Performance audit, Department of Administration, Human Resources Division

              State of Arizona
Office
of the
Auditor General
PERFORMANCE AUDIT
Report to the Arizona Legislature
By Douglas R. Norton
Auditor General
DEPARTMENT OF
ADMINISTRATION
HUMAN RESOURCES
DIVISION
February 1999
Report Number 99-1
2910 NORTH 44th STREET • SUITE 410 • PHOENIX, ARIZONA 85018 • (602) 553-0333 • FAX (602) 553-0051
DOUGLAS R. NORTON, CPA
AUDITOR GENERAL
DEBRA K. DAVENPORT, CPA
DEPUTY AUDITOR GENERAL
STATE OF ARIZONA
OFFICE OF THE
AUDITOR GENERAL
February 5, 1999
Members of the Arizona Legislature
The Honorable Jane Dee Hull, Governor
Mr. J. Elliott Hibbs, Director
Department of Administration
Transmitted herewith is a report of the Auditor General, A Performance Audit of the
Department of Administration, Human Resources Division. This report is in response
to a May 27, 1997, resolution of the Joint Legislative Audit Committee.
This report addresses the Division’s progress in addressing recommendations made in
the 1993 Auditor General’s review of the Division (Report No. 93-6). For example,
despite previous attempts and the expenditure of over $1 million to implement a new
job evaluation system for the State, the Division is just now in the process of
implementing a new system. In the meantime, the Division has continued to use the job
evaluation system criticized in the 1993 report for being subjective, easy to manipulate,
and improperly maintained. While the proposed job evaluation system should address
these problems, this system is still subject to manipulation. By implementing a
systematic maintenance program and developing guidelines for its analysts, the
Division can ensure that the new system better serves state agencies.
We also found that the Division has greatly improved its administration of state
employee health benefits. For example, the Division established an employee benefits
advisory committee to foster employee input into the benefits process and implemented
an employee wellness program. However, the Division can further improve its
administration of the benefits program by better monitoring healthcare providers and
tracking employee complaints to identify and address trends or correct prevalent
problems.
February 5, 1999
Page -2-
Finally, despite improving the hiring process through the implementation of an
automated resume database, the Division needs to undertake additional activities to
attract more candidates to state service and meet state agency hiring needs. First, the
Division needs to expand its analyst training and develop policies and procedures to
guide the formation of hiring lists that meet state agency needs. Additionally,
expanded advertisement of open state agency positions and education about how to
apply for state positions will help attract more candidates to state service.
In addition to the findings and recommendations presented in this report, this audit
presents other pertinent information on the State’s employee grievance process.
As outlined in its response, the agency agrees with all of the findings and recommendations.
My staff and I will be pleased to discuss or clarify items in the report.
This report will be released to the public on February 8, 1999.
Sincerely,
Douglas R. Norton
Auditor General
Enclosure
i
SUMMARY
The Office of the Auditor General has conducted a performance audit of the Department of
Administration, Human Resources Division, pursuant to a May 27, 1997, resolution of the
Joint Legislative Audit Committee.
The Department of Administration, Human Resources Division (Division) serves as the
State’s human resources office and engages in a variety of activities including recruitment
and evaluation services, assisting state agencies with hiring and other human resources is-sues,
and administering the State’s employee benefits program. While the Division primarily
provides its services to the approximately 32,000 state employees located in merit system
agencies, such as the Departments of Transportation, Economic Security, and Health Serv-ices,
employees outside the merit system also take part in the State’s employee benefits pro-gram.
Division Proposes New Job
Evaluation Method
(See pages 9 through 15)
Despite the important role that a job evaluation system plays in determining an organiza-tion’s
structure, the State currently lacks an effective method of defining and valuing posi-tions.
The current job evaluation system is inherently subjective and easily manipulated, and
has not been properly maintained. As a result, the State has many similar or unnecessary job
classifications. Further, the Division cannot ensure that job candidates have the appropriate
skills to fill vacancies and that state employees are appropriately compensated. These prob-lems
have been longstanding (they were also identified during a 1993 Auditor General re-view,
Report No. 93-6) and the Division has spent the past five years and approximately $1
million attempting to implement a new job evaluation system to address them.
In an effort to improve the State’s job evaluation system, the Legislature passed Laws 1998,
Chapter 292, requiring the Division to propose a new job evaluation system that would result
in fewer and broader job classes, a review of all job classes every three to five years, and
fewer classification actions, such as requests to reclassify a job or establish a new job. This law
also sets a goal of moving state employee compensation to within 5 percent of market com-pensation
by fiscal year 2002-2003. In response to this mandate, the Division proposed an
automated point factor job evaluation system, which could potentially correct many of the
current system’s problems because point factor systems are generally more objective and not
as easily manipulated. However, this type of system may still be subject to manipulation,
since state employees can still inappropriately request job description changes in order to in-crease
salaries. In addition, the point factor system cannot easily adapt to changes in market
salaries.
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Therefore, the Division must take several steps to ensure the success of a new system. First,
the Division must ensure that it implements routine maintenance of the new system to regu-larly
update job classifications and reduce the effects of manipulation. Second, the Division
should ensure that state compensation rates are brought closer to market compensation rates
by establishing new salary schedules based on the results of market surveys and by setting
up special pay schedules for positions that may experience significant changes due to fluc-tuations
in market compensation. Finally, the Division should allow state employees read-only
access to job evaluation information on a computer intranet and establish a process to
allow employees to update or correct job descriptions.
The Division Has Improved
Benefits Administration but
Further Efforts Are Needed
(See pages 17 through 22)
Further efforts are needed to ensure that health insurance carriers perform according to the
State’s expectations. Since the 1993 Auditor General review, the Division has taken several
steps to improve its administration of the state employee benefits program, such as improv-ing
communication with employees, involving employees in the benefits decision-making
process, and developing a comprehensive wellness program. However, the Division could
do more to ensure its health insurance carriers are performing according to contractual per-formance
standards. Specifically, the Division’s current contracts with health insurance carri-ers
include provisions for monitoring carrier performance. While the Division conducts em-ployee
satisfaction surveys and reviews carrier enrollment, claims, and utilization data, it
monitors most contractual performance standards only in response to employee complaints.
In order to ensure that health insurance carriers perform according to contractual standards,
the Division should conduct monitoring efforts on a routine, ongoing basis.
Further, despite the fact that the Division conducts monitoring efforts in reaction to employee
complaints, it does not compile and track employee complaints. Because complaints are criti-cal
to the Division’s monitoring of carrier performance, the Division should develop and im-plement
a mechanism for capturing and tracking complaint data.
Further Improvements Needed
to Increase Effectiveness of
Hiring Process
(See pages 23 through 28)
Additional efforts are needed if the State is to realize the maximum value from steps the Di-vision
has already taken to improve the hiring process. In an effort to improve and expedite
the hiring process, the Division implemented Resumix, a database software package that
electronically processes resumes and creates a bank of candidates and employee skills that
can be matched against the requirements of open positions. As a result, the Division can now
iii
generate candidate hiring lists within approximately three days instead of the eight weeks
the former manual process took.
However, despite the more efficient hiring process, some agency hiring supervisors have in-dicated
that hiring lists still do not contain enough qualified candidates. To ensure that hiring
lists meet state agencies’ needs, the Division should expand its human resource analyst
training to include instruction on how to produce more comprehensive candidate lists. The
Division should develop training to include basic procedures, such as when to add candi-dates
requested by an agency to a hiring list, as well as maneuvers often used by experienced
Resumix users to create comprehensive lists. Further, the Division should develop a set of
policies and procedures to guide human resource analysts and state agency hiring supervi-sors
through the hiring process.
In addition to conducting additional training, the Division should take steps to increase the
number of qualified candidates interested in state service. Specifically, the Division should
consider weekly advertising of frequently open positions and current hard-to-fill positions
along with information on how to prepare and submit a scannable resume. Additionally, the
Division should continue with or possibly expand its efforts to instruct potential job candi-dates
on how to apply for state positions by participating in job fairs and other forums that
attract job seekers.
