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HomeMy WebLinkAboutStaff Report 2410-3633CITY OF PALO ALTO Policy & Services Committee Special Meeting Tuesday, December 10, 2024 7:00 PM     Agenda Item     4.Office of the City Auditor Presentation of Recruitment & Succession Planning Audit Report Staff Presentation 5 7 5 2 Policy & Services Committee Staff Report From: City Manager Report Type: ACTION ITEMS Lead Department: City Auditor Meeting Date: December 10, 2024 Report #:2410-3633 TITLE Office of the City Auditor Presentation of Recruitment & Succession Planning Audit Report RECOMMENDATION The Office of the City Auditor recommends that Policy & Services Committee review and approve the results of the Recruitment and Succession Planning Audit report. BACKGROUND Baker Tilly, in its capacity serving as the Office of the City Auditor (OCA), performed a citywide risk assessment that assessed a wide range of risk areas, including strategic, financial, operational, compliance, technological, and reputation risks. The purpose of the assessment was to identify and prioritize risks to develop the annual audit plan. During the FY22 risk assessment, the OCA identified potential risks related to the City’s recruitment and succession planning efforts. ANALYSIS The objectives of the Recruitment and Succession Planning audit were to determine 1) the efficiency and effectiveness of the recruitment and hiring process; and 2) whether a formal succession plan and related policies and procedures are in place. In August 2023, the City commissioned a comprehensive assessment of its recruitment process which resulted in a Recruitment Strategic Plan with 31 initiatives related to recruitment and hiring process improvements across four categories. In May 2024, under the leadership of the City Manager and the Human Resources Department, progress was reported on several initiatives to implement the Plan’s recommendations. Also in May 2024, the City implemented a pilot Workforce Career Advancement & Continuity Planning program based on state guidance issued by Cal-ICMA. The statewide issued guidance is designed to facilitate talent discussions among local governments’ executive teams and help 5 7 5 2 executives assess current talent pools, identify gaps, recognize emerging leaders and pinpoint development opportunities. •While the City has made progress implementing recommendations from the Municipal Resource Group Recruitment Strategic Plan and seen improvements in hiring and recruitment metrics, oversight and monitoring of implementation progress can be strengthened. The OCA recommends the City identify which initiatives to implement and establish a clear timeframe for completion. •Due to developments facilitated by the Recruitment Strategic Plan, the City’s policies and procedures no longer reflect current recruitment and hiring practices. The OCA recommends developing comprehensive recruitment and hiring policies and procedures to ensure consistent, effective and efficient practices are followed in the future. •The City has undertaken several steps to enhance succession planning efforts but lacks a formalized succession planning program, policies and procedures. The OCA recommends formalizing succession planning efforts as well as policies and procedures to facilitate the transfer of knowledge when key positions are vacated due to retirement or attrition. FISCAL/RESOURCE IMPACT STAKEHOLDER ENGAGEMENT ENVIRONMENTAL REVIEW ATTACHMENTS APPROVED BY: October 30, 2024 City of Palo Alto Office of City Auditor Recruitment and Succession Planning Audit Contents network of Baker Tilly International Ltd., the members of which are separate and independent legal entities. Baker Tilly US, LLP is a licensed CPA firm that provides assurance services to its clients. Baker Tilly Advisory Group, LP and its subsidiary entities provide tax and consulting services to their clients and are not licensed CPA firms. EXECUTIVE SUMMARY .................................................................................................. 2 PURPOSE OF THE AUDIT ........................................................................................................................ 2 REPORT HIGHLIGHTS ............................................................................................................................... 2 INTRODUCTION ............................................................................................................... 4 AUDIT RESULTS.............................................................................................................. 6 FINDING 1 ...................................................................................................................................................... 6 FINDING 2 .................................................................................................................................................... 11 FINDING 3 .................................................................................................................................................... 