In the Framework of: Financed by:

BUSINESS PLANNING AND COMMERCIAL EFFICIENCY PROGRAMA TOOL TO ACHIEVE IMPROVED PERFORMANCE AND FINANCIAL SUSTAINABILITY

Business Planning Training Program

Session DATA Training Themes

Session 1 8-9 March12-13 March

• Introduction to Business Planning• Utility Vision and Mission• Current Condition Assessment• Strategic Goals• Water Demand Analysis and Forecast

Session 2 30-31 March 2-3 April

• Organization Structure and Staffing Levels• Operation and Maintenance Budget• Capital Investment Program• Performance Improvement Action Plans

Session 3• Revenue Needs Forecast• Tariff Structure and Pricing Methodology• Senior management overview of Business

Plan• Business Plan Monitoring

Module 8 Organization Structure and

Staffing Levels

• Staffing structure and staff empowerment drives success

• Organizational principles must be understood and put into practice

• Historical structures may not fit tomorrow’s challenges

Organizational Structure and Staffing Level

Line Authority

Chain of Command

Job Specialization

Span of Control

Delegation of Responsibility

Delegation of Authority

Principles of Organization

Principles of Organization

Staff Authority

Unity of Command

• Represents line of authority through the organization:

• A subordinate should have one and only one superior to whom he or she is directly responsible.

Span of Control

• Number of subordinates to a supervisor– Inefficient to have 1 to 1– Inefficient to have 10 to 1

• Factors to consider:– Capabilities of manager– Capabilities of subordinate– Similarities of work activities supervised– External pressure on manager– External help available to manager

• Effective utilities actively and aggressively delegate responsibility and authority.

• Both delegations must be done in parallel: Responsibility without authority will frustrate staff and lead to failure.

• Delegation takes place within Chain of Command.

Delegation of Authority and Responsibility

Work Specialization and Cross-training

• Water and wastewater job is technically complex and requires special skills.

• Specialization should not create inefficiency of staffing, especially in small utilities.

• Cross-training will improve staff competencies and diversity of work routine.

Line and Staff Authority

Mission

Staff Authority

Line AuthorityExecute the MissionExecute the Mission

Support Support the Missionthe Mission

Line Authority

Treatment

Distribution

Supply Metering

Commercial

Line Authority

Staff Authority

Legal

Accounting

Engineering

Personnel

Public Relations

Staff Authority

Current Structure and Lines Of Reporting

• Prepare graphic representation of current organizational structure.

• Clarify the Chain of Command – who reports to whom?

• Note the Span of Control for each person in a supervisory position.

• Using two colors, reflect which positions are line and which positions are staff.

75

General Manager (1)

Administrative Off ice 3 Engineering and Planning 3

Secretary (1) Section

Cleaning Services (1) Senior Engineer (1)

Driver (1) Junior Engineer (2)

Finance Section 3 Technical Section 55 Customer Service 10

Head of Section (1) Head of Section(1) Head of Section (1)

Accounting 1 Water Production and 12 Equipment/Services 9 Water/Sew age Netw ork 16 Water Reservoirs # Customer Service 9

Treatment Head of Sector (1) (5-Work Teams) Head of Sector (1) Meter Installer (1)

Accountant (1) Head of Sector (1) Welder (1) Head of Sector (1) Workers Res. No.1 (4) Meter Readers (5)

Lead Operator (4) Excavator Operator (1) Supervisor (5) Workers Res. No.2 (4) Billing Clerk (1)

Pump Operator (4) Equipment Operator (2) Netw ork Specialist (10) Workers Res. No.3 (4) Cashier (2)

Electrician (1) Electrician (1) Guard (4)

Supplies 1 Mechanic (1) Driver (3)

Chemist (1)

Supplies Clerk (1)

Typical well performing utility - large

General Manager

Technical Section

Accounting Water Production Equipment/Services Water/Sew age Netw ork

Sources/Reservoirs (3-Work Teams)

Accountant/Cashier/Store (1) Welder (1)

