Director of Fiscal Policy, Mackinac Center for Public
Before the Employment Relations, Training and Safety
Committee of the Michigan House of Representatives
Oct. 22, 2003
Good afternoon. Thank you for inviting me to testify. I
am, as you mentioned, director of fiscal policy for the Mackinac Center for
Public Policy, a free market research and educational institute. I have worked
with the Center for 10 years and have had the good fortune to study, write and
speak on the good and often bad ideas produced at all levels of government. I
have been asked to briefly address the issue of "consolidation," and field any
questions that you may have with respect to
House Bill 5190.
Consolidation of often decentralized and highly varied
assets and services is nothing new to the world, let alone Michigan, in either
the private or public sectors. Indeed, the idea of reorganizing scarce
resources either to improve a particular product or service, to save money, or
both, is so common there are likely few areas of private and public industries
where it has not been tried to some degree.
In preparing for my remarks I sifted through more than one
hundred academic journals on the subject and several hundred newspaper and
magazine accounts of specific consolidations. I would like to briefly share
just a few examples with you now, just to give you an idea of how sweeping
consolidation efforts are:
In 2002, the state of Florida launched a
plan to consolidate its human resources reform. The reforms included the
consolidation of human-resource employees and duties into a more centralized
Los Angeles County consolidated its Health and Human
Services human resource functions with the county’s Department of Human
Resources in 1995.
In Texas, just yesterday, hearings were held on the
state’s plan to consolidate 12 Health and Human Service agencies into just
five. Texas expects to save $1 billion in just two years through this
According to an Oct. 6 Crain’s Detroit Business, Wayne
State University has "consolidated 11 administrative positions into five as
one step in a plan to trim up to $40 million" from its budget. These
consolidation efforts included some human resource services consolidation.
The University is now looking to consolidate its College of Liberal Arts with
its College of Science.
One very popular area in which municipalities are
consolidating is in emergency service providers. Municipalities such as Orange
County, Fla., and Salem, Wisc. have consolidated their emergency services
In Georgia, whole cities such as Augusta and Athens have
actually merged with the counties in which they are located in order to increase
In 2001 Grand Rapids Mayor John Logie encouraged local
government consolidations in Michigan through what he called a "metropolitan
rebate," whereby the state would give back a portion of an areas’ total income
tax back to units of government that agreed to consolidate.
But consolidation is, of course, not limited to the public
sector. I’ve known for-profit firms to consolidate to save rental space; real
estate syndicates have consolidated into a single-purpose legal entity; company
warehouse consolidations are also common. I’ve read studies of large-scale
consolidations, of airline industries in Europe, for example, or of
biotechnology and hardware retailers in the United States; and also of
smaller-scale, more exotic consolidations, for example, of perfusion services in
Royal Oak. Perfusion service is a way of describing the heart-lung machine work
that is necessary for open-heart surgeries.
Private sector companies also have adopted consolidation to
make their human resource departments more efficient. Recent examples include
General Electric, Honeywell, Pfizer, Marriott, and Lucent.
Clearly, the use of consolidation as an effective
management technique to save money or improve services is widespread. Will it
work here? The short answer is that it can and it should if, and this is
vital, if you do it right. I stress this because consolidation, as with
so many other management techniques, can be done wrong which is worse than not
doing it at all.
One real-world example of where consolidation was done
wrong was in Orange County, Calif. Apparently the County expended substantial
resources in developing and executing a plan to consolidate its emergency
services. But when the plan met with extreme opposition, officials lost their
nerve and didn’t follow through and implement the plan. One thing you have to
be prepared for with consolidation plans is for there to be opposition to
changes in the status quo.
That being said, what can you do to ensure a successful
consolidation of human resource services? There are several key steps to
Appoint a champion. Someone should be the
acknowledged leader of the effort. A member of this committee could be a
candidate, or perhaps a staffer this committee identifies could be the project
Develop a written plan. This is a common
business practice. In Florida, officials created a comprehensive business
plan to help guide them in reorganizing their human resource apparatus. I am
told that they also contracted with a firm to help them manage the entire
project. Just last week, the state of Texas published its 100-page plan for
consolidating its health and human services agencies.
Push the button. What I mean by this is that if
you intend to consolidate human resource services please don’t do everything
except actually go through with the consolidation. As in California, it would
be a waste of the taxpayers’ money and time.
Monitor the results. It is important that you
set up a monitoring system to ensure that your goals are met in the short and
Consolidating varied resources has become a "best
practices" management technique in both the private and public sector. Done
right, it can save money and improve services.
I would be happy to take any questions you may have.