Incentives, staffing, and benchmarking in a tight economy.
David W. Sosa, Ph.D., and Virginia Perry-Failor
In several recent utility rate cases, regulators have disallowed portions of utility compensation expenses, on the basis that difficult local economic conditions justify pay cuts. However, when utilities begin squeezing their uniquely qualified technical and management staffs, performance can suffer. Analysis Group authors David W. Sosa and Virginia Perry-Failor review experiences at several companies to show how an evidentiary approach will help utilities avoid disallowances of critical compensation for valued employees.
It's tempting to compare rates between utilities- to use those simple rankings as regulatory carrots and sticks-but those who do may play a dangerous game. While such rankings may appear compelling, they can add an inappropriate bias to the regulatory process and penalize well-performing electric utilities that operate in high-cost service territories, such as large metropolitan areas.
While utilities continue to pare staff to skeletal levels, the latest labor statistics indicate that employees, though increasingly more productive, are working fewer hours per week.
A comparison of the U.S. Bureau of Labor Statistics' December 1997 and preliminary December 1998 statistics indicate that while staff levels continued to decline at electric, gas and sanitary utilities, employees who remain are working 2 percent fewer hours per week.
Companies in competitive industries routinely collect information about their customers through a variety of sources (em including surveys, national census, and government and private sources. Such customer information and its applications are jealously guarded secrets, rarely shared with others in the industry. Customer information is not limited to expenditure on a company's products or services, but usually includes a customer profile.
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