Report on Benchmarking stakeholder meeting€¦ · 3!! 1. Introduction!...

REPORT ON THE STAKEHOLDERS MEETING ON BENCHMARKING

Prepared by Commercial and Financial Inspector

18/12/12

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Table of Contents

Page

1. Introduction................................................................................................................3

1.1 Objective of the Workshop.............................................................................3

2. Background.................................................................................................................4

3.1 NWASCO Benchmarking System................................................................... 4

3.2 Commercial Utilities’ Benchmarking System................................................ 7

3.3 The New Regulation by incentives Concept and Benchmarking................... 8

4. Outcomes of the Workshop......................................................................................11

5. Conclusion..................................................................................................................11

6. Terms of Reference....................................................................................................12

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1. Introduction

The Commercial and Financial Inspector organised a stakeholders meeting on Benchmarking with support from GIZ. This was one of the outcomes of the Benchmarking training of trainers that she attended in German during the period 19th to 22nd where a number of lessons were picked up on how to enhance the NWASCO benchmarking system. The ToT was one of the many Human Capacity Development (HCD) initiatives by the WAVE plus programme which operates in five countries namely Zambia, Kenya, Tanzania, Uganda and the Republic of South Sudan. As the leading regulator in benchmarking in the region, NWASCO sought to take the first step at refining the already existing benchmarking system not only for the benefit of the Zambian water sector but also to save as a good practice for the other regulators in the region. The workshop which involved the key stakeholders in the Zambian Water and Sanitation Sector was held on Friday 14th December 2012 at Nomads Court in Lusaka and ran from 08:30 to 16:30 hours. Among the stakeholders that attended the workshop were the Managing Directors of Commercial Utility Companies (CUs), Cooperating partners, namely GIZ and JICA, the Director of Department of Infrastructure and Housing (DHID) at Ministry of Local Government and Housing, WASAZA and NWASCO officials; a total of 27 participants.

1.1 Objective of the Workshop

The main aim of the workshop was to create a fora to discuss the sector benchmarking system currently being used by NWASCO, how it ought to work and get feedback from the various stakeholders on how it can be enhanced. The discussions also included incentive regulations as an important ingredient for benchmarking. The learning and sharing was anchored on the 3 main topics as follows:

I. NWASCO sector benchmarking system-‐ objectives, methods and processes and how these link to sector targets and policies

II. Internal benchmarking system for the Commercial Utilities-‐ as a driver for actionable plans for performance improvement

III. Regulation by incentives -‐how it is linked to benchmarking, focusing on improving incentives as an ingredient for successful benchmarking

Through the process of learning and sharing, the outcome of the workshop was to

I. Create a common understanding among all stakeholders of the sector benchmarking system currently being used and suggest areas needing improvement.

II. ToRs for a benchmarking consultant who is envisaged to be engaged during the first quarter of 2013 to look into the suggested areas of improvement.

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2. Background

Concerns have been raised in the past on the sector benchmarking system that NWASCO is using and how it could be enhanced. With the exposure obtained by the Commercial and Financial Inspector on the subject matter, it came to light that in as much as some of the concerns were as a result of lack of full appreciation of the system, there was a lot that could be done to enhance it. It was also noted that the sector benchmarking system has never been discussed in an open fora with various stakeholders hence, the speculations and apprehension about the system by the various sector players. Therefore, there was need to create a deliberate fora for stakeholders first to understand what is currently being done on benchmarking and then suggest improvement which could be further exploited by a benchmarking expert to be engaged.

3. Presentations

Presentations covering the three topics mentioned above were made by NWASCO officials and a representative of the CUs. All presentations were further discussed in the groups and suggestions of areas needing improvement noted. The overarching issue was that generally, the benchmarking process should lead to performance improvement of the CUs in particular and the sector as a whole.

3.1 NWASCO sector benchmarking system

The presentation which was made by the NWASCO Director, detailed the sector benchmarking system that is currently being used by NWASCO focusing on the objectives, the methods and processes and the link to the sector targets and policies. Some of the salient issues from the presentation were as follows:

Benchmarking had two distinct aspects, that is, Performance assessment and performance improvement. It was noted that performance assessment should be a means to the ultimate aim of Performance improvement and not an end in itself. Currently, the NWASCO benchmarking system ended at performance assessment with the expectation that CUs to pick it up and ensure there was performance improvement.

The aspect of performance improvement was one of the areas which was identified as needing enhancement.