Other Pertinent Information
(See pages 29 through 31)
During the audit, other pertinent information was gathered regarding the State’s employee
grievance system. According to personnel rules, each state agency covered by the rules shall
develop an employee grievance procedure. Agencies typically follow a multi-step process,
which consists of the grievance being elevated to different levels within an agency’s man-agement
structure. The personnel rules also contain special provisions for the Division to
conduct final reviews on grievances alleging discrimination or noncompliance with the per-sonnel
rules. During the audit, a review of 52 of the 90 grievances the Division received and
reviewed in fiscal year 1997-98 found that the Division conducts thorough, timely reviews of
these grievances in conformance with the personnel rules.
iv
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v
Table of Contents
Page
Introduction and Background.............................................................. 1
Finding I: Division Proposes New Job
Evaluation Method............................................................................ 9
Job Evaluation a Critical
Human Resources Function................................................................................................ 9
Current Job Evaluation
Method Ineffective................................................................................................................. 9
Division Proposes New
Job Evaluation Method......................................................................................................... 12
Division Must Take Several
Steps to Ensure New Job
Evaluation Method’s Success ............................................................................................. 14
Recommendations................................................................................................................. 15
Finding II: The Division Has
Improved Benefits Administration
but Further Efforts Are Needed....................................................... 17
Several Improvements
Made to Employee
Benefits Program.................................................................................................................... 17
Division Should
Improve Insurance
Carrier Monitoring Efforts................................................................................................... 19
Division Should
Track Complaints................................................................................................................... 20
Recommendations................................................................................................................. 22
vi
Table of Contents (cont’d)
Page
Finding III: Further Improvements Needed
to Increase Effectiveness
of Hiring Process............................................................................... 23
Deficiencies Remain Despite
Overall Improvements
in Hiring Process..................................................................................................................... 23
Increased Emphasis on Internal
Activities Can Improve
Quality of Hiring Lists .......................................................................................................... 25
Additional Advertising and
Education Needed to Attract
More Candidates to State Service....................................................................................... 26
Recommendations................................................................................................................. 28
Other Pertinent Information.................................................................. 29
Employee Grievance
Process...................................................................................................................................... 29
Agency Response
vii
Table of Contents (concl’d)
Tables and Figure
Page
Table 1 Arizona Department of Administration
Human Resources Division
Statement of Revenues, Expenses,
and Other Changes in Retained Earnings
Years Ended June 30, 1996, 1997, and 1998
(Unaudited) ........................................................................................... 2
Table 2 Arizona Department of Administration
Human Resources Division
Comparison of Benefits Offered by the
State of Arizona and Other Local
Organizations by Rank Order
October 1998.......................................................................................... 19
Table 3 Arizona Department of Administration
Human Resources Division
Contracted Health Insurance Carriers
Selected Performance Standards, Monitoring Activities,
and Penalties for Noncompliance
Effective October 1997......................................................................... 21
Figure 1 Arizona Department of Administration
Human Resources Division
Comparison of Duties by Position
As of January 1999................................................................................ 11
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1
INTRODUCTION AND BACKGROUND
The Office of the Auditor General has conducted a performance audit of the Arizona De-partment
of Administration, Human Resources Division pursuant to a May 27, 1997, resolu-tion
of the Joint Legislative Audit Committee.
Division Mission
The Arizona Department of Administration, Human Resources Division (Division) serves as
the State’s human resources office, with its mission being:
“To provide efficient, timely, customer-driven, professional human resources services to
meet our agency, employee and public customers’ needs.”
To fulfill this mission, the Division provides recruitment and evaluation services, assists state
agencies with hiring, training, and other human resources issues, and administers the State’s
employee benefits program. In addition, as part of its role as the State’s human resources of-fice,
the Division administers the State’s merit system. Currently, of the approximately 60,000
state employees, about half are employed in agencies covered by the merit system. The re-maining
state employees work for uncovered state entities that fall outside of the merit sys-tem,
such as the state universities, all legislative agencies, the State Supreme Court and Court
of Appeals, the Department of Public Safety, and the Schools for the Deaf and Blind. While
most of the Division’s services are provided primarily to merit system agencies, both merit
system and non-merit system employees take part in the State’s employee benefits program.
Division Budget
Organization and Staffing
To carry out its mission and provide a variety of human resource services, the Division re-ceived
approximately $8.7 million in fiscal year 1997-98 (see Table 1, page 2). Additionally,
the Division employs over 140 full-time equivalent positions (FTEs), organized into the fol-lowing
five sections.
n Employment and Training (34 FTEs)—The employment unit produces candidate lists
for state agencies covered under the merit system rules to use when filling vacant state
positions. This unit compiles these lists using a resume database computer program
2
Table 1
Arizona Department of Administration
Human Resources Division
Statement of Revenues, Expenses, and Other Changes in Retained Earnings1
Years Ended June 30, 1996, 1997, and 1998
(Unaudited)
1996 1997
Operating revenues:
Charges for services 2 $7,793,808 $8,692,393
203 793 2,301
Total operating revenues 7,794,011 8,392,303 8,694,694
Operating expenses:
Personal services 4,359,080 4,104,203 4,224,537
Professional services 3 445,589 1,343,254 1,190,050
Depreciation 288,987 4 181,718 198,354
Insurance premiums 111,556 102,600 122,296
Other 5 1,063,556 934,451 1,270,615
Total operating expenses 6,268,768 6,666,226 7,005,852
Operating income 1,525,243 1,726,077 1,688,842
Nonoperating expenses: 6
Reversion to the federal government 286,736 320,637
Remittance to the State General Fund 1,327,768 1,606,266 911,573
Total nonoperating expenses 1,327,768 1,893,002 1,232,210
Income (loss) before operating transfers 197,475 (166,925) 456,632
Operating transfer out             (500,000) 7
Net income (loss) 197,475 (166,925) (43,368)
Retained earnings, beginning of year 715,347 912,822 745,897
Retained earnings, end of year $ 912,822 $ 745,897 $ 702,529
1 Excludes financial activity of the various state employee health and other benefits programs, except for administrative costs. The Division
holds the assets of these programs in a trustee capacity and may expend only the principal for the designated purpose of the programs.
2 The Division receives a pro rata share of payroll costs from agencies covered under the merit system. For fiscal years 1996 and 1998, the rate
charged was 0.9 percent of agency payroll costs. For fiscal year 1997, the rate charged was 0.95 percent for the first half of the fiscal year and
0.8 percent for the second half of the fiscal year.
3 Beginning in fiscal year 1997, Data Center costs for the Human Resource Management System and Benefit Information Tracking System
computer run times were charged to the Human Resources Division instead of the Finance and Information Services Divisions. This change
resulted in additional contractual service expenses of approximately $1 million annually.
4 Includes depreciation expense attributable to prior years because they had not previously been recorded for the Division.
5 Includes approximately $311,000, $406,000, and $446,000 of rental and lease payments on state-owned buildings for fiscal year 1996, 1997,
and 1998, respectively. Other significant operating expenses included printing and distributing costs associated with benefit newsletters and
open-enrollment information for all state employees, and repair and maintenance costs for data processing equipment. In addition, the Di-vision
purchased approximately $210,000 of data processing equipment during fiscal year 1998 that was not required to be capitalized.
6 A.R.S. §41-764 restricts the Division to a $200,000 cash balance at year-end; consequently, monies in excess of this limit were remitted to the
State General Fund. Since state agencies used both federal and state monies to pay their pro rata share of payrolls to the Division, the federal
government received a portion of the excess cash balance beginning in fiscal year 1997. The amount reverted was based on a negotiated
agreement between the State and the federal government.
7 This amount was transferred to the Government Information Technology Agency to address Human Resource Management System Year
2000 compliance issues.
Source: The Arizona Financial Information System (AFIS) Accounting Extract File, Revenues and Expenditures by Fund, Pro-gram,
Organization, and Object and Trial Balance by Fund reports for the years ended June 30, 1996, 1997, and 1998.
3
called Resumix (see Finding III, pages 23 through 28 for further information regarding
the Resumix system). Further, the training unit provides training on topics such as ethics,
management and supervision, and sexual harassment to state agencies without internal
training staff.
n Classification and Compensation (18 FTEs)—This section maintains the State’s job
evaluation system, which establishes job classifications, job descriptions and require-ments,
and associated pay structures. Analysts address requests from state agency man-agers
or employees to establish or reclassify positions by reviewing classification docu-ments,
interviewing supervisors and incumbent employees, and observing incumbent
employees at work. Based on this information, analysts will write a report recommending
an appropriate classification and pay range. In addition, this section produces the Joint
Government Salary and Benefits Survey as well as the Annual Recommendation to the
Joint Legislative Budget Committee for Adjustments to the State Salary Plan.
n Program Services and Benefits (26 FTEs)—This section contains three different units.
The Employee Benefits unit negotiates for and acquires benefits for approximately 50,000
state employees and their dependents, plus about 7,000 state service retirees. Currently,
approximately 120,000 individuals are covered under the State’s employee benefits pro-gram.
Benefits include medical, dental, short- and long-term disability, and life insurance.
In addition, the Benefits unit also operates the Employee Assistance Program, which pro-vides
counseling and referrals to state employees with personal or work-related prob-lems.
A second unit operates the State’s Wellness and Occupational Health Programs. The
wellness program provides state employees with a variety of classes, such as low-fat
cooking; and health screenings or services, such as mammography screenings and flu
shots. The Division provides these activities at various worksites throughout the State, at
little or no cost to employees. The Occupational Health program reviews specific job
classes that historically have had high incidences of workers’ compensation claims and
requires candidates for these positions to undergo a medical exam prior to being placed
in a job. The exam outcome will determine what accommodations, if any, are needed for
the new employee to perform his/her job duties with a reduced risk of injury.
