this function needs to be coordinated outside the individual agencies in order for the employees to feel that it is trul y neutral and that the proceedings are fair.

The Legislature has already acknowledged the benefits of ADR techniques by passing the Texas Alternative Dispute Resolution Procedures Act of 1987. A mediation service for state employees would be consistent w ith the requirements of this act and further its purpose by increasing the state s ability to avoid lawsuits, decreased productivity or other personnel-related costs.

There are many alternative dispute resolution initiatives in or serving Texas government. One is the Attorney General s ADR program in the General Litigation division. The program will provide ADR opportunities for client agencies in the hope of resolving disputes earlier and reducing the legal fees and potential for negative publicity for the client. 8

The Texas Public Policy Dispute Resolution Center is another initiative. It has been funded by the National Institute for Dispute Resolution, a leading national resource on alternative dispute resolution. Although the center is still new, it will help stat e entities to establish ADR programs. The Interagency ADR Group is an employee task force which has been collecting information about current mediation efforts in Texas and determining how they can be applied to all agencies.

Employee Assistance Programs
Employee assistance programs (EAPs) also deal with employee problems, however, they are generally of a different nature. The problems that can be resolved by employee assistance programs are typically drug and alcohol dependency, financial, legal, marital, sexual, family problems, work-related problems and career counseling.

The manager can refer the employee to confidential counseling or the employee can arrange the appointment individually. Services often include counseling for the employee s dependents. The services that an employee assistance program can offer varies. They can include assessment and referral, 24-hour telephone numbers, employee orientation programs, supervisor training in problem recognition, training videos, marketin g materials, speakers (brown bag lunches and conferences) and agency crisis counseling. Some of these services are provided in house, while others are contracted out. All of these services are aimed at maintaining good morale, low absenteeism and high leve ls of productivity.

EAPs can also be a way to comply with the Drug-Free Workplace Act, the Americans with Disabilities Act and federal statutes related to sexual harassment. These federal requirements will leave the state at considerable risk if not addressed in a uniform an d legally sound manner. To administer each of these federal laws effectively will require some level of training for both management and staff level employees. EAPs help agencies comply with these acts by offering employees opportuni ties to get help. They can help managers and supervisors to recognize problems, how to legally approach their employees and how to reprimand an employee for continued poor behavior. Risk would be minimized to the state if one program is developed which is in compliance with statutes and avoids the pitfalls of agencies which do not have the resources and technical expertise to research and develop training.

At least 25 states have centralized EAPs for their employees. 9 However, there is no Texas statute t hat authorizes state agencies to establish employee assistance programs. The State Employees Health Fitness and Education Act of 1983 gives some statutory authority to those agencies with programs now, but it does not require agencies to establish EAPs. Cu rrently, 22 have EAPs and an additional 30 would be interested in implementing one. 10

The Texas Performance Review (TPR) conducted a personnel survey of all state agencies in November 1992. Of the 143 responding, 71 indicated they use some employee relat ions method that involve employees in decision making and personnel-problem solving. The extent and type of method used is extremely varied and some are not official policies. For both EAPs and mediation, there is no standard of service that must be offere d to employees.

Mediation and EAPs can help the state retain valuable employees by quickly resolving conflicts that arise, thereby enabling the employee to focus on service to the state s customers. Private industry has recognized the costs of unresolved conflict and has taken steps to eliminate it with both ADR and employee assistance programs. The result has been reduced turnover and absenteeism and increased productivity. Since the state cannot compete with private industry salaries in many cases, emplo yee relations programs like mediation and EAPs are even more important for government, because they reduce the reasons employees leave agencies.

The state should provide an employee relations ombudsman located in a centralized personnel office to coordinate activities and help agencies establish mediation services and employee assistance programs.

Another recommendation in this report proposes establishing a central personnel office within the General Services Commission. The main functions of the ombudsman would be researching statutes, soliciting bids for services, contracting with external vendor s, consulting with existing ADR groups, maintaining a centralized information source, developing a cost-savings tracking system as well as developing and providing training related to these two employee relations services.

However, needs vary depending on the types of services an agency provides, the education and skill level of its employees, the age of its employees and other demographics. Because of this need to maintain a decentralized administration of the complaint and employee assistance functions, only the initial research, training and guidance (central source of information) need be handled by a central office.

Central izing this function would eliminate duplication, help fill service gaps for some state employees, provide a higher quality of service and minimize risks to the state under federal laws. In addition, tracking cost-savings can be coordinated to provide the L egislature with an accurate picture of the savings and a cost justification for other statewide ADR uses.

Fiscal Impact
According to two studies, turnover costs can be calculated. The factor determined in both studies is 1.5 times the departing employee s salary. 11 This cost takes into consideration such items as the differences in position level, job functions, hiring and terminating costs, recruiting costs and inefficiency variables. Cost avoidance to the state would total nearly $4.7 million based on the assumpt ion that employee relations services could reduce turnover by at least 0.1 percent.

Additional savings can be achieved through EAPs in reducing used sick leave. Based on conservative estimates, the cost of sick leave to the state is $160.5 mil lion per year. This estimate takes the average number of hours used per employee, multiplied by the number of state employees and the average hourly wage. Cost avoidance for the state would total $160,500 based on the assumption that employee use of sick l eave can be reduced by 0.1 percent through a statewide EAP effort.

There is the potential for more savings by reducing costly litigation, settlements and judgments. The average cost of a personnel suit is conservatively estimated at $79,000 (based on the average cost of personnel suits over three years divided by the average number of personnel suits). Savings could be realized if these programs eliminated even one of these lawsuits.

None of these figures include the benefits of increased productivity and customer service. The cost of initiating the program would be minimal, since the duties of an ombudsman and support staff would be carried out by the centralized personnel office reco mmended in another section of this report.

1 Comptroller of Public Accounts, Annual Cash Report Volume II, Part I - Revenue and Expenditures of State Funds for the Year Ended August 31, 1992.
2 Comptroller of Public Accounts, Human Resources Information Services, Report on Turnover Costs for Texas State Agencies excluding temporary employees for fiscal year 1992 (print out) and historical turnover data from the State Auditor s office.
3 Ibid.
4 Comptroller of Public Accounts, claims report of object code 7226 for Fiscal Year 1992 run 11/10/92.
5 Office of Court Administration, Annual Report Texas Judicial System Fiscal Year 1991 (Austin, Texas, December 1991), pp. 222-224.
6 The Dispute Resolution Center, We Can Work It Out, Austin, Texas. (Promotional flyer.)
7 American Bar Association Standing Committee on Dispute Resolution, Legislation on Dispute Resolution (Washington, D.C., 1990).
8 Chorda Conflict Management, Inc., Conflict Management and Dispute Prevention Analysis for the General Litigation Division with Supporting Recommendations for the Office of the Attorney General State of Texas (Austin, Texas, May 1, 1992).
9 The National Association of State Personnel Executives and The Council of State Governments, State Personnel Office: Roles and Functions Second Edition (Lexington, Kentucky, 1991).
10 Texas Legislative Committee of the Interagency Task Force to Review the State s Employee Assistance Programs, Employee Assistance Program Questionnaire (Austin, Texas, October 6, 1992).
11 J. Douglas Phillips, The Price Tag of Turnover, Personnel Journal (December 1990), p. 58.