4.1. ERMUSR 10-11-2016 Elk River
Municipal Utilities UTILITIES COMMISSION MEETING
TO: FROM:
Elk River Municipal Utilities Commission Theresa Slominski—Finance & Office
John Dietz—Chair Manager
Al Nadeau—Vice Chair
Daryl Thompson—Trustee
MEETING DATE: AGENDA ITEM NUMBER:
October 11, 2016 4.1
SUBJECT:
Performance Metrics Evaluation Update
BACKGROUND:
December 2012 the Commission first adopted the Performance Metrics program. This is a
company performance based program designed to incentivize employee commitment towards the
company's success. Divided into categories representing core values of the company and again
into sub-categories that are quantifiable,this program is designed to track goals that require
companywide support of the employees to continually achieve. The goal is to have the
employees work together as a team to achieve these goals, and the company recognizes a
corresponding increase in value to our customers.
DISCUSSION:
At close of each fiscal year, and completion of the audit,the final score card is evaluated and
presented to the Commission for awarding the related bonus. There has been some discussion of
changing some of the metrics' measurements from those we started with in 2012. As the metrics
need to be determined prior to the start of the fiscal year in which they are to be measured, we
would need to decide what to implement/change prior to January 1,2017.
Last month's meeting I presented the suggestions with proposed measurement means. After
discussing them one by one,the changes identified having the most potential were 1) Changing
the water metric from Water Quality Standards having 15 points,to breaking it out into three
separate metrics worth 5 points each of Lead and Copper quality results in the 90th percentile,
Bacteria no positive samples, and the remaining water quality measurements aggregated, and 2)
Adding Line Loss below 5%and Water Loss below 10%.
Since the meeting,there has been discussion among staff regarding the water loss percentage of
10%. Ten percent is an industry standard,however, it is a measurement that takes into
consideration estimates provided by management to arrive at the 10%mark. These estimations
are the unmetered use of water for hydrant flushing,backwashing, fire department use,water
main preparation, etc. The measurement tracked in our audited financials does not take into
P ® w E IBED 8 Y
Page 1 of 2 ISA "URE
POWEREDReliable Public
Power Provider To S ERV E
118
account the estimated unmetered usage, only the metered usage, and this measurement has been
between 8.01%and 15.39%,with an average of 11.60%. It would be non-transparent to set the
bar at 10% and allow the measurement to contain estimated data. It would also be unfair to set
the bar at 10% and dismiss this unmetered component. Therefore,perhaps the bar needs to be
set at a higher percentage,benchmarked against the appropriate industry standard. According to
the Key Performance Indicator(KPI) library,the industry range is 11.36%to 19.07%with an
average target of 11.28%. Given this information, I ask the commission to set the Water Loss
criteria at no less than 11.28%.
Additionally it was discussed implementing a physical fitness incentive, and staff was directed to
seek legal advice for implementation compliance. After consulting with our attorney,we have
been advised that this would not be an appropriate metric for our organization. Two concerns
were noted. The first concern is a Minnesota law prohibiting physical examinations unless a
business necessity can be proven, and evaluation of a performance metric would not be deemed a
business necessity. The other concern was compliance with EEOC regulations regarding
disability accommodations. It would be "hopelessly complex"to try and incorporate that with
our job descriptions since they are so varied. Given the legal advice,this metric suggestion
should not be considered.
Also,the Customer Satisfaction sub-category goal could be increased to 90%instead of 85%.
We strive for excellent customer service and that is better represented at the higher percentage.
Finally, with the introduction of a new Line Loss and Water Loss items worth 10 points in the
Safety,Reliability and Quality of Services category, a redistribution of points is needed,
otherwise we have 110%percent,not 100%. A suggestion of making the same category 40%,
and reducing the Financial Goals category to 30%(with the sub-percent changing to 15 for
Margins/Net Profit and 5 for Inventory Accuracy) has been presented. The commission would
need to make this final determination.
Presented is a revised score card with the suggested options for consideration, and suggested
points distribution.
ACTION REQUESTED:
Approval of a revised Performance Metrics criteria with a determination of Water Loss%, and
the points determination with the related Score Card.
ATTACHMENTS:
• Performance Metrics and Incentive Compensation Policy Score Card
ifPOWEREO Al
. ;; Page 2 of 2 NATURE
Reliable Public
Power Provider POWERED To SERVE
119
"9.
o
3
0
00
m
ui
_m cn
x x
m LS
Let Hi
Q
'PI co v
P > >
c 2 2
'� •E w w
n v
0 `o
0
E n o 'o
w c c
a
2 c CU LI 21
c •
13 m
> F F
O
d
a
`v
3 a
MO 0
• V
v
E -0 E E
O t t
a
o -v0 -O
0
a -
v
TU `o
`o
w 0 o
o
o w
v
3
m a
d
-0 0
a
u ¢ a O
N
v •
R = P
3 = ea
a g a • c
0
.y
0
0
o a 3
v — 0
a-0
as 427 a
v
L o v o o o
m n m m
In 0 2 _5 L a E m v v v Al V A ml nl �I N :o
o '^ O m
O I- 3
u .
0
O v
I III
a I
C i .n m .n .n .n m m m ,y .n 3
Oa
n o
C N 1111
N ti E 2 c Ca ¢ LI
, rts
- o
N
U d N
L
.E
ov N
'QC d m M �
NVC
C C
2 u Y i' m 0 2 v o
0
r >.0 > v o c u Y
L CZ o ._ _ 2 j'' .§.) E 2 0 `o
jv 1° .n `m o - 1 v
O• >
E� '- ; - ov 'm i o v
Y O ' j S .4'Z'
0 a
W d ^ 3 ¢ ¢