Definition and Calculations of Performance Indicators was another area which was discussed extensively. Stakeholders were taken through the nine indicators that are currently used for ranking performance of CUs, as published in the sector report. It was however, noted that there were other indicators that were published in the report but were not used for ranking. Further, the criteria for ranking and awarding of the various incentives given by NWASCO were elaborated as shown below:

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CATEGORY DESCRIPTION INCENTIVE

Best performing CU Top of the ranking Floating trophy, institutional trophy and monetary award

Runner up Second on the ranking Institutional trophy and monetary award

Most improved highest magnitude of performance improvement

Institutional trophy and monetary award

Best in peri urban areas Accelerates coverage to the peri urban areas and successfully implements DTF projects

Institutional trophy and monetary award

Performance in each of the 11 SLG indicators

Achievement in the 11 service indicators.

Recognition certificate

Progress on the 11 SLA indicators

Magnitude of achievement in each of the 11 service indicators.

Recognition certificate

Best in each of the 9 sector indicators

Effort and Consistency Recognition certificate

The other Award which was recently introduced was the CEO Award and the runner up. The criteria used was as stated below

ü Ability of CEO to build a high performing management team

ü Giving strategic direction

ü Implementing clear plan

ü Implementation of short and long team company objectives

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ü Nominations by CEOs

It was noted that the criteria for the awards, particularly the CEO of the year and the best in management of peri urban areas needed to be refined.

The whole concept of sector benchmarking and the various linkages was summarised in the following diagram:

Performance of the CUs in the year

SECTOR BENCHMARKINGSector Report

Inter CU Benchmarking

SECTOR IMPROVEMENT

NWASCO SP

SECTOR TARGETS-‐Policy issues

RBI

Cus SP

Support structures e.g CPs

Performance improvement

Suggestions and/or recommendations from the group discussion and plenary session

Ø The nine indicators currently being used for ranking are sufficient. Ø Definition of hours of supply needs to be looked at. It was noted that there was a

misunderstanding between actual hours of supply at the customer service and the pumping hours. The concept of weighted average for hours of supply has not been well understood especially when compiling the source data. Further the treatment of the issue of variations in hours of supply within the same area due to topography was not very clear.

Ø Need to add an indicator on level of investment (whether internal or external). Suggestions were to have an indicator investment per cubic meter or per connection be per cubic or per connection. However, it was noted that investment needed to be clearly defined. This will help in gauging the level of investment going into the sector to alleviate infrastructural challenges.

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Ø The indicators of Staff per 1000 water connections was said not to be exhaustive as a measure of productivity. The question which was asked was what about sewer connections and the staff that were dedicated to these connections? Discussions were around including sewer connections, excluding staff dedicated to sewer or considering the number of operation centres/units which are a matter of design. It was agreed not to view the indicator in isolation but relate it to the other staff efficiency indicators reported in the sector report.

Ø The number of casuals (below one year contracts) who work with the CU throughout the year and the link with the staff per 1000 connections indicators was another area which needed refining. CUs tend to have a certain constant number of casuals running throughout the year e.g those who dig trenches. These are however, excluded when computing the staff per 1000 connections indicator. This does not depict the real efficiency for staff.

Ø NRW verses UfW. Is there need to migrate to NRW as opposed to UfW looking at what is happening world over and also bearing in mind the information requirements for NRW. The group felt that the migration should be given time. Some CUs still have scanty information which may not enable them compute UfW.

Ø The group felt that the basis for the weights given to the indicators used for ranking was okay. Additionally, the reasoning behind the regulators perception indicators as being used purely to break ties when ranking was acceptable.

Ø The group also felt that the benchmarks for the various indicators did not need any revision for the time being and the CU clusters were also generally acceptable, although there was discussion as to whether Chambeshi WSC was in the correct cluster. There seemed to be a big difference with the other cluster 2 CUs.

Ø The indicator O&M cost coverage was unfair when viewed in relation to the tariff adjustment process were some CUs, particularly those below 100% O&M cost coverage (cluster 3) were by government policy only allowed to make revenue to cover a specified proportion of their O&M, which was less than the benchmark, (e.g LpWSC). The suggestion was to use the cost coverage allowed in the tariff as benchmark.

The presentation gave useful insights on some of the elements that needed to be further exploited and therefore could form part of the ToRs for the consultant.