12 Executive Summary Purpose of the Audit Baker Tilly Advisory Group, LP (Baker Tilly), in its capacity serving as the Office of the City Auditor (OCA) for the City of Palo Alto (the City), conducted a performance audit of the recruitment and succession planning processes and controls based on the approved Task Order 4.23. The objectives were to: 1) Determine the efficiency and effectiveness of the recruitment and hiring process. 2) Determine whether a formal succession plan and related policies and procedures (“P&P”) are in place. Report Highlights Finding 1: While the City has made progress implementing recommendations from the Municipal Resource Group (“MRG”) Recruitment Strategic Plan issued May 2024 and has seen improvement in recruitment and hiring metrics, oversight MRG, a third-party consulting group specializing in organizational assessments and staffing solutions, issued a Recruitment Strategic Plan, hereafter referred to as Recruitment Plan, with 31 initiatives related to recruitment and hiring process improvements across four categories. Under the leadership of the City Manager and Human Resources (“HR”), progress towards the initiatives within these categories is already underway, demonstrating a commitment to enhancing City recruitment processes. The City has made progress in improving its recruitment and hiring metrics, specifically in vacancy rates, time to hire, and turnover rate. Although the City has begun addressing recommendations from the Recruitment Plan, it lacks a formal implementation approach, making it unclear which recommendations are prioritized or agreed upon by stakeholders, and specific implementation timelines have not been established. Key Recommendation We recommend the City establish a formalized implementation approach with clear steps, timelines, and resources, ensuring stakeholder consensus, defined priorities, specific timelines for each recommendation, and a system for regular monitoring and reporting to maintain oversight and accountability. Monitoring should include defining Finding 2: Due to developments facilitated by the Recruitment Plan, the City’s P&P no longer reflect current recruitment and hiring practices. Since the HR Department implementing various initiatives to address the recent Recruitment Plan findings, and continues to enhance its current recruitment processes, P&Ps will need to be updated to reflect these changes and ensure they continue to be followed in the future. The City does not have formal recruitment P&P and has not regularly reviewed and updated its hiring P&Ps. Key Recommendation We recommend the City develop and document comprehensive recruitment and hiring P&P, including detailed P&P for the recruitment process such as job postings, Finding 3: The City has undertaken several steps to enhance succession planning efforts, but needs to formalize a succession planning program and P&P. The City has implemented a succession planning pilot program called “Workforce Career Advancement & Continuity Planning,” with the assistance of department heads. This program is expected to enhance the City’s ability to effectively develop and retain talent. Although the City does not have a formal centralized citywide succession planning program, the pilot program incorporates most of the key succession planning program best practices. To ensure a seamless transition of leadership and critical roles within its various departments, the City should consider establishing formal succession planning program and P&P, which includes a knowledge transfer program. Key Recommendation Given the strong foundation of the City’s pilot program, we recommend enhancing the framework that is in place. This recommendation includes establishing formal succession planning P&P, as well as a structured knowledge transfer program to Introduction The objectives of the audit were to: 1) Determine the efficiency and effectiveness of the recruitment and hiring process. 2) Determine whether a formal succession plan and related P&P are in place. Background During the FY2022 risk assessment, Baker Tilly identified risks with the City’s recruitment and succession planning processes. Key public sector risks include: 1. Competitive candidate market and salary structure – private sector may offer more attractive salaries and benefits 2. Increased turnover rates – public sector has higher retirement rates and not as many opportunities for advancement 3. Limited resources – constrained budgets and difficulty hiring qualified candidates can impact resources around generating a succession planning framework 4. Inadequate training and development – limited resources can lead to inadequate training for leadership roles As highlighted in the audit results, the HR Department has made increasingly positive strides to help improve recruiting, hiring, and succession planning processes. The scope of this audit was to assess the recruitment and hiring process, as well as determine whether a formal succession plan framework is established, and if P&P are in place. The OCA conducted an analysis of the City’s recruitment and hiring and succession planning P&P to ensure they are current and