Finally, the third unit provides testing services to ensure the validity and legal defensibil-ity
of the State’s selection methods, such as written examinations or panel interviews.
n Communications and Employee Relations (4.5 FTEs)—This section reviews em-ployee
grievances alleging discrimination or noncompliance with personnel rules that
were not resolved to an employee’s satisfaction at the agency level. Further, the section
also compiles various performance measurement data from the Division’s other sections,
such as the number of employees counseled by the Employee Assistance Program, the
number of resumes scanned into the Resumix database, and the number of employee
4
grievances received. Using this data, the section prepares monthly reports regarding the
Division’s progress toward meeting its strategic goals.
n Administrative Services (10 FTEs)—This section provides accounting, information
technology, and other administrative support to the Division.
In addition to the sections described above, the Division maintains offices in the Departments
of Health Services, Economic Security, Corrections, Transportation, Revenue, Administra-tion,
Juvenile Corrections, and AHCCCS, to more efficiently and effectively provide services
such as processing new employee paperwork, answering benefits questions, and providing
advice on hiring and firing. Further, an additional human resources office serves the needs of
all the small and medium-sized agencies covered under the merit system rules. These human
resources offices house an additional 46 Division FTEs.
1993 Report and
Follow-up
As part of the current audit, concerns identified in the Auditor General’s 1993 performance
audit (Report No. 93-6) were reviewed. Specifically, the 1993 audit highlighted five areas for
improvement:
n The need to redesign the State’s outmoded hiring system;
n The need to address fundamental problems with the State’s classification system;
n The need to more proactively manage the employee health care benefits program;
n The need to implement mechanisms to curb escalating health care benefits costs; and
n The need to improve efforts to inform decision-makers about salary issues.
In response to the 1993 report, the Division implemented several recommendations. For ex-ample,
to manage the health benefits program more actively and reduce its costs, the Divi-sion
implemented a wellness program, which provides a variety of classes and health
screenings to state employees. The Division also developed a policy regarding benefits en-rollment
fraud to decrease or eliminate the amount of money spent on health care coverage
for ineligible dependents, such as persons who are not an employee’s legal spouse or chil-dren.
To better inform the Legislature regarding salary issues, the Division now submits its
annual salary recommendation by September 1 of each year instead of December 31, allow-ing
the Legislature more time to consider the report before a legislative session begins. The
5
Division also expanded the information provided to the Legislature through the annual rec-ommendation.
Some problems identified in the 1993 report were again identified during this audit. Specifi-cally,
Finding I (see pages 9 through 15) describes how, after five years of effort and expen-ditures
of approximately $1 million, the Division is still in the process of developing a new
job evaluation system. Finding II (see pages 17 through 22) points out that the Division has
made many improvements in its administration of employee health benefits, but needs to
make further efforts to ensure that health insurance carriers perform according to contractual
standards. Finally, Finding III (see pages 23 through 28) points out that although the Division
has improved the efficiency of its hiring process by installing a new resume database system,
the Division can still do more to improve the quality of hiring lists used to fill vacant posi-tions
and attract more candidates to state service.
Audit Methodology
and Scope
This audit is a follow-up to concerns identified in the Auditor General’s 1993 performance
audit (Auditor General Report No. 93-6), and addresses the Division’s efforts to fulfill its re-sponsibilities
regarding the State's job evaluation system, hiring process, benefits administra-tion
and procurement, and employee grievance review. Several methods were used to study
these issues, including:
n Reviewing five consultant reports regarding the State’s job evaluation methodology to
determine the Division’s efforts to develop and implement a new job evaluation system.
n Reviewing two consultant reports comparing the benefits of several other organizations
to assess the competitiveness of the State’s employee benefits;
n Analyzing a sample of 52 of the 90 employee grievances alleging discrimination or per-sonnel
rule violation the Division reviewed in fiscal year 1997-98 to assess the appropri-ateness
and timeliness of the Division’s review activities;
6
n Surveying human resources functions in 21 other states, 4 local governments, and 4 pri-vate
organizations regarding job evaluation, benefits, and /or hiring;1
n Observing classification analysts as they evaluated a Psychiatric Technician I position at
the Arizona State Hospital to determine the process used by the analysts when evaluating
a request to reclassify a position;
n Reviewing various health insurance carrier reports and other documentation to deter-mine
the extent of the Division’s efforts to monitor carrier performance;
n Reviewing records for the procurement of the current employee health benefits contracts
to determine the appropriateness of the process; and
n Interviewing and obtaining information from ten hiring supervisors from various state
agencies to assess the quality of hiring lists developed by the Division, and interviewing
Resumix Corporation officials to determine the system’s capabilities and limitations.
The report presents findings and recommendations in three areas:
n The Division needs to proceed with efforts to develop and implement a new job evalua-tion
system;
n The Division needs to improve its monitoring efforts to ensure that health insurance car-riers
meet contractual performance standards; and
n The Division needs to improve the effectiveness of its current hiring process.
In addition, the report contains Other Pertinent Information regarding the Division’s review
of employee grievances alleging discrimination or noncompliance with personnel rules and
potential problems with the process used to procure the current employee health benefits
contracts.
1 The following 18 states that use or have used job evaluation methods similar to the one the Division is cur-rently
proposing and/or employ a similar number of employees as Arizona does were contacted: Con-necticut,
Kansas, Kentucky, Louisiana, Maryland, Minnesota, Montana, Nebraska, New Mexico, New York,
North Carolina, North Dakota, South Dakota, Tennessee, Utah, Vermont, Washington, and Wyoming. Five
states and three corporations using a resume database program were also contacted: Louisiana, Michigan,
Minnesota, New Jersey, Utah, American Express, Nike, and Intel Corporation. The state of Colorado was
contacted regarding its method for tracking employees’ complaints related to employee health benefits. Fi-nally,
the following four local governments and one corporation were contacted based on their job adver-tisements
in local newspapers: City of Chandler, City of Glendale, City of Phoenix, City of Gilbert, and the
Salt River Project.
7
This audit was conducted in accordance with government auditing standards.
The Auditor General and staff express appreciation to the Director and staff of the Depart-ment
of Administration and its Human Resources Division for their cooperation and assis-tance
throughout the audit.
8
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9
FINDING I
DIVISION PROPOSES NEW JOB
EVALUATION METHOD
For several years, the State has lacked an effective job evaluation system, a system that cre-ates
a hierarchy of positions and establishes their relative worth. The State’s current system
has not been kept up to date and is easily manipulated, resulting in hundreds of unnecessary
job classifications and the inability to ensure that candidates have the appropriate skills to fill
job vacancies. However, the Division is proposing a new system. If properly maintained the
new system should address these past problems, but several actions are needed to ensure its
success. These include following through with plans to routinely review all state position de-scriptions
for accuracy and ensure appropriate compensation for these positions, as well as
developing ways to ensure that the new system can adjust to salary changes in the outside
job market.
Job Evaluation a Critical
Human Resources Function
Job evaluation systems provide public sector organizations with a structured approach for
categorizing and valuing a large number of positions. Using various criteria, such as the
content of work, skills required to perform work, the value of work to an organization, and
the culture of the workplace, a job evaluation system groups jobs with similar duties and re-sponsibilities
together and establishes appropriate pay ranges for each grouping. A job
evaluation system should ultimately create a hierarchy among jobs or groups of jobs, which
can aid in establishing pay differentials within an organization. Finally, a well-structured
classification system can also serve to guide candidate recruitment or selection for open posi-tions
and assist in planning by helping to determine future staffing needs.
Current Job Evaluation
Method Ineffective
The State’s current job evaluation system remains ineffective. Specifically, the system now in
use is inherently subjective and easily manipulated. As a result, the State has many job classi-fications
that are similar or unnecessary, and has difficulty ensuring that candidates have the
appropriate skills to fill vacant positions. While the Auditor General’s 1993 report identified
these same problems, the Division’s previous attempts to implement a new system have
been unsuccessful.
10
Current job evaluation method susceptible to manipulation—For almost 30 years, the Divi-sion
has used the “whole job” method of job evaluation. This method separates jobs into a
series of classes by comparing each job and its requirements to a class specification or de-scription.
These requirements include the level of responsibility and authority, knowledge,
skills, and abilities (KSAs) to satisfactorily perform a job. However, human resource analysts
must rely on their own judgment and experience to assign jobs to classes based on a review
of the job’s requirements. As a result, these job evaluation analyses can vary from analyst to
analyst.
The lack of clear criteria makes the system vulnerable to manipulation. Such manipulation
can occur when a manager asks the Division to reclassify an existing position or establish a
new position merely to obtain a pay increase for the position, and not because the duties
have changed significantly. Without clear criteria, the system lacks controls to prohibit
changes that may not be clearly warranted on the basis of changed duties.