Accountant (1) Operator (3) Excavator Operator (1) Supervisor (3)

Equipment Operator (1) Netw ork Specialist (6)

Customer Service

Meter Readers (3)

Billing Clerk (1)

Finance and Customer Service

Typical well performing utility - small

Board

Ex-officio members•Chairman•Accountant General•Director WDD

Other members•From local government

TechnicalServices

Administration Internal Audit FinancialServices

Manager

Structure of Water Boards in Cyprus

• Staffing level is affected by technology, automation, skill level, geographic size

• Common performance indicator is number of staff per 1000 water/sewer connections

• Well performing utilities– Water only = 2.5 to 4.0– Water and Sewer = 3.5 to 5.0

Optimal Staffing Level

• Consider functional areas currently under staffed

• Consider functions that are not specifically defined in the organization

• Consider cost centers and functional areas such as bulk services and retail services

• Consider a transition strategy if down-sizing is necessary

Changing and Transitioning Staffing Level

Group Exercise: Staffing Analysis and Forecast

Step 1: Documenting Current Staff List

Position Code No. Name Last Name Date of Birth

Date of Employment

Gender Profession Education Monthly Salary (PhP)

Code

Director 1 1 Engjell Gjondrekaj 24.10.1967 01.04.1996 Male Director University 48,500 1 Engineering/Planning 2 5 Shpresa Kodra 01.10.1965 01.06.1992 Female Engineer University 25,056 2 Head of Department 3 3 Meri Çuni 10.11.1963 01.05.2002 Female Chief/ Engineer University 25,056 2 Finance/Accounting 4 2 Sabahet Vidhaj 19.02.1955 13.07.1993 Female Chief/ Marketing University 40,000 3 Customer Service 5 4 Ikbal Idrizi 7.09.1964 16.12.2006 Female Chief/ Finance University 35,000 3 Meter Reader 6 7 Lazarela Ndoci 16.08.1981 01.11.1997 Female Chief/ Juridical University 35,000 3 Head of Section/Foreman 7 6 Ardita Sokoli 11.12.1970 01.02.2005 Female Economist University 20,000 4 Pump Operator 8 8 Belkize Oroshi 22.07.1922 01.12.1992 Female Cashier University 12,528 4 Technician 9 10 Nerinda Hysa 30.05.1982. 16.02.2006 Female Economist University 15,000 4 Network Water Specialist 10 16 Ruzhdi Kajushi 2.05.1948 19.09.2006 Male Economist University 17,400 4 Network Sewer Specialist 11 84 Vinçens Dega 21.01.1949 01.06.1992 Male Chief/ Storekeeper University 10,440 4 Water Police/Inspector 12 95 Pashuk Arra 15.01.1965 16.09.1996 Male Storekeeper University 11,832 4 Worker 13 9 Senada Sheqi 06.04.1983 01.06.1992 Female Operator University 13,500 5 Driver/Cleaning Service 14 54 Ganimet Ibro,Bujari 12.01.1954 16.03.2003 Female Cashier University 9,280 5 Guard/Handler 15 55 Natalina Destani 08.07.1954 01.02.2002 Female Chief/ Cashier University 9,628 5

77 Vjollca Bala,Kadia 29.09.1953 20.08.1994 Female Cashier University 9,280 5 98 Edlira Alushi,Anamali16.08.1968 01.08.2002 Female Cashier University 9,280 5

100 Lejla Sherja,Zaganjori08.02.1954 01.06.1992 Female Cashier University 9,280 5 155 Aferdita Limani,Kraja 03.06.1950 01.06.1992 Female Cashier University 9,280 5

Pozicioni Kodi

Drejtor 1Burime Njerzore & Administrata 2Studime dhe Projektime + GIS 3Shef Departamenti 4Pergjegjes Sektori 5Finance Kontabiliteti 6Arketar 7Operator te Sistemit te Faturimi 8Lexues/Faturues 9Task Force Grup 10Mardhenie me Klientin 11Sektori I Prodhimit + Pompimit + Remontit U 12Sektori I Depove 13Sektori I Rjetit + Dispecer U 14Sektori I Pompimit KUZ 15Sektori I Trajtimit KUZ 16Sektori I Rjetit KUZ+KUB 17Sektori Makineri/Pajisje/Mjete 18