functioning as intended. This audit was designed to identify any gaps or areas for improvement to align the City’s processes with best practices and effectively support its staffing needs. Methodology 1. In order to address our audit objective (1), we performed the following procedures: • Interviewed the appropriate individuals to understand the process, the information system used, and internal controls related to the current recruitment and hiring process. • Requested and analyzed P&P as well as the regulations and standards to identify the criteria to be used to assess efficiency and effectiveness. • Examined the City’s Recruitment Strategic Plan, recruitment and hiring metrics in place, and annual vacancy data. • Compared recruitment and hiring activities against industry best practices. 2. In order to address our audit objective (2), we performed the following procedures: • Interviewed the appropriate individuals to understand the process around succession planning for leadership positions. 1 Government auditing standards require an external peer review at least once every three (3) years. The last peer review of the Palo Alto Office of the City Auditor was conducted in 2017. The Palo Alto City Council approved a contract with Baker Tilly U.S, LLP for internal audit services for October 2020 through June 2022 with an extension through June 2025. City Council appointed Kate Murdock, Audit Manager in Baker Tilly’s Risk Advisory practice, as City Auditor in May 2024. Baker Tilly’s most recent firmwide peer review was completed in October 2021 with a rating of “Pass”. The scope of that peer review includes projects completed under government auditing standards. A report on the next firmwide peer review should be available later in 2024. • are in place. • Compared succession planning initiatives against industry best practices. Compliance Statement generally accepted government auditing standards, except for the requirement of an external peer review 1. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Organizational Strengths include: • The HR Department was supportive of the audit process. • In 2024, the City utilized a third-party, MRG, to complete a case study on their Recruitment Strategic Plan, highlighting the critical importance of understanding and prioritizing the recruitment and hiring process. • In 2024, the City initiated a pilot program through California Local Government Management Collaborative (“Cal-ICMA”) program. The OCA greatly appreciates the support of the HR Department in conducting this audit activity. Thank you! Audit Results 2 Municipal Resource Group. 2024. Recruitment Strategic Plan Navigating Talent Streams to Reel in Excellence. City of Palo Alto Finding 1: While the City has made progress implementing recommenda- tions from the Municipal Resource Group Recruitment Strategic Plan and seen improvements in hiring and recruitment metrics, oversight and monitoring of implementation progress can be strengthened. Efforts underway to improve recruitment and hiring In August 2023, the City commissioned the MRG to conduct a comprehensive assessment of its recruitment process, including interviews with department stakeholders, hiring managers, recent candidates, current and former recruitment staff, and all current HR Department staff involved in any aspect of recruitment, marketing, or onboarding. Based on interviews and data analysis, MRG issued a Recruitment Strategic Plan 2, hereafter referred to as the Recruitment Plan, with 31 initiatives related to recruitment and hiring process improvements across four categories. In May of 2024, under the leadership of the City Manager and HR, progress towards the initiatives within these categories is already underway, demonstrating a commitment to enhancing City recruitment processes: Initiative Category City Action Boost Recruitment Capacity and Capabilities Regular meetings involving the City Manager, Assistant City Manager, HR Director, and Assistant HR Director to discuss recruitment and hiring activities. Active Marketing, Advertising, and Sourcing Positions within Public Works and Utilities were selected to pilot enhanced digital advertising campaigns meant to drive candidate engagement and lead Streamline Processes and Enhance Data/Metrics City Manager with key data metrics, such as total vacancies, vacancies by department, positions budgeted, positions filled, terminations, hires, and promotions; Piloting a dashboard to communicate in real-time with department directors, improving their ability to drill down into specific metrics such as turnover rates and vacancy rates for individual positions. This granular visibility will allow for more informed decision-making and strategic planning; Piloting a new onboarding program to streamline the new hire experience. Invest in Talent Pipeline In addition to the actions listed above, HR staff started tracking progress on management had determined which recommendations to implement, the priority in which they should be implemented and an appropriate timeframe for doing so were unclear, however, these efforts are underway. Improvement in Recruitment and Hiring Metrics The City of Palo Alto has made significant progress in improving its recruitment and hiring metrics, particularly in terms of its vacancy rates. Since July of 2021, the City has seen decreases in its vacancy rates despite increasing the number of budgeted positions. Annual Vacancy Rates Date Budgeted Filled Vacant Vacancy % 7/1/2021 1,035.85 861.85 174 7/1/2022 1,014.35 852.60 161.75 7/1/2023 1,063.10 901.10 162 7/1/2024 1,092.10 948.10 144 This improvement is significant considering, historically, the City of Palo Alto’s lowest vacancy rate of 10%.