System is not well maintained to compensate for manipulation—Although routine mainte-nance
of the system could help guard against manipulation, it is not being done. Routine
maintenance entails a review of each position classification every three to five years to ensure
accurate position descriptions and appropriate compensation. However, because it lacks
funding to make salary adjustments that typically result from maintenance reviews, the Divi-sion
has not conducted regular maintenance reviews for several years. Instead, the Division
conducts maintenance reviews only for agencies with the money available to fund associated
compensation increases or agencies experiencing operating problems as a result of outdated
job classifications.
Without proper maintenance, the State has experienced the following problems:
n Too many similar or unnecessary job classes—The State’s current job evaluation
method contains over 1,400 position classifications, many of which are very similar or
unnecessary. For example, as illustrated in Figure 1 (see page 11), the position descrip-tions
for an Administrative Assistant III and II differ by only a few words, but the pay
rates for the two positions differ by two grades.
n Difficulty ensuring candidates have appropriate knowledge, skills, and experience
to fill vacant positions—Absent regular classification maintenance, the State has diffi-culty
ensuring that it can refer appropriate candidates for jobs. Regular maintenance re-views
would allow the Division to update the KSAs needed to perform a job, as technol-ogy
or job duties change. However, without regular reviews, some position specifica-tions
no longer accurately reflect the KSAs actually needed to perform a particular job.
Therefore, recruitment efforts may not produce candidates who possess the KSAs
needed to perform the job. For example, technology improvements have changed the
work performed by Duplicating Equipment Operators. However, this position’s KSAs
11
Figure 1
Arizona Department of Administration
Human Resources Division
Comparison of Duties by Position
As of January 1999
Source: Auditor General staff summary of Department of Administration, Human Resources Division descrip-tions
of various state positions.
have not been updated since 1992 to reflect the technological changes. As a result, the Di-vision
might refer inappropriate candidates to agencies that need duplicating equipment
operators.
n Inaccurate, inequitable employee compensation—The lack of regular reviews also
prevents the Division from providing accurate, equitable compensation scales. As men-tioned
previously, jobs are separated into classes according to their requirements. Because
jobs are compensated based on the class they are assigned to, the job’s requirements, or
KSAs, help determine compensation. Without regular maintenance reviews, compensa-tion
may not match the required KSAs of some positions. Further, as illustrated in Figure
1, pay inequities can occur among state employees who perform similar duties but are
paid at different levels.
Division has had difficulty making improvements—The problems caused by lack of proper
maintenance were identified in the 1993 Auditor General review of the Division, which
found that the Division did not properly maintain or manage the State’s classification system.
That audit found the Division had discontinued regular reviews in 1989 because it lacked the
funding to implement the salary upgrades that often resulted. The report recommended that
the Division develop a plan to establish the future purpose and direction of the State’s classi-
Administrative Assistant III
n Performs a variety of complex tasks
including preparation of special re-ports
and budgets
n Prepares a variety of grant proposals
and contracts
n Coordinates and supervises the op-erations
of one or more Programs.
n Pay Grade: 17
Administrative Assistant II
n Performs a variety of administrative
tasks, including preparation of spe-cial
reports and budget estimates
n Prepares grant proposals and routine
contracts
n Coordinates and oversees the activi-ties
of one or more programs
n Pay Grade: 15
12
fication system, including goals, strategies, and an approach to gain the legislative support
needed to maintain and enhance the system.
In 1995, the Division contracted with a consulting firm to help implement a new job evalua-tion
system. However, after concerns from the Governor’s Office and the Legislature
prompted two reviews of the proposed system by other consultants, the Division did not
implement the new job evaluation system. Consultants who reviewed the proposed system
determined that it would produce unreliable job descriptions and make equitable compen-sation
difficult. In the past five years, the State has spent over $1 million attempting to im-plement
a new job evaluation method.
Division Proposes New
Job Evaluation Method
Recognizing the importance of a strong job evaluation plan, the Division is making efforts to
implement a system that should address many of the problems associated with the current
whole job evaluation system. In response to a legislative mandate, the Division proposed re-placing
the current whole job method of job evaluation with a “point factor” method. Al-though
the point factor method possesses many advantages, it also has potential limitations
that must be addressed.
Division proposes a new job evaluation method—In response to a legislative requirement,
the Division is proposing a new job evaluation method. Laws 1998, Chapter 292 required the
Division to propose a new job evaluation method that would result in fewer and broader job
classes, fewer classification actions, and a review of all classes once every three to five years.
In response, the Division proposed switching to an automated point factor job evaluation
method.
While there are many different versions of point factor systems, the same basic principles
apply. In a point factor system, an organization selects the appropriate job skills or factors
that are important to it and essential for its work, such as interpersonal skills or level of edu-cation,
and determines the extent to which these job factors are required for each position.
Next, the organization assigns point values and weights to the various factors, according to
the importance the organization has assigned to each factor. For example, the number of
points assigned to interpersonal skills will depend on the importance of this skill for a par-ticular
job. Further, the weight assigned to interpersonal skills would be greater if the organi-zation
values this skill more highly than it values level of education. Using the points and
weights, a point total is calculated for each position within the organization. Those positions
that are most critical to the organization should receive the highest point totals.
13
A point factor system would provide the following advantages over the current system:
n Explicit criteria—Point factor systems are generally more objective and reliable than
whole job systems because they contain specific job factors with associated point values,
which form the basis of evaluation for each job in the organization. Individual human re-source
analysts can use the established factors and points to make informed job evalua-tion
decisions, such as whether to reclassify or establish a position, instead of depending
solely on judgment or expertise. Therefore, different analysts should reach the same con-clusions
when making job evaluation decisions.
n Internal Equity—Point factor systems also allow for a higher degree of internal equity
than whole job systems allow. Internal equity ensures that similar positions receive equi-table
compensation. Because positions are evaluated using factors with defined levels and
corresponding points, they are more likely to be analyzed in a consistent manner across
and within various state agencies.
In addition to proposing a point factor system, the Division plans to establish a regular
maintenance schedule and address legislative concerns about employee compensation levels.
The Division plans to review approximately 35 percent of all job classifications each year, be-ginning
in the year 2000. At this pace, each classification will be reviewed every three years.
Further, because the Legislature also mandated that state employee compensation must be
within 5 percent of market compensation by fiscal year 2002-2003, the Division will perform
market salary surveys and determine what the State’s new pay ranges should be, based on
market survey results.
Point factor systems not without potential problems—Although point factor systems can
correct many of the State’s current job evaluation problems, they are not without potential
disadvantages. Specifically:
n System still subject to manipulation—Although a point factor system is more objective
than a whole job method, system manipulation can still occur. For example, state agency
managers and employees who play a part in defining a position’s duties could overstate
the job duties. In addition, the Division proposes implementing a process for employees
to review their job descriptions and duties to ensure accuracy. While the Division plans to
take steps to control this process, such as requiring agency management and human re-source
analyst approval of any changes to job descriptions or duties, manipulation can
still occur. Specifically, managers can request job description changes to obtain employee
pay increases even though job duties have not changed significantly.
n System may have difficulty responding to the external market—While point factor
systems generally provide internal equity, a survey of other states that use these systems
14
showed that the systems can be difficult to adjust in response to increases in market sala-ries.
Salary adjustments are tied to point values and point values only change as job du-ties
change. If the average market compensation rate for a particular position increased
but job duties did not change, there would be no justification to increase point totals for
the position. As a result, it would be difficult to adjust the salary for the position without
upsetting the system’s point structure. This can be a problem in keeping the system cur-rent
with changing market conditions for positions in such areas as information technol-ogy,
where technological changes can bring about abrupt changes in market demand for
qualified persons.
Division Must Take Several
Steps to Ensure New Job
Evaluation Method’s Success
While implementing a new job evaluation method potentially offers improvements, the Divi-sion
must take steps to ensure its success. Specifically, the Division should diligently pursue
its plans to:
n Conduct routine system maintenance—The Division should follow through on plans
to routinely maintain the new system to ensure that each job class is reviewed at least
once every three years. Routine maintenance would allow the Division to regularly up-date
job descriptions and ensure their accuracy. Further, through regular maintenance re-views,
the Division could identify positions that may have been manipulated and make
the appropriate adjustments to correct the affected job descriptions.
n Develop a compensation plan—The Division should assist and support legislative ef-forts
to bring state compensation within 5 percent of the market to prevent the possibility
of system manipulation. Manipulation is more likely to occur if state employees’ compen-sation
rates are significantly below what comparable positions are worth in the private
sector and other public sector entities. Such disparities encourage manipulation because
this may be the only means of obtaining a salary increase for a valued employee. There-fore,
the Division should follow through with its plans to conduct a salary survey once
job evaluation is completed and restructure salary ranges based on the results. Further,
the Division should consider establishing special pay schedules for positions, such as in-formation
technology jobs, that may experience significant changes due to fluctuations in
market pay. Two software companies contacted during the audit that sell automated job
evaluation systems indicated that their systems can be altered to include special pay rates
for various positions without adversely affecting the job evaluation system.
n Develop a communications plan—The Division should carry out its plans to discuss
and demonstrate the automated job evaluation system with human resources staff and
state agency managers and supervisors to inform them of how the system works and
what constitutes appropriate job evaluation actions. In addition, the Division should pre-
15
pare a comprehensive set of business practices to guide its analysts in making job evalua-tion
decisions that meet both the State’s and individual agencies’ needs and communicate
to agency managers and supervisors the requirements for obtaining a position reclassifi-cation
or establishment. Finally, to decrease the potential for manipulation of the point
factor system, the Division should establish a process to ensure that human resources staff
make changes to employees’ job descriptions only in cases where job duties have
changed.