3.2 Commercial Utilities Benchmarking System

This presentation highlighted the background, objectives and outcomes of the CU benchmarking system underway. The cardinal issue noted was that the system aimed at improving performance of the CUs drawing from the performance assessment conducted and reported by NWASCO in the sector. This initiative was being championed by LWSC as the chairperson for the Water and Sanitation Utilities Association of Zambia pursuant to one of their objectives of implementing inter CU benchmarking. The process would emphasis

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regular reporting (Quarterly), from which performance gaps would be identified. Recommendations for twining and attachments to induce performance improvements would then be made and implemented. The link with the NWASCO sector benchmarking system was therefore that the CU system would pick up from the performance assessment to stir the sector benchmarking process to performance improvement.


Ø It was noted that CU benchmarking was linked to sector benchmarking because it made use of the indicators used in sector benchmarking.

Ø The group also felt that there was need to domesticate and simplify the NIS to enable CUs use it for monitoring purposes

Ø Include mentoring and site visits as actionable outputs of the process which should lead to performance improvement

Ø It was also felt that CEOs should be involved in the process. Currently it is only with the technocrats.

Ø CUs had commenced quarterly meeting with rotating hosts, so far two have been held, in Lusaka and Kabwe.

Ø The group suggested that the process should not dwell so much on reporting but should pick up the performance from the NWASCO report and break them down into actual process, tasks and functions in order to identify the good practices for purposes of learning.

Ø It was noted that the process should ultimately lead to performance improvement which should reflect in sector report.

3.3 The New Regulation by Incentives Concept

This session focused on enhancing the use of incentives as an important ingredient in the benchmarking system. As earlier noted that currently, NWASCO gives out awards for the following categories

I. Best performing CU, II. Runner Up, III. Most Improved CU, IV. Best in management of Peri Urban areas,

And also recognises performance in the following areas in each of the SLGs indicators, best submitted data, the best CEO and the runner up.

It was noted that these were viewed in isolation to the whole system of incentive regulation hence, the need to harmonise. Emphasis was put on both the CU and the staff. The above and other new incentives, mainly material and emotional, were suggested as part of the benchmarking system. The new incentives proposed were as follows:

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1. District/Branch awards for world water day and world toilet day which would comprise a NWASCO trophy the deserving district/branch for each CU.

2. Energy Efficiency Award for a CU that is most efficient in energy utilisation. 3. HIV/AIDS Award for a CU that is making strides in mainstreaming HIV/AIDS. This

would be sponsored by GIZ and would comprise a trophy and a monetary award.

The staff awards proposed were as follows:

CATEGORY DESCRIPTION When

Labour day Award Hard working staff as nominated by CU based on the SIS

On labour day

Capacity building award Hardworking staff needing further training as nominated by CU based on appraisal system

Annually

CEO of the year CEO of the year is selected based on developed criteria

Annually, during sector report launch

Conference sponsorship Upcoming staff needing exposure as nominated by CU based on appraisal system

Annually

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This presentation focused on how these and other incentives already being issued could be enhanced and adopted as part of the incentives for benchmarking.


Ø Regulation by incentives should be part of benchmarking Ø Templates for reporting must be standardised and be more or less what is reported

annually by the CUs. Ø Incentives must be based on a performance management system in the CUs, which

will clearly define the work that should attract a bonus. This will mean CU staff having job descriptions that have performance indicators and also have clearly defined penalties for non performance.

Ø NWASCO could assist the CU in identifying best practices. Ø Incentives should include a 13th cheque, which is the general practice for most

incentive systems. It could also include a performance based notch system. Ø The suggestion of emotional incentives was said to be very vital. Money alone may

not be enough. Ø The other incentives proposed e.g Labour Day should be based on a well functioning

performance monitoring system of the CU. They should not be subjective. Ø The criteria for incentives should be well defined for both staff and the institution. Ø Engage MLGH so that incentives for staff and institutional performance are included

as part of support to HR in the programme. Ø Suggestion to include PEF as an incentive fund was well taken, however modalities

needed to be worked out. This could also be used for staff incentives until such a time when CUs were able to pay for incentives using their own resources.

Ø MLGH should actively engage Government to pay off debts on water and sanitation services rendered to government which might be used to enhance the staff incentive systems in the CUs.

Publicity Award Deserving staff’s biography publicised in NWASCO publications

Annually

On spot Awards Hardworking staff as identified by the inspectors during inspections awarded with promotional materials e.g caps, T-‐shirts

During Inspections

Attachment Hardworking staff requiring further exposure sponsored for attachment in a well performing

Annually

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Ø Private sector could also be used for benchmarking purposes i.e benchmark with the private sector in similar areas of operation.