² Turnover in Palo Alto can be attributed to the high cost of living, a competitive job market encouraging frequent job changes, and a limited availability of affordable housing. Competitive private sector salaries also contribute to higher turnover in government jobs as employees seek better financial rewards and career opportunities, especially among highly skilled workers who can command higher salaries. To combat this, the City has adjusted their hiring approach, by revising salary ranges up to the 75th percentile for certain positions. This, along with incorporating MRG broader strategy recommendations such as improving career development opportunities has contributed to reduced turnover. The City of Palo Alto’s “time to hire” metric, indicating the average number of days it took to fill a position from the time it was posted, has also shown improvement. Table 1: Time to Hire - All Departments From September 2023 to October 2024, figures fluctuate significantly, with a peak in October 2023 at 106.8 days and a low in November 2023 at 57.6 days. While variability exists from month to month, the “time to hire” metric continues to trend positively. This improvement is significant as prolonged hiring times can increase departmental costs due to extended vacancy periods and the resources required for lengthy recruitment processes. It can also impact team productivity and morale, as existing employees may need to take on extra responsibilities while positions remain unfilled. Additionally, delays in making offers can result in losing candidates to other opportunities. Improvement is also evident in the City of Palo Alto’s “turnover rate,” which indicates the percentage of employees who leave an organization within a specific period. Quarterly improvement can be seen over the duration of FY 24. Table 2: Turnover Rate FY24 (July23-June24) Month Number of Separated Employees Average Number of Employees Turnover Rates Quarterly Turnover Rates July 9 901 1.00% August 3 888 0.30% September 9 890 1.00% 2.30% October 5 900 0.60% November 6 903 0.70% December 11 905 1.20% 2.40% 0 20 40 60 80 100 120 3 White Paper: 10 Recruiting Metrics to Measure | NEOGOV January 5 917 0.50% February 6 921 0.70% March 4 919 0.40% 1.60% April 9 924 1.00% May 2 930 0.20% June 6 945 0.60% 1.80% Overall, the improvements made by HR are contributing to fewer vacancies, shorter hiring times, decreased turnover, enhanced operational efficiency and reduced costs. Continuing to understand and analyze these trends can help the City optimize their recruitment strategies, ensuring they are prepared for periods of high demand and can maintain a steady pipeline of qualified candidates. Efforts to improve recruitment and hiring data Due to the challenges the City faces with data management in its recruitment processes, specifically the lack of integration between NEOGOV and SAP, HR staff is forced to manually generate data metric reports. This in turn requires HR staff to perform extensive manual integration and quality control reviews which can be time-consuming. The lack of a centralized information system further complicates data management, making it difficult to centralize and streamline these tasks. HR staff is planning to integrate its information systems, and it is essential for City leadership to prioritize support for this initiative. This integration is vital for streamlining operations, improving data accuracy, and enhancing overall efficiency. Supporting this initiative will also demonstrate a commitment to modernizing infrastructure and optimizing resource management, ultimately benefiting the entire organization. Recruiting Best Practices to Consider Creating a data-driven recruitment strategy is essential for public sector agencies facing challenges with staffing shortages and high employee turnover. To enhance the public sector recruitment process, it’s crucial to measure the appropriate metrics. This requires careful planning and foresight. NeoGov’s “10 of the Most Important Recruiting Metrics to Measure for Public Sector Agencies”, provided guidance around the most important metrics to capture when recruiting in the public sector. The 10 metrics, referenced in more detail in the NeoGov report, are:3 1. Application conversion rate 2. Application per job posting 3. Time-to-hire 4. Time-to-fill 5. Cost-to-hire 6. Source-to-hire Recommendation Management Response 8. Offer acceptance rate 9. Quality of hire 10. First-year attrition rate Palo Alto is currently tracking all but three from this list: Candidate experience, quality of hire, and first-year attrition rates. HR leadership should consider if adding these additional metrics to its KPI monitoring would help to strengthen its recruiting strategies. Given the depth of the recommended Recruitment Strategic Plan, with 31 initiatives across four categories, as well as the acknowledged multiple-year effort needed to complete implementation, it is imperative that oversight of the implementation be thoroughly monitored, documented, and reported with regular frequency to ensure successful adoption and execution of the recommendations. Although the City has started to address the recommendations, the implementation approach can be enhanced and formalized to ensure a clear roadmap is established. This roadmap should detail the necessary steps, timelines, and resources. Additionally, it remains unclear which initiatives the City has chosen to prioritize or abandon. Furthermore, the City should establish specific timelines for implementing each recommendation wherever feasible and provide justifications for those deemed lower priority with ongoing or open-ended timelines. This approach enhances transparency and demonstrates a good faith effort to implement recommendations appropriately. Finally, the City should implement a system for regular monitoring, documentation, and reporting of progress to maintain oversight and accountability. By formalizing the implementation plan, the City can transform strategic recommendations into actionable steps, ensuring a structured and efficient approach to achieving the project’s objectives and maximizing the value of City funds spent on these improvements. Responsible Department(s): Human Resources with support from stakeholder departments and the City Manager’s Office Concurrence: Agree Target Date: CY Q1 2025 Action Plan: A tool to track and oversee the progress of the various actions recommended in the Recruitment Plan has been established, as noted in the report) including oversight with the Human Resources team identifying clear actions and routine oversight by the City Manager’s Office on progress. In addition, to ensure increased dedicated focus, a new position of Division Manager Recruitment was added in July 2024 to oversee the ongoing iteration 4 https://www.dgs.ca.gov/OHR/Resources/Hiring-Handbook?search=hiring%20handbook __________________ Finding 2: Due to developments facilitated by the Recruitment Plan, the City’s P&P no longer reflect current recruitment and hiring practices. Recommendation including implementing a report out on the Recruitment Plan as well. _____________________________________________________________________ The City does not have formalized P&P outlining its recruitment processes. While the HR Department implements various initiatives intended to address the recent MRG study recruitment findings, previously mentioned, and continues to enhance its current recruitment processes, having a documented framework is critical to the future success of the department in this area. Without documenting the procedures, guidelines, and targets established during this period of growth, inconsistencies in the City’s recruiting processes may continue or new issues may develop. The HR Department has plans to hire a new Recruitment Division Manager in FY 2025, expand its City HR Liaison Program, integrate its information systems, and overhaul its data metric communication process with a new manager dashboard, among others. The Human Resources Liaison Program has a Guidebook and to maximize the success of these efforts and minimize confusion among staff, standardized P&P are needed. Additionally, a review and update are needed for the City’s hiring procedures. While the City currently has a thoroughly documented procedure, it has not been revised since March of 1999. Over time, procedures can change or become unclear. Regular reviews help ensure they are still relevant, clear, and effective in guiding employee behavior and management decisions. We recommend the City expand and formalize a comprehensive recruitment and hiring P&P, with appropriate direction for hiring managers on recruitment processes and resources. The City should ensure these P&P are aligned with current employment laws, rules, and regulations to maintain compliance and reduce legal risks. Additionally, City leadership should implement a schedule for regular reviews and updates of its P&P, at least annually, or as needed, based on changes in laws or organizational needs. Detailed P&P can lead to a more consistent, efficient, and legally compliant recruitment process, ultimately leading to better hiring decisions and a more effective workforce. The California Government, Office of HR, offers a strong resource for recruitment with their “Hiring Handbook”. High-level areas covered in the Hiring Handbook include:4 1. Identifying vacancy and evaluating need 2. Hiring Toolkit 3. Application/Interview planning 4. Language on hiring process 5. Application screening 6. Interview process – start to finish, including critical questions 7. Job offer 8. Hiring package 5 Key Issues in Succession