Recommendations
1. In order to ensure that the new point factor system is properly used and maintained, and
assist and support legislative efforts to bring state compensation to within 5 percent of
market compensation by fiscal year 2002-2003, the Division should pursue plans to:
a. Implement systematic maintenance of its point factor job evaluation system;
b. Conduct a salary survey and develop new salary grades based on market salaries;
c. Develop special salary schedules for positions that may experience significant fluc-tuations
in market pay to help bring salaries for these positions closer to market with-out
compromising the integrity of the automated point factor system;
d. Communicate with human resources staff, state agency managers, and supervisors
regarding proper use of the new system; and
e. Develop business practices to guide analysts in making proper job evaluation deci-sions.
2. In order to decrease the potential for system manipulation, the Division should establish
a process to ensure that human resources staff make changes to employees’ job descrip-tions
only in cases where job duties have changed.
16
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17
FINDING II
THE DIVISION HAS
IMPROVED BENEFITS ADMINISTRATION
BUT FURTHER EFFORTS ARE NEEDED
Although the Division has taken steps to address many of the benefits recommendations
made in the Auditor General’s 1993 report, further efforts are needed to ensure that health
insurance carriers perform according to the State’s expectations. Steps the Division has taken
to improve its administration of the state employee benefits program include improving
communication with employees, involving employees in the benefits decision-making proc-ess,
and developing a comprehensive wellness program. However, by conducting more rou-tine
monitoring efforts, the Division could do more to ensure that its health insurance carriers
perform according to contractual standards. The Division can also improve its monitoring of
insurance carrier performance by developing a mechanism to capture and track employee
complaint data.
Several Improvements
Made to Employee
Benefits Program
Since 1993, the Division’s administration of employee benefits has significantly improved.
Changes made since 1993 have positively affected the employee benefits program. Moreover,
a recent comparison study involving a total of 30 major Arizona employers found that the
State’s benefits are highly competitive.
Several improvements implemented since last audit—The Division has implemented several
improvements in the administration of the employee benefits program as a result of the 1993
Auditor General report. Specifically, the Division took the following steps:
n Employee Benefits Advisory Committee—In 1993, the Division created an advisory
committee to allow employees input into the benefits process. This committee consists of
active employees from various state agencies in urban and rural areas, in addition to re-tirees
and one member from the public employee’s union. With the establishment of this
committee, employees now have input into decisions regarding current and future bene-fits
and can discuss topics such as benefits trends and proposals for new benefits cover-age
with Division officials.
18
n Health Plan Design—Before 1997, the Division relied on insurance carriers to propose
their own specifications for health plans. However, for the most recent benefits contract
period, beginning on October 1, 1997, the Division developed the design of the health in-surance
plans and included the specifics of the plan design in the Request for Proposal
submitted to insurance carriers. Therefore, insurance carriers had to bid on a plan that the
State developed with its employees’ best interests in mind, rather than the carriers pro-posing
health plans that may not have met the needs of state employees.
n Communication with Employees—The Division improved its communication with
employees through a monthly benefits newsletter, an open enrollment newsletter, and
open enrollment meetings throughout the State. These methods of communication in-form
state employees of the benefits available and any changes made to the benefits pro-gram.
They also help employees choose the best plans/options for themselves and their
families. As an additional way of communicating with employees and retirees, the Divi-sion
established an Internet Web page. It presents information about state benefits, open
enrollment, and national quality ratings for medical and dental insurance plans.
n Wellness Program—To improve overall employee wellness and lower insurance costs,
the Division developed and implemented a comprehensive wellness program. The pro-gram
provides various classes covering topics such as low-fat cooking, stress manage-ment,
and walking. It also brings certain health screenings, such as mammography,
hearing, and osteoporosis to various worksites throughout the State and it provides state
employees with free flu shots.
State’s benefits deemed competitive in a comparison study—The State’s total benefits pack-age
compares favorably to the benefits offered by other major Arizona employers. In 1998,
the Division contracted with a consulting firm to perform a benefits comparison study com-paring
the benefits of 30 Arizona employers, including the State.1 Table 2 (see page 19), illus-trates
how the State’s total benefits package and specific benefit coverages ranked as com-pared
to the other organizations surveyed. (The table shows only five of the other govern-mental
organizations included in the survey, but the rankings for these organizations are
based on all 30 employers.) For example, the State’s total benefit package ranked 12th out of
the 30 organizations, while life and dental insurance ranked 8th and 23rd, respectively. Life
insurance ranked highly because the consulting firm included the death benefit provided by
the Arizona State Retirement System in its analysis, and the Division increased the standard
amount of life insurance provided at no cost to state employees from $5,000 to $10,000. How-ever,
dental insurance ranked low because many other organizations provide higher levels of
this coverage at lower or no cost to employees, as compared to the State.
1 State of Arizona, Department of Administration, 1998 Watson Wyatt Comparison Study, performed by
Watson Wyatt Worldwide, October 1998.
19
Table 2
Arizona Department of Administration
Human Resources Division
Comparison of Benefits Offered by the
State of Arizona and Other Local Organizations by Rank Order1
October 1998
Organization
Total
Benefit
Package
Life
Insurance
Coverage
Medical
Coverage
Dental
Coverage
Short-Term
Disability
Coverage
State of Arizona 12 2 8 9 23 23
City of Phoenix 17 11 18 11 17
Maricopa County 12 2 6 11 15 28
Mesa Public Schools 14 2 29 2 27
Maricopa County Community
College District 1 7 2 3 22
U. S. Government 11 26 23 25 15
1 The source of this information was a study that compared the benefits offered by 30 public and private sector organiza-tions
within Arizona and ranked each organization from 1 to 30 in each category according to competitiveness, with 1
being the most competitive.
2 The State of Arizona’s total benefit package tied for 12th place with Maricopa County.
Source: Watson Wyatt Worldwide, State of Arizona, Department of Administration 1998 Watson Wyatt Benefits Comparison Study,
September 1998.
Division Should
Improve Insurance
Carrier Monitoring Efforts
Although the Division has improved its administration of employee benefits, it should in-crease
efforts to monitor health insurance carriers’ performance according to contractual
standards. The Division’s contracts with health insurance carriers contain performance stan-dards
and provisions for monitoring whether carriers meet these standards. However, this
monitoring activity is not done on a regular basis and should be done routinely.
Health benefits contracts call for monitoring carrier performance—The Division’s current
contracts with health insurance carriers include provisions for monitoring carrier perform-ance.
As illustrated in Table 3 (see page 21), these contracts require carriers to meet several
performance standards. For example, health maintenance organizations (HMOs) must pro-
20
vide routine appointments, such as general health exams, to state employees within five to
seven days of request and maintain adequate provider networks to meet the State’s needs.
The contracts provide various monitoring tools that the Division can use to determine
whether carriers meet these standards. For example, as illustrated in Table 3 (see page 21),
the Division can review employee complaint data and perform satisfaction surveys. The Di-vision
has taken some monitoring steps by contracting with consulting firms to audit some of
its insurance carriers’ claims processing and payment activities and conducting employee
satisfaction surveys. In addition, the Division collects and reviews various monthly, quar-terly,
and annual reports provided by insurance carriers covering topics such as claims, en-rollment
demographics, and utilization. These reports provide the Division with information
to understand the type of activities and total costs resulting from state employee enrollment
in carrier health plans.
Some of Division’s monitoring efforts not performed on regular basis—Although the Divi-sion
conducts satisfaction surveys and claims audits, it does not routinely monitor carrier
performance. Currently, the Division only monitors performance in some standards when it
receives an employee complaint in that area. For example, the Division might monitor the
“Access to Primary Care Providers” standard if it receives a complaint that an employee had
to wait longer than five to seven days before receiving a doctor’s appointment. However, the
Division performs this activity only after receiving a complaint, not as part of an ongoing
monitoring process to assess carrier performance. By not routinely monitoring carrier per-formance,
the Division cannot proactively correct problems, but must instead wait for an
employee to complain before taking action. Moreover, the lack of an ongoing monitoring
process could hinder the Division’s ability to meet legislative requirements. Specifically,
Laws 1998, Chapter 212 requires the Division to report at least semiannually to a legislative
oversight committee regarding health plan carriers’ achievement of performance standards.
Therefore, instead of monitoring only in reaction to employee complaints, the Division
should regularly monitor health insurance carrier compliance with performance standards.