19

Pregatitni listen e stafit dhe vendosnisecilin person

Data e Punesimit

Gjinia Profesioni Shkollimi Paga Mujore (Lek)

Kodi

13.02.2010 M Drejtor I Larte 80,000 1 16.08.2008 F Shef Finance I Larte 50,000 4 ….. ….. ….. ….. …..….. ….. ….. ….. …..….. ….. ….. ….. …..

Pregatitni listen e stafit dhe vendosni Pagen Mujore per secilin person

Step 2: Staff Coding

Step 3: Staff Forecasting

Nr.Paga Baze

MujoreKosto Vjetore Nr.

Paga Baze Mujore

Kosto Vjetore

1 Drejtor 1 80,000 960,000 0 80,000 02 Burime Njerzore & Administrata 1 52,800 633,600 0 52,800 03 Studime dhe Projektime + GIS 1 52,800 633,600 0 52,800 04 Shef Departamenti 3 53,380 1,921,680 0 53,380 05 Pergjegjes Sektori 4 25,100 1,204,800 0 25,100 06 Finance Kontabiliteti 2 28,130 675,120 0 28,130 07 Arketar 3 25,570 920,520 0 25,570 08 Operator te Sistemit te Faturimi 7 26,983 2,266,560 0 26,983 09 Lexues/Faturues 4 23,390 1,122,720 0 23,390 010 Task Force Grup 4 21,380 1,026,240 0 21,380 011 Mardhenie me Klientin 5 22,050 1,323,000 0 22,050 012 Sektori I Prodhimit + Pompimit + Remontit U 3 21,620 778,320 0 21,620 013 Sektori I Depove 2 15,400 369,600 0 15,400 014 Sektori I Rjetit + Dispecer U 2 15,400 369,600 0 15,400 015 Sektori I Pompimit KUZ 2 15,400 369,600 0 15,400 016 Sektori I Trajtimit KUZ 2 15,400 369,600 0 15,400 017 Sektori I Rjetit KUZ+KUB 15 15,400 2,772,000 0 15,400 018 Sektori Makineri/Pajisje/Mjete 2 15,400 369,600 0 15,400 019 0 0 0 0 0 0

Kosto Totale Personeli ne Vit (Lek) 63 18,086,160 0 0% Vjetore e rritjes se Kostos se Punes -100.0%

Nr. lidhjeve (U+K) 10,828 3,642Punonjes/1000 lidhje 5.82 0.00

Nr. PozicioniViti 2011 Viti 2012

Step 4: Salary indexing

Nr. Indeksimi i Pagave 2012 2013 2014 2015 20161 Drejtor 6% 6% 6% 6% 6%2 Burime Njerzore & Administrata 6% 6% 6% 6% 6%3 Studime dhe Projektime + GIS 6% 6% 6% 6% 6%4 Shef Departamenti 6% 6% 6% 6% 6%5 Pergjegjes Sektori 6% 6% 6% 6% 6%6 Finance Kontabiliteti 6% 6% 6% 6% 6%7 Arketar 6% 6% 6% 6% 6%8 Operator te Sistemit te Faturimi 6% 6% 6% 6% 6%9 Lexues/Faturues 6% 6% 6% 6% 6%

10 Task Force Grup 6% 6% 6% 6% 6%11 Mardhenie me Klientin 6% 6% 6% 6% 6%12 Sektori I Prodhimit + Pompimit + Remontit U 6% 6% 6% 6% 6%13 Sektori I Depove 6% 6% 6% 6% 6%14 Sektori I Rjetit + Dispecer U 6% 6% 6% 6% 6%15 Sektori I Pompimit KUZ 6% 6% 6% 6% 6%16 Sektori I Trajtimit KUZ 6% 6% 6% 6% 6%17 Sektori I Rjetit KUZ+KUB 6% 6% 6% 6% 6%18 Sektori Makineri/Pajisje/Mjete 6% 6% 6% 6% 6%19