Planning (gfoa.org) Management Response __________________ Finding 3: The City has undertaken several steps to enhance succession planning efforts, but lacks a formalized succession planning program and P&P. updating recruiting and hiring P&P. Responsible Department(s): Human Resources Concurrence: Partially Agree Target Date: CY Q3 2025 Action Plan: While the City's current Policy on selection (2-10) complies with current employment laws, it does not align with best/next practices the City is already seeking to implement. The Policy in current form does not inhibit the city's streamlining of processes due to its ambiguity, staff agree that an update to come into alignment with more commonplace terminology and the current methods will ensure clarity on business operations today. Overall, the policy update will seek to strike a balance between conformance to best practices while still allowing for the flexibility needed to run an agile recruitment process responsive to every changing recruitment markets. Therefore, the level of granularity may remain in the Human Resources Liaison Guidebook versus formalized in a policy and procedure. __________________________________________________________ In January 2024, Cal-ICMA issued a statewide template designed to facilitate talent discussions among local governments’ executive teams. This initiative aims to bolster talent development efforts across local governments in California. The template’s primary objectives are to help executive teams assess their current talent pool, identify gaps, recognize emerging leaders, and pinpoint development opportunities. Per the Government Finance Officers Association’s (“GFOA”) “Key Issues in Succession Planning,” a successful succession planning program should include key criteria to avoid issues:5 1. Provide a formal, written succession plan as a framework for succession initiatives. 2. Develop written P&P to facilitate knowledge transfer. 3. Promote development of leadership skills. 4. Encourage personal professional development activities 5. Design better recruitment and retention practices to aid in the succession process. Succession planning program is not yet formalized. As of May 31, 2024, the City has implemented the Cal-ICMA template through a pilot program called “Workforce Career Advancement & Continuity Planning,” with the assistance of department heads. This program follows a four-step process that is expected to enhance the City’s ability to effectively develop and retain talent: 1. Department Directors, Assistant Directors, and Division Managers employees. 3. The completed templates are submitted to the HR Director for review with the City Manager’s Office. 4. Following the review, Department Directors, Assistant Directors, and Division Managers conduct Talent Discussions with employees. Although the City does not have a formal centralized citywide succession planning program, the pilot program incorporates most of the key succession planning program best practices, as highlighted by the GFOA. If the City were to improve their current program, they should consider developing succession planning P&P. The City currently lacks formal succession planning P&P to facilitate knowledge transfer. Currently, the City does not have P&P for facilitating knowledge transfer to new employees. Succession planning P&P help to ensure the seamless transition of leadership and critical roles within an organization’s various departments. Documented P&P at the department level can serve as an effective training tool, streamlining processes for employees. By clearly documenting standard operating procedures, employees can familiarize themselves with their roles and responsibilities, reducing the need for extensive hands-on training from managers and supervisors. This approach not only ensures consistency and clarity in task execution but also allows leadership to allocate more time to strategic initiatives and other critical functions, thereby enhancing overall departmental efficiency and productivity. While the HR Department plays a crucial role in overseeing the development of organizational P&P, the responsibility for creating specific procedures at the department level falls to the individual departments themselves. Focusing on the development, implementation, and accuracy of department level procedures can help the City meet its objectives. As the process owner for succession planning, HR should consider leading the transfer of knowledge initiative and formalize the approach so that all departments have supporting documentation that new and existing employees can reference. The City is actively promoting development of leadership capabilities. Additionally, the City established and implemented a Leadership Competencies framework in November 2023. This framework highlights key areas that are necessary for leadership positions. These focus areas include: 1. Overarching Competencies 2. Leading Change while Maintaining Stability 3. Leading People & Building Coalitions 4. Service in the Public Realm A few of the critical competencies within the framework include