These efforts might include calling various providers to determine how long it takes to
schedule an urgent appointment or regularly analyzing current provider lists to ensure state
employees have sufficient coverage.
Division Should
Track Complaints
The Division should track employee complaints to facilitate their review and enhance their
use as a monitoring tool. The Division works to quickly resolve the complaints it receives
each month but does not necessarily maintain a record of them. Further, the Division has no
means for tracking complaints that state agency benefits liaison or health insurance carriers
receive from employees. Only written complaints the Division receives are summarized and
reported to Division management. Inadequate employee complaint information limits the
21
Table 3
Arizona Department of Administration
Human Resources Division
Contracted Health Insurance Carriers
Selected Performance Standards, Monitoring Activities,
and Penalties for Noncompliance
Effective October 1997
Categories of
Performance Standards
Monitoring
Activity
Penalties for
Noncompliance
with Standards
Access to Primary Care Providers—HMOs
must provide routine appointments within
five to seven days of a state employee’s re-quest.
Review of complaints logged by
the Division; random audits
conducted by the Division.
$100 for every incident
when elective access is not
met.
Staffing of Member Services Depart-ment—
Carriers must maintain diverse per-sonnel
to serve clinical, language, gender,
and geographic preferences of the State’s
employee population.
Review of complaints logged by
the Division; random audits
conducted by the Division.
$150 per incident for in-ability
to meet the State’s
need for reasonable per-sonnel
diversity.
Provider Networks—Carriers must main-tain
adequate provider networks to meet
the Division’s access requirements.
Review of complaints logged by
the Division; review of vendor
network directory as compared
to the location of state employ-ees.
$5,000 per quarter for
network problems not
brought to the Division’s
attention in advance.
Customer Satisfaction—Annual state em-ployee
satisfaction survey must show no
less than 80 percent overall patient satisfac-tion.
Review and analysis of satisfac-tion
surveys by the Division.
Five percent reduction in
retention fees for less than
80 percent overall state
employee patient satisfac-tion.
Appeals and Grievances—All appeals and
grievances must be researched and resolved
within state and federal time frames.
Random audits conducted by
the Division.
$50 per day for each ap-peal
or grievance not re-solved
within state or fed-eral
time frames.
Source: Auditor General staff summary of the October 1997 state employee health benefits contracts.
22
Division’s ability to thoroughly assess carrier performance for several performance standards
and collect any associated financial penalties for noncompliance with these standards.
Because complaints are critical to the Division’s monitoring of carrier performance and im-posing
financial penalties, the Division should develop and implement a mechanism for
capturing and tracking complaint data at the state agency, carrier, and Division level. This
would enable the Division to analyze this valuable source of data and identify and address
trends, correct prevalent problems or issues, and make adjustments to future contracts in or-der
to improve carrier service to the State. For example, Colorado tracks employee com-plaints
regarding health insurance carriers by entering all complaints into a computer data-base.
This allows Colorado benefits staff to periodically sort the database and identify trends
or problems, and discuss potential resolutions with the carriers. Further, Colorado benefits
staff use the database to assist them in evaluating whether health insurance carriers are
meeting contractual performance standards.
Recommendations
1. The Division should conduct ongoing monitoring efforts, such as calling various provid-ers
to determine how long it takes to schedule an appointment or regularly analyzing
current provider lists on a routine basis to ensure that health insurance carriers meet con-tractual
performance standards and provide adequate service to state employees.
2. The Division should develop and implement a mechanism for capturing and tracking
employee complaints to ensure that employee complaint information is considered.
23
FINDING III
FURTHER IMPROVEMENTS NEEDED
TO INCREASE EFFECTIVENESS
OF HIRING PROCESS
Additional efforts are needed if the State is to realize the maximum value from steps the Di-vision
has already taken to improve the hiring process. The Division has adopted a new ap-proach
that drastically reduces the amount of time needed to develop a pool of viable candi-dates
for state service vacancies. At times, however, these lists are incomplete or include can-didates
who are not qualified for the position. The Division needs to focus on additional ac-tivities,
such as improved staff training, that will further improve the quality of hiring lists.
To increase the number of candidates, the Division also needs to conduct more advertising
and continue with and possibly expand its efforts to educate the public.
Deficiencies Remain Despite
Overall Improvements
in Hiring Process
The Division’s major change to the hiring process has been the implementation of an auto-mated
resume database. This resume database allows the Division to maintain a large pool of
potential candidates for state service, matching candidates with jobs as pertinent openings
appear, and improving the efficiency and quality of the overall hiring process. Despite these
improvements, some state agencies continue to receive candidate lists from the Division that
do not meet their needs.
Implementation of database improves efficiency of the hiring process—In an effort to im-prove
and expedite the hiring process, the Division implemented Resumix, an automated
resume database, in 1994. Resumix is a software package that electronically processes re-sumes
and creates a bank of candidates and employee skills that can be matched against the
requirements of open positions. An individual interested in employment with the State must
now submit a resume to the Division for scanning into the Resumix database, where it will
remain active for six months. During that time, a candidate’s name can be extracted from the
system and placed on hiring lists when the skills listed on the candidate’s resume match
those requested by a hiring supervisor.
Resumix has significantly decreased the time it takes to produce a hiring list for state agen-cies’
use. Because the Resumix database electronically matches candidate resumes to vacant
state positions, Division human resource analysts can now generate candidate hiring lists
within approximately three days after receiving a request from a hiring supervisor. Under
24
the previous approach, it could take up to eight weeks to develop a candidate hiring list be-cause
the analyst had to announce the position, collect and process applications, score the
applications based upon each applicant’s experience and training, and generate a list of the
top-scoring candidates.
Implementing Resumix has also allowed the Division to delegate a large part of the hiring
process to state agencies. For example, several of the large merit system agencies, such as the
Departments of Transportation and Health Services, now have access to the Resumix data-base
and can generate hiring lists immediately upon receiving requisitions from hiring su-pervisors
within the agency. Additionally, decentralization allows human resources analysts
to work more closely with their agency’s hiring supervisors to determine the skills, knowl-edge,
and abilities needed for a position under consideration and produce higher-quality
hiring lists.
Lists do not always contain names of qualified candidates—While the Resumix database
has improved the efficiency of the hiring process and has generally helped produce satisfac-tory
lists, state agency hiring supervisors have indicated that some hiring lists have not met
their needs. Some hiring supervisors interviewed during the audit explained that these hir-ing
lists contained candidates who did not possess the appropriate skills or minimum quali-fications
needed for the vacant position. For example, a hiring supervisor from the Arizona
Parks Department looking to fill a grant coordinator position received a hiring list from the
Division containing two individuals with prior experience as parks and recreation lifeguards,
but who did not possess the qualifications necessary for a grant coordinator. In addition, the
Department of Insurance found it difficult to fill an insurance analyst position when it re-ceived
a hiring list containing four individuals who previously worked for insurance com-panies
as accountants, but who did not possess the qualifications necessary to perform as in-surance
analysts. In both of these examples, the unqualified candidates were extracted from
the database because a key word, such as recreation or insurance, matched the key words the
Division entered into the system. These candidates were included on hiring lists because the
Division’s analysts did not manually review the resumes and screen them out.
While some hiring lists contain unqualified candidates, other lists do not contain a sufficient
number of viable candidates. Some hiring supervisors maintained that, after eliminating all
of the unqualified candidates on lists, they often end up with very few, if any, reasonable ap-plicants
from which to choose. For example, a hiring supervisor from the Office of the Attor-ney
General claimed that he rarely receives hiring lists containing any candidates that he
would like to interview. As a result, he is often faced with the task of conducting his own re-cruiting
searches in order to establish a pool of applicants.
Lists with inadequate numbers of qualified candidates erode the efficiencies achieved
through Resumix, because hiring supervisors must use other means to attract viable appli-cants,
such as subsequently placing advertisements for open positions. One hiring supervisor
explained that once he has determined that a hiring list contains no appropriate candidates,
he places a newspaper advertisement for the position and sends the resulting resumes to the
25
Division for inclusion on the hiring list. Two other hiring supervisors stated that they adver-tise
some positions prior to requesting hiring lists since the Division has historically provided
inadequate lists for these positions. These additional activities can increase the time it takes to
receive an adequate hiring list to approximately three to five weeks.
Increased Emphasis on Internal
Activities Can Improve
Quality of Hiring Lists
To ensure that lists include all candidates who are qualified for the position an agency is
seeking to fill, the Division should enhance its efforts in several areas. First, the Division
should expand its human resource analyst training program to include instruction on how to
produce more comprehensive candidate lists. Second, the Division should develop a com-prehensive
set of policies and procedures to guide analysts and hiring supervisors through
the hiring process. Finally, the Division should test the ability of its analysts to consistently
produce comprehensive hiring lists that meet state agencies’ needs.