Module 9 Operations and Maintenance

Budget Forecast

Budgeting Operations and Maintenance Costs

Documenting Recent Financial Performance

• Gather financial information for at last the past three years

• Evaluating expenditure trends

• Identify factors influencing future expenses

• Sincerely evaluate operational and maintenance expenses

O&M Cost Categories

• Salaries

• Personnel Costs

• Consumable Expenditures

Itemizing O&M Cost Categories

Salaries• Annual Base Salary • Overtime• 13-th Month Paycheck• Bonuses• Other Compensations• Board of Directors Compensation

Personnel Costs• Social Security• Employee Compensation• Training

Itemizing O&M Cost Categories

Consumable Expenditures • Maintenance • Materials• Electrical Energy• Security Services• Other Contracted Services• Office and Administrative• Transport• Confidential and Intelligence • Taxes • Purchased Water• Public Relations Campaign• Other Expenditures

Group Exercise: Operation and Maintenance Budget Forecast

Module 10 Capital Expenditure and

Investment Forecast

Capital Expenditure

Capital Renewal

• Underground or Buries Assets

Capital Repair and Replacement • Above Fixed and Moveable Assets

New Capital Investments

• Add New Technology

• Expand Systems or Increase Coverage

Underground Assets

Capital Renewals Expense

• Buried Pipelines and Networks

• Indeterminate Useful Life

• Hidden Conditions

• Difficult to Apply Depreciation Rates

• Budget on Annual Expense Base

Above Ground Assets

Capital Repair/Replacement Fund

• Operating Equipment

and Structures

• Actual Conditions

• Technical Innovations

• Consider Depreciation Rates

• Determine Average Contribution• Used as the Needs Dictate

Asset Management

•Know your assets!•Know their technical condition!•Know their replacement cost!

You cannot manage what you do not know!

Estimate expected year of replacement!

Forecast potential future capital expenditure!

•Realistic asset value•Base for planning •Connects MIR and

accountancy

Asset InventoryAsset Inventory Reconstruction PlanningReconstruction Planning

•What…?•When…?•How… ?•From what resource?

Asset Management

ASSET INVENTORYASSET INVENTORY

•Built on the best quality data available! (map records, GIS…)•Object-based•Structured•Integrated•Regularly updated

Development of Asset Book Value

Value at Acquisition

Book value of water utility assets:•does not reflect to the real value of utilities•does not generate the necessary funds for reconstruction

Market value:•regulated pricing of water utility services•no market value, not applicable method

Depreciated Replacement Cost (DRC) Method•state/municipality ownership of water utilities•non-marketable assets•required by regulations and professional standards (TEGoVa, EVS)

Methods of Asset Evaluation

Proportion of reconstruction funds in water/wastewater

tariffs: (amortization of utility assets/revenue from tariffs): –Hungary: <11%–Germany: 45%–Switzerland: 69%

Reconstruction ratio of networks and calculated period of full renewal (network reconstruction/lenght of network/year):–Switzerland: 1.9-1.0% 50-100 years–Germany: 1.0% 100 years–Hungary: 0.4-0.2% 250-500 years

Reconstruction of Existing SystemsInternational Outlook

New Capital Investment Fund

• New Technology or Services Level• 24-hour Pressurized Water• Higher Treatment Standards• More Water Available• Improve Performance

• Increase Service Coverage• New Connection• Increases Customer Base• Higher Water Production

Capital Investment Plan and Sources

Capital Investment Plan Forecast• Performance Improvement Program

• Capital Expenses/Reserve Fund Needs

• Timing Contributions/Expenditures

Identifying Sources of Capital Investment• Capital Reserve Funds• Different Local Grants or Credits• Credits or Grants from Donors or IFI’s• Credits from Commercial Banks

Module 11 Performance Improvement

Program (PIP)

Performance Improvement Program

• Establishing the imperative for change and performance improvement.