integrity, communication, external/community awareness, strategic thinking, leveraging the positive impact of diversity, problem solving, accountability, and financial and operational management. By integrating competencies into succession risks associated with leadership transitions, ensuring the organization remains resilient and competitive. Succession Planning – Census Data The HR Department provided census data for City employees as of July 31, 2024. The key data highlighted in the tables below includes the total number of employees, ages, years of service, and those eligible for retirement (estimated). This data aims to provide an understanding of the current workforce landscape. Accurately predicting the timing of employee retirements presents challenges, such as legal implications and privacy concerns associated with inquiring about employees’ retirement plans. Table 3: Full-time vs. Par-time Employees Type Percentage Regular 962 74% Hourly 330 26% Table 4: Age of City Employees 1 2 13 16 8 8 7 0 3 3 4 1 1 0 1 2 2 0 0 0 0 59 61 48 45 22 24 43 0 16 30 22 18 8 3 0 3 15 1 2 1 1 0 2 3 13 3 6 4 1 7 20 14 6 13 20 1 2 8 3 0 1 2 0 2 6 8 3 0 0 0 5 23 11 8 6 11 0 23 38 51 11 10 9 2 19 44 61 24 25 26 1 34 56 70 28 24 30 Table 5: Employee Years of Service 26 12 6 3 5 2 1 7 3 2 0 0 0 0 5 0 0 0 0 0 0 201 37 17 20 13 10 4 35 13 16 14 14 5 0 16 2 0 3 1 0 1 8 11 5 3 3 0 1 57 10 1 4 4 4 1 12 5 0 0 0 0 0 12 5 0 1 1 0 0 37 12 4 5 5 1 0 53 25 25 15 15 6 3 84 38 31 14 20 10 4 100 50 28 24 20 12 9 Table 6: Retirement Eligible City Employees – Overall* Yes 16% No 84% *Estimated based on employees over the age of 55 and have at least 5 years’ service Table 7: Retirement Eligible City Employees – by Department* 12 43 1 11 0 5 48 254 7 90 2 21 10 21 15 66 1 16 6 10 Steps to Succession Planning (gfoa.org) OOT 19 PLA 64 POL 142 PWD 201 UTL 243 Total Years Service 202 1,090 1,292 *Estimated based on employees over the age of 55 and have at least 5 years’ service According to our estimated retirement analysis, 32% of the IT Department are retirement eligible, followed by the Administrative Services Department (22%) and the Public Works Department (21%). The City’s workforce exhibits a well-balanced distribution of experience across various age groups and lengths of service. This stability ensures a dynamic and versatile team, combining the fresh perspectives of newer employees with the seasoned insights of long-term staff members. Such a diverse range of experience levels allows for a collaborative environment where innovative ideas and proven strategies can thrive, ultimately enhancing the overall effectiveness and adaptability of the City’s workforce. Succession Planning Best Practices to Consider GFOA suggests, "Knowledge transfer is a critical component of succession management. There should be written procedures in place to formalize the knowledge transfer. A meeting should be held with departing staff to document job responsibilities."⁴ “Succession planning has gotten even more challenging in recent years, given a changing job market, shorter employee tenure, and COVID-19 job turnover— which means that governments should make it an even higher priority.” GFOA has created a 10-step approach to succession planning so that organizations can retain critical talent and hire skilled employees that replace staff that leave the City. The 10-steps summarized include:6 1. Develop an integrated approach. 2. Continually assess potential employee turnover. 3. Provide a formal, written succession plan as a framework. 4. Develop written policies and procedures to encourage knowledge transfer. 5. Develop leadership skills as a key component. 6. Encourage personal professional development activities. 7. Design better recruitment and retention practices. 8. Work out how collective bargaining agreements fit in with the overall succession plan. 9. Consider non-traditional hiring strategies. 10. Be prepared by addressing the succession planning risks associated with essential positions. Recommendation Management Response structured knowledge transfer program to ensure critical information and expertise are retained at the City. A structured knowledge transfer program complements succession planning by systematically capturing and sharing essential knowledge and skills from experienced employees to their successors. This program can include mentorship opportunities, detailed documentation of processes, and regular training sessions. By institutionalizing these practices, the City can mitigate the risk of knowledge loss, maintain operational efficiency, and foster a culture of continuous learning and development. Knowledge transfer initiatives not only safeguard the City’s institutional knowledge but also empower employees by providing clear career progression pathways and professional development opportunities. This holistic approach to workforce planning ensures that the City remains resilient, adaptable, and well-equipped to meet future challenges. In conclusion, the City should designate a responsible entity to lead the development of P&P for knowledge transfer across departments. This responsibility