Additional staff training needed to ensure comprehensive lists—While the Division has con-ducted
limited training sessions for its analysts, training thus far has focused only on how to
properly use the Resumix software. The Division has not conducted training sessions to
teach analysts some of the maneuvers, often known by more experienced analysts, that can
be used in creating appropriate, more user-friendly hiring lists. In addition, it has not devel-oped
training sessions to introduce analysts to the basic procedures to be followed in con-structing
lists, such as when to add candidates requested by an agency, when to eliminate
inappropriate candidates from lists, or how to ensure that all qualified candidates have been
extracted and included on hiring lists.
Utah, another state that uses Resumix, provides more extensive training by conducting
monthly training sessions that demonstrate how to use Resumix software and review the
standard procedures to be followed when creating suitable hiring lists. These training ses-sions
include information on special tactics that analysts can use to develop more consistent,
higher-quality hiring lists.
The Division has tentatively scheduled analyst training sessions for 1999. To help resolve
problems with incomplete or inaccurate lists, these training sessions should not only focus on
how to use the Resumix software package, but also on how to build candidate lists that con-sistently
meet state agencies’ needs.
Policies and procedures are needed to guide the formation of lists—Currently, the Division
does not have a set of policies and procedures to aid in the production of more comprehen-sive,
consistent hiring lists. While the Division does have a manual that outlines how to use
the Resumix software, it does not have policies and procedures to guide human resource
analysts and state agency hiring supervisors on issues such as when it is appropriate to add
more candidates to a hiring list, how to ensure that all qualified candidates have been in-
26
cluded on a list produced through Resumix, or when an agency should conduct its own ad-vertising.
For example, a manual might contain a policy for advertising open positions that
explains which newspapers should be used and lists account numbers that should be used
for a reduced billing rate.
Utah has developed a manual that provides guidelines for important elements of the hiring
process. For instance, the manual describes the role of hiring supervisors in the hiring proc-ess,
how to advertise open positions, and how to conduct effective recruitment searches us-ing
the Resumix database. Developing a similarly comprehensive manual in Arizona would
help guide analysts and hiring supervisors through all aspects of the hiring process.
Division should regularly test consistency of analysts—While the Division conducts limited
testing to ensure that resumes are accurately read into the database, it performs no testing to
ensure that analysts consistently include all appropriate candidates from the Resumix data-base
on hiring lists. To test the consistency of hiring lists produced by its analysts, the Divi-sion
can have its analysts run applicant searches from the same position’s vacancy requisition
and produce a candidate hiring list. This simple test would demonstrate the consistency of
hiring lists among analysts and help the Division create training sessions to address any
weaknesses found.
Additional Advertising and
Education Needed to Attract
More Candidates to State Service
In addition to conducting internal activities to ensure that all of the appropriate candidates
are being included on hiring lists, the Division should take steps to increase the number of
qualified candidates interested in state service. Specifically, the Division should increase its
advertising efforts to attract more candidates for state positions. Further, the Division should
continue with and possibly expand its efforts to educate the public about how to effectively
apply for state positions.
The Division should advertise a larger number of open positions—To increase the number of
qualified candidates in the Resumix database and further improve the quality of hiring lists,
the Division should expand its advertising efforts. Since the implementation of Resumix, the
Division has reduced its advertising of open positions. While the Division advertised many
of the State’s open positions on a weekly basis prior to implementing Resumix, it currently
advertises only those positions for which it cannot find any candidates within the database.
This policy has potentially limited the public’s knowledge of open state positions and con-tributed
to the inadequate hiring lists the Division generated. One hiring supervisor who was
dissatisfied with the hiring list he received for an accounting technician position suggested
that the Division should place a general advertisement for accounting technicians in the
newspaper in order to maintain an adequate pool of candidates for this frequently requested
position.
27
Interviews with officials in other private and public organizations showed that many employ
much wider advertising efforts. For example, human resource professionals from Nike and
Intel said their companies use automated resume systems only to process and store candi-date
resumes. To ensure a sufficient number of candidates are available for consideration,
these corporations advertise in newspapers, professional journals, and on the Internet. Hu-man
resource professionals from the Cities of Phoenix, Glendale, Chandler, and Gilbert indi-cated
that the majority of their applicants identify open positions through advertisements in
local newspapers. Most of these local government entities also found extensive use of job
hotlines and the Internet to be very beneficial in attracting potential job candidates.
The Division should consider advertising frequently open positions and current hard-to-fill
positions on a weekly basis in local newspapers and continue posting job openings on its
newly constructed Internet Web page. The Division could also incorporate a statement di-recting
interested job seekers to contact the Division via phone or Internet to obtain informa-tion
on how to prepare and submit a scannable resume. Recently, the Division implemented
an Internet Web page, which offers information on state job opportunities as well as how to
prepare a scannable resume.
The Division should continue and expand current efforts to educate the public—The Division
should continue with and possibly increase its effort to educate the public regarding state
service positions and how to apply for them. Currently, the Division attends job fairs to re-cruit
for various state positions and occasionally conduct educational workshops on how to
prepare scannable resumes for the Resumix database. For example, the Division recently
participated in a job fair at Arizona State University to discuss state job opportunities and
educate interested students on how to apply for state positions. In addition, the Division
conducts job fairs in conjunction with other state agencies to recruit for specific positions,
such as youth corrections officer or eligibility interviewers. Therefore, the Division should
continue with and possibly expand its efforts to instruct potential job candidates on how to
apply for state positions and how to prepare and submit a scannable resume by participating
in job fairs and other forums that attract job seekers.
28
Recommendations
1. The Division should ensure that all of the appropriate candidates from the Resumix data-base
are included on hiring lists by:
a. Conducting regular training sessions to teach analysts how to use the Resumix data-base
and to teach analysts some of the basic maneuvers or procedures that can be
used in producing lists that meet state agencies’ needs;
b. Developing a set of policies and procedures containing information about standard
business practices for analysts and agencies to use in developing adequate candidate
lists; and,
c. Regularly testing analysts’ abilities to search for viable candidates using the Resumix
database.
2. The Division should increase the number of viable candidates in the Resumix database
by:
a. Advertising frequently open positions and current hard-to-fill positions on a weekly
basis in local newspapers in addition to continuing its efforts to post job opportunities
on the Internet; and,
b. Continuing with and possibly expanding its attendance at job fairs.
29
OTHER PERTINENT INFORMATION
During the audit, other pertinent information was gathered regarding the State’s employee
grievance system.
Employee Grievance
Process
According to the State’s personnel rules, employees should have access to a process that al-lows
them to resolve complaints. Each state agency covered by these rules must establish a
grievance process. As part of this process, agencies allow employees to refer a grievance al-leging
discrimination or noncompliance with personnel rules to the Division for independent
review, if the employee believes the agency did not satisfactorily address the complaint.
Based on a review of 52 grievances referred to the Division for review during fiscal year
1997-98, the Division conducts thorough, timely reviews according to personnel rules. How-ever,
the Division’s role in this process could be affected by the recommendations of a legis-latively
appointed committee examining the rules pertaining to grievances.
Agency grievance procedures—According to personnel rules within the Arizona Administra-tive
Code, each state agency covered by the rules shall adopt a grievance procedure which
affords each employee a systematic means of resolving complaints concerning discrimina-tion,
an agency’s noncompliance with these rules, or other work-related matters which di-rectly
and personally affect the employee. The personnel rules further establish minimum
requirements agencies must follow when developing grievance procedures.
While agencies must incorporate into their grievance procedures the minimum requirements
set forth in the personnel rules, these procedures vary somewhat from agency to agency.
However, agencies typically follow a traditional form of grievance process, which consists of
elevating a grievance through an agency’s management structure. Depending on the
agency’s size, a traditional, multi-step grievance process can take from 25 to 40 working days
to complete from the time the grievance is submitted through the time the agency renders its
final response. For the larger agencies contacted, this process includes the following four
steps.1
n Step One—An employee submits a written grievance to his or her immediate supervisor.
The supervisor provides a written response to the grievance and, if the employee is not
1 The following agencies were contacted as part of this review: Department of Corrections, Department of
Transportation, Department of Economic Security, Arizona State Parks, Board of Cosmetology, Board of
Podiatry Examiners, and the Residential Utility Consumer Office.
30
satisfied with this response, the grievance is referred to a manager, division director, or
assistant director.
n Step Two—A manager, division director, or assistant director reviews and responds in
writing to the grievance. Again, if the employee is not satisfied with this response, the
grievance is referred to the agency’s director or deputy director.
n Step Three—The agency’s director or deputy director responds in writing to the em-ployee.
The director’s resolution represents the agency’s final response unless the griev-ance
alleges discrimination or noncompliance with the personnel rules. In these instances,
the director’s response informs the employee that he/she may submit the grievance to
the Division for an impartial final review.
n Step Four—The Division reviews grievances that employees submit alleging discrimi-nation
or noncompliance with personnel rules.
State agencies typically inform employees of the availability of a grievance process through
new employee orientation meetings, employee handbooks, policy and procedure manuals,
agency newsletters, the presence of a grievance coordinator or employee relations depart-ment,
and by word-of-mouth, particularly in the smaller agencies.