• Moving from Strategic Goals to Performance Improvement through an Action Plan.

• Measuring performance to document success against the defined standard of performance.

Performance Gap

• Where is the Utility today?

• Where does the Utility want to be tomorrow?

• How does the Utility begin to close the Performance Gap?

Performance Standards

• Express how the Utility should be performing in all aspects of its work .

• Defined in a unit of measurement to allow for rational monitoring (deadline, cost, quality, quantity, or other).

Measuring Performance

• What to measure?– Usually defined by the

standards established.

• How to measure?– Balance between

getting the data and cost in time and money.

• When to measure?– Frequent enough to

understand situation in terms of performance.

In 2008 the IWA benchmarking initiative split benchmarking into two aspects:

• Metric benchmarking: compares PIs of utilities with different characteristics

• Process benchmarking: identify/adapt best practices to improve performance

In 2010 the IWA Benchmarking and Performance Assessment Group implemented an evolutio,n which replaced ‘Metric’ and ‘Process’ Benchmarking with Performance Assessment and Performance Improvement.

Benchmarking

Elements of Benchmarking

METRIC PROCESS

Evaluating Actual Vs Expected

• Managers interpret deviation and identify problem.

• Managers decide on need for corrective action.

• Decision on corrective action is implemented immediately and all are responsible.

Performance Improvement Action Plan

• Clear direction and explanation on actions to achieve each stated Strategic Goal.

• Sets the implementation schedule and interim milestones.

• Does not replace need for detailed work plans (weekly, monthly)

Performance Improvement Cycle

Structure of Performance Improvement Program (PIP)

Statement of Specific ActionDescribes, very briefly, the specific action intended to support the Strategic Goal addressed

Strategic Goal Addressed Is the quantified statement of the Strategic Goal being addressed

Description of Primary ActionsDescribes the primary actions that will be undertaken to achieve the stated Strategic Goal

Schedule of Tasks and Key MilestonesIllustrates the Company's planned schedule for the actions needed to achieve the stated Strategic Objective

Application of Investment CapitalDetails the capital cost estimate for each capital investment to be made by the Company

Measurable Improvement in PerformanceLists the measurable interim milestones of the overall strategic goal to be achieved

Sample Format for

Performance Improvement

Plan

Commercial Cycle

Overview of the Commercial Cycle of a Water Utility Operator

Meter installation and testing

Meter reading Billing Collection

Preliminary activities

Contract signing

Illegal connections

Demand profiling

Demand mng’t at

DMA level

Financial treatment

Provisions

Write-off rules

Budgeting

Overall Customer Service

IT / IS / Data Management:-Customer Information System

-Account Management-Integration GIS - CIS

Stage 1: Meter Installation, Testing and Replacement

Know your meters: Condition assessment + demand profiling

Fill in database with high-consumption

users

Data capture with clamp-on ultra sonic meters

Demand profiling

Meter selection and installation

Experience at Sofia Water (2011 Study): 13 new meters (50-mm) of different brands, types and classes showed net difference of >5%...

Specific focus should be: hotels, large admin buildings, swimming pools and stadiums

Stage 2: Meter Reading

Top 2 Issues: (1) Control and (2) Time to process meter-readings

Month 1 Month 2 Month 3 Month 4

A. Meter reading moment

Consumption period B. Data entry /

billing moment

C. Paper invoice delivery D. Formal payment

deadline

Day X: Monthly visit of the meter reader

Day X: Monthly visit of the meter reader

Day X: Monthly visit of the meter reader

Day X: Monthly visit of the meter reader

A good example: dynamic control (GPS-based) + picture of reading + immediate entry in

system (Durres Water Utility)

Stage 3: Data Entry and Billing – How many bills do we actually produce?