Ø Engage with Government on private sector participation through the use of service contracts in certain areas e.g the cases of Kisumu in Kenya.

Ø Engage MLGH on the suggestion of performance contracts for management and how these can be used as an effective tool for performance improvement and also in line with the incentive system and benchmarking.

4. Outcomes of the Workshop a) The stakeholders generally understood the concept of benchmarking and agreed that it

should ultimately lead to performance improvement, an area which has been lacking. b) Terms of Reference (ToRs), for a benchmarking consultant, hereto attached, to be

engaged during the first quarter of 2013 with the help of GIZ. 5. Conclusion

The workshop provided useful lessons and also an opportunity to discuss the process of benchmarking with the various sector players in an objective and transparent manner, to enable improvement to the system. The stakeholders were generally happy with the initiative by the regulator to hold a benchmarking workshop and also appreciated the deliberations and outcomes. It was agreed that the ToRs once developed would be subjected to the stakeholders for further input before being adopted. It is hoped that this process will lead to tremendous improvements to the sector benchmarking system which will spur NWASCO to be an icon of benchmarking in the region.

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Terms of Reference for the Review of the NWASCO Sector Benchmarking System

1. Background

The Government has established a Water Policy and put in place a legal and institutional

framework to enhance efficiency and sustainability in the sector. The provision of water

supply and sanitation services has been devolved to the Local Authorities (LAs) all of whom

have formed water and sewerage companies to run the services on a commercial basis.

To date, there are eleven (11) Commercial Water Utilities (CUs) established under the

Companies Act to provide water supply and sanitation services to the urban areas of

Zambia.

The National Water Supply and Sanitation Council (NWASCO) was established by

Government through Act 28 of 1997 to regulate the water and sanitation service providers

for efficiency and sustainability of water supply and sanitation service provision. Its

functions generally include:

a) Licensing providers

b) Advise

Ø Government on Water supply and sanitation matters

Ø Local authorities on institutional arrangements for provision of water supply and

sanitation services;

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c) Develop sector guidelines and establish and enforce standards

d) Disseminate information to consumers

Since its inception, NWASCO has developed a number of regulatory tools which are used in

regulating water supply and sanitation service providers which include sector

benchmarking. The results of the benchmarking process are contained in the sector report

which is presented to parliament through the Minister of Mines, Energy and Water

Development.

2. Objective of the Assignment

The objective of this assignment is to review the NWASCO sector benchmarking system

taking into consideration

1. The definition, adequacy and fairness of the performance indicators currently being

used, particularly staff per 1000 water connections as a measure of productivity,

O&M cost coverage by collections in relation to the tariff adjustment process and

possibility of including an indicator to measure the level of investment in the sector.

2. The performance improvement aspect of benchmarking, how it can be strengthened

and linked the benchmarking system of the CUs and overall sector performance.

3. Explore the possibility of using incentives in benchmarking in view of the Regulation

by incentives concept developed by NWASCO. How this can be linked to the

NUWSSP and the Performance Enhancement Fund by DTF as possible sources of

incentives.

4. Any other issue on benchmarking in line with the leading practices world over.

3. Tasks to be carried out

The assignment shall include but not limited to:

§ Review the NWASCO sector Benchmarking system focusing on:

o Definition of indicators,

o Adequacy of the indicators in measuring performance of CUs,

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o Link with sector policy and targets,

o Fairness and transparency of the process,

o Leading practices world over and suggest practical ways of improving.

§ Review of the CU benchmarking system and how it is linked to the performance

improvement aspect of benchmarking, in view of the sector benchmarking system

and propose ways of strengthening the linkage.

§ Explore the possibility of enhancing the use of incentives in benchmarking in view of

the Regulation by incentives concept and stakeholder involvement (e.g MLGH, CPs

private sector) in making the incentives more attractive, inducing and sustainable.

4. Output

The output of the assignment shall be a report detailing the findings of the consultant on

the above mentioned tasks and practical recommendations which will be communicated to

the NWASCO management at a stakeholders meeting.

5. Reporting and Timeframe

The task will be undertaken according to a work plan to be developed by the consultant. The

consultant will report to the Director but will liase with the Commercial and Financial

Inspector for day to day activities.

The assignment shall be undertaken within a period of 6 weeks from 1st February 2013.

Report on Benchmarking stakeholder meeting€¦ · 3!! 1. Introduction!...

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