The Division’s role in employee grievances—Once the Division receives a grievance alleging
discrimination or noncompliance with personnel rules, it conducts an administrative review
of the grievance, including a review of the agency’s written responses to the grievance and
any other supporting documentation submitted by the employee. In some cases, the Division
may contact the employee or others involved in the grievance for additional information. If
the facts of the grievance support the agency’s final response, the Division must affirm that
decision. Otherwise, the Division must conduct an investigation and produce a report of its
findings and final decision. The personnel rules allow the Division 20 days to complete its
review and issue any necessary reports. During the past three fiscal years, the Division re-ceived
and reviewed over 270 grievances alleging discrimination and/or noncompliance
with personnel rules.
Based on a review of 52 of the 90 grievances received and reviewed by the Division during
fiscal year 1997-98, the Division conducts thorough, timely reviews of these grievances in
conformance with personnel rules. In all 52 cases, the Division’s recommendations were
based on the facts presented in the grievances and supporting documentation. The Division
found that in all 52 cases, the agency’s review and actions appeared appropriate and that
none of the grievances contained proof of discrimination or noncompliance with personnel
rules. The following examples represent typical grievances the Division reviews:
31
n An employee violated her agency’s grooming policy and was told to take corrective ac-tion
or go home without pay. Although the employee admitted to not complying with the
grooming policy and chose to go home without pay, she felt discriminated against and
filed a grievance.
n An employee was suspended for 40 hours without pay due to insubordination. Although
the employee admitted to the insubordination, he felt his suspension was an abuse of
power and in noncompliance with personnel rules regarding standards of conduct.
Proposed changes to rules pertaining to grievances—The Legislature recently formed a
committee to review and revise the current set of personnel rules including the rules per-taining
to employee grievances. Specifically, Laws 1997, Chapter 288 designated a committee
to study the existing personnel rules, recommend revisions to simplify and standardize the
rules, and report its recommendations to the Governor. The committee plans to submit its
final report and recommendations to the Governor in January 1999. To facilitate its review,
the committee formed a special team to identify problems with current employee grievance
rules and practices and generate potential solutions. Based on its research, the grievance team
concluded that state employees are dissatisfied with the grievance process. In particular, the
grievance team determined that the process inhibits communication and the ability to solve
grievances at the lowest level. Further, the team found that employees lack sufficient time
and resources to participate in the process.
While the grievance rules review team made several recommendations to improve the griev-ance
process at the state agency level, it made one recommendation that could affect the Di-vision.
Specifically, the team recommended to remove the Division’s authority to review
grievances alleging discrimination. Instead, employees not satisfied with their agency’s final
response to a discrimination grievance would be referred to the Equal Employment Oppor-tunity
Commission.
(This Page Intentionally Left Blank)
Agency Response
(This Page Intentionally Left Blank)
JANE DEE HULL J. ELLIOTT HIBBS
GOVERNOR DIRECTOR
ARIZONA DEPARTMENT OF ADMINISTRATION
Office of the Director
1700 WEST WASHINGTON - PHOENIX, ARIZONA 85007
February 1, 1999
Douglas R. Norton, Auditor General
Office of the Auditor General
2910 North 44th Street, Suite 410
Phoenix, Arizona 85018
Dear Mr. Norton:
We have completed our review of the Arizona Department of Administration, Human Resources
Division, performance audit. We generally agree with the audit findings and recommendations
contained therein and believe that the report provides an accurate picture of the state of the
Human Resources Division and its progress and performance since the last audit.
As the audit indicates, we have made significant progress in enhancing existing processes. More
responsive customer service approaches are being developed for implementation within our
available resources. These are identified in our response to each of the findings and
recommendations as appropriate.
Finding I: Division proposes new job evaluation method
Recommendation 1: In order to ensure that the new point factor system is properly used
and maintained, and assist and support the legislative efforts to bring state compensation
to within 5 percent of market compensation by fiscal year 2002-2003, the Division should
pursue plans to:
a. Implement systematic maintenance of its point factor job evaluation:
b. Conduct a salary survey and develop new salary grades based on market
salaries;
c. Develop special salary schedules for positions that may experience significant
fluctuations in market pay to help bring salaries for these positions closer to
market without compromising the integrity of the automated point factor system;
d. Communicate with human resources staff, state agency managers, and
supervisors regarding proper use of the new system; and
e. Develop business practices to guide analysts in making proper job evaluation
decisions.
Douglas R. Norton
February 1, 1999
Page 2
Response: The finding of the Auditor General is agreed to and the audit recommendation will be
implemented.
The Division's action plan includes conducting routine system maintenance, developing a
compensation plan and developing a communication plan. The Division will continue to conduct its
annual salary survey and make salary recommendations to the Legislature that will address
monies needed to assist the Legislature in meeting its established goal of bringing state employee
compensation within 5% of market.
The Request for Proposals for the new job evaluation system includes all of the provisions outlined
in recommendation #1.
Recommendation 2: In order to decrease the potential for system manipulation, the Division
should establish a process to ensure that human resources staff make changes to
employees' job descriptions only in cases where job duties have changed.
Response: The finding of the Auditor General is agreed to and the audit recommendation will be
implemented. The Division has begun the planning and training necessary to implement a process
to review all job classes once every three to five years as a means of ensuring that the new job
evaluation system is current and maintained. In addition, the Division will increase the number of
on-site desk audits that it conducts as a means of ensuring that changes to employees' job
descriptions are made only in cases where job duties have changed.
Finding II: The Division has improved benefits administration but further efforts are needed
Recommendation 1: The Division should conduct ongoing monitoring efforts, such as
calling various providers to determine how long it takes to schedule an appointment or
regularly analyzing current provider lists on a routine basis to ensure that health insurance
carriers meet contractual performance standards and provide adequate service to state
employees.
Response: The finding of the Auditor General is agreed to and the audit recommendation will be
implemented. The Division is developing an appropriate audit schedule for each carrier based on
contractual criteria, membership volume, revenue volume and complaint data. The implementation
of this audit schedule or a derivative thereof will be predicated on funding availability within existing
and future appropriations.
Recommendation 2: The Division should develop and implement a mechanism for
capturing and tracking employee complaints to ensure that employee complaint
information is considered.
Response: The finding of the Auditor General is agreed to and the audit recommendation will be
implemented. The Division is in the final stages of implementing an automated complaint tracking
system with the final phase scheduled for completion in February 1999.
Douglas R. Norton
February 1, 1999
Page 3
Finding III: Further improvements needed to increase effectiveness of hiring process
Recommendation 1: The Division should ensure that all of the appropriate candidates from
the Resumix database are included on hiring lists by:
a. Conducting regular training sessions to teach analysts how to use the Resumix
database and to teach analysts some of the basic maneuvers or procedures that
can be used in producing lists that meet state agencies' needs;
b. Developing a set of policies and procedures containing information about
standard business practices for analysts and agencies to use in developing
adequate candidate lists; and
c. Regularly testing analysts' abilities to search for viable candidates using the
Resumix database.
Response: The finding of the Auditor General is agreed to and the audit recommendation will be
implemented.
The Employment Unit has a training program in place that provides training to all employees
assigned to perform recruitment duties. This training has focused on introductory training and
system functionality. The training has been expanded to include advanced recruitment training and
a monthly assessment of analysts' abilities to search for viable candidates in the Resumix
database.
Recommendation 2: The Division should increase the number of viable candidates in the
Resumix database by:
a. Advertising frequently open positions and current hard-to-fill positions on a
weekly basis in local newspapers in addition to continuing its efforts to post job
opportunities on the Internet; and,
b. Continuing with and possibly expanding its attendance at job fairs.
Response: The finding of the Auditor General is agreed to and the audit recommendation will be
implemented.
The Division is placing a weekly announcement in the newspaper advising job applicants about
State employment and how to submit job applications. It will continue to post hard-to-fill, open
continuous and special recruitment needs vacancies on its web page. In addition, it will continue to
participate in job fairs and special recruitment events to educate applicants and the public on jobs
within the State and on how to submit scannable resumes.
Douglas R. Norton
February 1, 1999
Page 4
Your recognition of the improvements that have occurred in the Division since 1993 in the areas
of benefits and employment is appreciated. With regard to the planned implementation of a new
job evaluation method, I am excited about the potential for process improvements and
increased levels of customer satisfaction.
Your comments have provided us with valuable insight. We look forward to your ongoing support
and assistance that will enable us to reach the objectives outlined in your review. The Department
of Administration and the Human Resources Division continue to strive to understand and
anticipate our customers needs and to deliver services that exceeds their expectations. The
performance audit identifies opportunities for continuous process improvement projects in the
Human Resources Division and establishes priorities for the work of the Division staff. My
expectations for the next 6 months include measurable progress in the areas identified in the
performance audit.
Sincerely,
J. Elliott Hibbs
Director