64

1 000

Number of house

connections

900

Number of valid

contracts

Number of properly working meters

850830

Number of real meter readings

750

Number of non-zero

meter readings

745

Number of bills

650

Number of bills paid on

time

A

B

CD

F

A – Illegal connections, disconnected customers, own supply; B – meters to be replaced; C – lack of access to meter, omission of meter reader; D – zero readings – no consumption, seasonal usage, wrong reading;

E – discrepancies in the billing process; F – non-regular payers

E

Stage 3: Data Entry and Billing – Good Practices

65

1. Introduce “transaction reporting” – daily and weekly report showing number of bills produced. Analyze discrepancies.

2. Spot variances:– Billed volume vs. last month. Billed volume vs. same month last

year. Vs. budget.– Zero reading vs. positive readings– 20% differences– Negative “Common needs” (where applicable)

3. Exception-handling rules. Define “exceptions”.4. A book/walk is not finished before there is an explanation against

every account in it.5. “Desired conflicts of interests”:

– Meter readers vs. data-entry operators– Complaints handlers vs. billing

6. Information management: Billing function is usually the first module of a CIS system. Utilize it to define future CIS functionalities.

Stage 4: The collection process - Good practices

1. There is not good and bad collections. There is consistent and inconsistent.

2. Always analyze results through the ATB and track the improvement. Changes in the procedure take about an year to show the result.

3. A good collections procedure is the one that covers the whole Aged Debt Report and has no gaps.

4. Always use a combination of collection methods but take into consideration the cost per collected EUR.

5. Make sure you have one dedicated person to manage the collection process.

6. Know your customers – building a database takes time but brings the returns in the end.

7. Building your KPIs through tracking results. Month vs months. Year vs Year.

 

Analyzing the Efficiency of CollectionsAged Debt Report (Dobrich Water, Bulgaria)

Analyzing the Efficiency of CollectionsAged Debt Report

A commercially efficient water utility shall have its commercial activities organized around a seamless commercial cycle that includes four distinct stages:•Meter Management: meter installation, maintenance, and calibration…•Meter Reading: recording and/or retrieving the meter values of water consumption…•Customer Billing: meter readings, data management. Issue of Customer Bills…•Bill Collection: revenue collection, bill payments…

Performance Improvement in Commercial Cycle

Example 1

I. Statement of Specific Action

Increase Amount of Billed Water as Percentage of Total Water Produced.

II. Strategic Goal Addressed

Increase the amount of billed water, such that the Company is billing 70% of its water production, as measured at the sources, by the end of 2009, with interim goals of 40% by the end of 2007, and 55% by the end of 2008.

III. Description of Primary Actions

• Install production meters at each of the sources of supply, at the discharge of all pump stations, and at the inlet and outlet of each of the storage reservoirs.

• Install zone meters to record the volume of water entering each of the water supply pressure zones of the system.

• Install meters at all customer connections throughout the system.

• Identify and eliminate all illegal connections and unregistered connections, based on the findings of the inventory and routine field investigations.

Example 1 (continued)

IV. Schedule of Tasks and Key Milestones

V. Application of Investment Capital

Example 2

I. Statement of Specific ActionImprove bill collections rate as a percentage of the value of bills issued.

II. Strategic Goal Addressed

Increase the collection rate (collection percentage) to 90% of the value of billings issued by the end 2012.

III. Description of Primary Actions

• Operate the existing computerized billing and collection system to capture the entire customer base, and to acquire and incorporate upgrades to the program software.

• With the assistance of local officials and media, develop and implement a sustained program of public education that clearly explains the cost of water supply and sewerage services, and the need to pay bills as the means for sustaining this valuable service.

• Follow-up on all customers, who are not current in paying their water bill, and alert them to the Company’s service termination policy.

Example 2 (continued)

IV. Schedule of Tasks and Key MilestonesClient notification of overdue payments and termination of service procedures will be part of the routine monthly procedures to be managed by the Customer Service Department and the networks Task Force for illegal connections and collections enforcement.

V. Application of Investment Capital

No capital investment is needed to implement this action plan.

 

Group Exercise: Writing Performance Improvement Action Plans