could be assigned to the City Manager’s Office, the HR Department, or a Succession Planning Committee comprised of department heads. Responsible Department(s): Human Resources and Citywide Departments Concurrence: Partially Agree Target Date: Ongoing Action Plan: As noted in the report, the City initiated the Workplace Career Advancement and Continuity Planning effort or "WCACP". This initiative focuses on the identification of critical roles within the organization, the identification of existing talent with growth potential, and the creation of Individual Development Plans IDPs for those existing employees. This program is curated to help departments with succession planning, safeguarding institutional knowledge, and retaining existing talent. While still in its initial phase the program is set to expand in 2025 to include more individuals and more structure planning documents as recommended by the Auditors report. However, staff expect that documents to support this effort and knowledge transfer will focus on a framework for such initiatives; given the diverse workforce and job functions. Baker Tilly Advisory Group, LP and Baker Tilly US, LLP, trading as Baker Tilly, are members of the global network of Baker Tilly International Ltd., the members of which are separate and independent legal entities. Baker Tilly US, LLP is a licensed CPA firm that provides assurance services to its clients. Baker Tilly Advisory Group, LP and its subsidiary entities provide tax and consulting services to their clients and are not licensed CPA firms. City of Palo AltoOffice of the City Auditor (OCA) Policy & Services Committee Meeting Recruitment and Succession Planning Audit, October 30, 2024 Presenter: Mike Chimera, Manager December 10, 2024 2 Objectives 1.Determine the efficiency and effectiveness of the recruitment and hiring process. 2.Determine whether a formal succession plan and related policies and procedures (“P&P”) are in place. 3 Finding 1: Monitoring and Oversight of Recruitment Strategic Plan Finding Recommendation While the City has made progress implementing recommendations from the Municipal Resource Group (“MRG”) Recruitment Strategic Plan issued May 2024 and has seen improvement in recruitment and hiring metrics, oversight and monitoring of implementation progress can be strengthened. The City has started addressing Recruitment Plan recommendations; however, lacks a formal implementation approach, resulting in unclear prioritization, stakeholder agreement, and specific timelines. We recommend the City establish a formal implementation approach with: •clear steps •specific timelines •resource allocations •defined priorities •system for regular monitoring and reporting, including key metrics tracking. 4 Finding 2: Recruitment and Hiring Policies and Procedures Finding Recommendation Due to developments facilitated by the Recruitment Plan, the City’s P&P no longer reflect current recruitment and hiring practices. The HR Department plans to hire a new Recruitment Division Manager in FY 2025, expand the City HR Liaison Program, integrate information systems, and overhaul the data metric communication process with a new manager dashboard. A review and update are needed for the City’s hiring procedures as they have not been revised since March 1999. We recommend the City develop and document comprehensive recruitment and hiring P&P, including: •job postings •candidate screening •interviewing •selection Additionally, the City should regularly review and update P&P annually, or as needed, based on changes in laws or organizational needs. 5 Finding 3: Formalized Succession Planning Program and Policies and Procedures Finding Recommendation The City has implemented a succession planning pilot program called “Workforce Career Advancement & Continuity Planning,” with the assistance of department heads. This program is expected to enhance the City’s ability to effectively develop and retain talent. Although the pilot program incorporates key succession planning program best practices, the program is not formally centralized citywide. Lastly, the City lacks P&P for knowledge transfer to new employees. We recommend establishing formal succession planning P&P, as well as a structured knowledge transfer program to ensure critical information and expertise are retained at the City. The City should designate a responsible owner to lead the development of P&P for knowledge transfer across departments. Questions? Baker Tilly Advisory Group, LP and Baker Tilly US, LLP, trading as Baker Tilly, operate under an alternative practice structure and are members of the global network of Baker Tilly International Ltd., the members of which are separate and independent legal entities. Baker Tilly US, LLP is a licensed CPA firm that provides assurance services to its clients. Baker Tilly Advisory Group, LP and its subsidiary entities provide tax and consulting services to their clients and are not licensed CPA firms. The name Baker Tilly and its associated logo is used under license from Baker Tilly International limited. 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