National Academies Press: OpenBook

Developing Transportation Agency Leaders (2005)

Chapter: Chapter Three - State Agency Overview

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Page 10
Suggested Citation:"Chapter Three - State Agency Overview." National Academies of Sciences, Engineering, and Medicine. 2005. Developing Transportation Agency Leaders. Washington, DC: The National Academies Press. doi: 10.17226/23300.
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Page 11
Suggested Citation:"Chapter Three - State Agency Overview." National Academies of Sciences, Engineering, and Medicine. 2005. Developing Transportation Agency Leaders. Washington, DC: The National Academies Press. doi: 10.17226/23300.
×
Page 11
Page 12
Suggested Citation:"Chapter Three - State Agency Overview." National Academies of Sciences, Engineering, and Medicine. 2005. Developing Transportation Agency Leaders. Washington, DC: The National Academies Press. doi: 10.17226/23300.
×
Page 12
Page 13
Suggested Citation:"Chapter Three - State Agency Overview." National Academies of Sciences, Engineering, and Medicine. 2005. Developing Transportation Agency Leaders. Washington, DC: The National Academies Press. doi: 10.17226/23300.
×
Page 13

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BACKGROUND Leadership at state DOTs has some unique characteristics. In some cases, the top position is filled by an engineer who has risen through the ranks and is a career professional. Others are appointed from outside the agency and may have little or no experience with a transportation organization. Neither approach is guaranteed to be successful 100% of the time, nor is either immune to disappointing results. Indeed, excep- tional leaders have emerged from both processes. One challenge facing a new state DOT executive is length of service. Most are appointed by the state’s governor and serve at his or her pleasure, meaning that they can be removed from their position at any time. Although some states show great stability, such as Arkansas, where Dan Flowers has served for many years as the DOT’s chief executive, others have seen more turbulent times. With short tenure comes the leadership challenge of inducing change in a state DOT over a relatively brief period of time. It has been said that change in a government agency can be described as Darwinian in nature and thus not susceptible to changes attempted by short- term political appointees. Key to making substantive changes in a state DOT is buy- in from middle management and the agency as a whole. Time and again, fundamental change has been resisted by the rank and file despite the well-meaning efforts of a state CEO. The lessons learned in examining the state of leadership in a DOT reflect the need for change to occur quickly and with as much support and buy-in from the employees as pos- sible. A state CEO may have 4 or fewer years to affect the kind of change necessary for the agency to move forward in a dynamic world. Key leaders who can carry forward the pro- grams that the CEO establishes from within the organization will have to be identified. Most employees involved will be in civil service positions, so the CEO will have to use per- suasion and passion to advance ideas and programs, whereas private-sector leaders may have more threatening options available. Leading a state DOT is a tremendous task, one to be undertaken with deliberateness and conviction. STATE ORGANIZATION To fully understand the findings of this synthesis it is helpful to examine the characteristics of transportation agencies 10 today. This project effort included a survey assessment of var- ious attributes of state transportation agencies (STAs) to estab- lish a basic profile and also to form a basis for the comparison of leadership programs. Although state DOTs have much in common, they also have unique characteristics depending on geography, location within the United States, and mix of urban and rural elements. Therefore, what may seem a homo- geneous group of agencies is really a collection of organiza- tions with similar elements yet many differences. Twenty-five state DOTs responded to the survey request, providing a large amount of information from which to draw observations and conclusions. Organizationally, most transportation agencies are simi- lar; all have many business units in common including: • Planning, • Environmental, • Engineering, • Construction, and • Administration. These areas make up the business core of an STA. On the other hand, some agencies have additional units as part of their orga- nization. Activities not shared by all agencies include the fol- lowing types of business units: • Motor vehicle, • Driver’s license, • Ports, • Rail, • Bus, and • Aeronautics. In discussing leadership and succession management, the type of organization, its fundamental business units, and any special requirements may dictate the kind of programs an agency uses to develop its future cadre of leaders. Agency size, in terms of total personnel, was assessed. This information was gathered with the dual purpose of pro- filing the agencies that responded and determining if funda- mental differences in leadership development and succession programs were influenced by agency size. Overall, agencies CHAPTER THREE STATE AGENCY OVERVIEW

11 that responded to the survey ranged in size from more than 1,000 individuals to more than 10,000, with the average size in the 2,001 to 5,000 range. Figure 1 shows the distribution of agencies by number of employees. Staffing trends were also sampled to determine if agencies were predominantly increasing or decreasing in size. Figure 2 shows how state staffing levels have changed in the last 2 years (from 2002) and reflects the predictions by each DOT of future trends. Although the majority of responding agen- cies saw a reduction in staffing levels during the last 2 years, these same groups anticipate stabilizing full-time equivalents in the future. One of the demographic trends of interest in this project was the average age of the workforce in individual agencies. Figure 3 reflects these data as specified by the states. Although the age distribution shown in this figure is not itself alarming, some issues must be analyzed regarding this important demo- graphic. The data reveal that 61% of agencies have an aver- age age of 41 to 45, showing that the workforce is largely “middle-aged,” with approximately 20 years of service. Thus, most employees are not ready to retire immediately. Perhaps more important to consider are those agencies with an aver- age age of 46 to 50 and those in the 51 to 55 range. These indi- viduals are closer to retirement; and, in many cases, states reported that they hold key leadership positions. Note that no agency has an average age younger than 36 to 40. Some of the questions in the state survey were designed to gain an understanding of the number of individuals in senior management/leadership positions eligible to retire in the near future. Each state was asked to identify how close key lead- ers were to retirement. Although intuitively the problem of retirements has been known for some time, it was felt that this report should explore the timing of this phenomenon. Figure 4 shows the information provided by the states regarding how soon their key leaders may retire. The following noteworthy observations may be made about the data in this table. First, over one-third of the top three levels in the state DOT leader- ship hierarchy are currently eligible to retire, with another 10% able to do so in the next 3 years. Also significant is that the three middle leadership levels show that more than 20% are eligible to retire immediately, with 10% able to leave in the next 3 years. Thus, although the average age of the work- force is in the low 40s, agencies face a high level of possible turnover of top leaders during the next several years. This exodus of senior leaders from transportation agen- cies can be influenced by external factors, which may either 0% 12% 52% 32% 4% 0% 10% 20% 30% 40% 50% 60% Less than 1000 1001- 2000 2001- 5000 5001- 10,000 10,000 and above Employees Pe rc en t 8% 58% 33% 13% 35% 52% 0% 10% 20% 30% 40% 50% 60% 70% Increase Decrease Stay the Same Pe rc en t Last 2 years Next 5 years FIGURE 1 Distribution of DOTs by number of employees. FIGURE 2 Recent and predicted staffing trends. 4% 61% 30% 4% 0% 10% 20% 30% 40% 50% 60% 70% 36-40 41-45 46-50 51-55 Age Pe rc en t FIGURE 3 Employee age distribution in state DOTs.

12 accelerate individual departures or cause leaders to leave in greater numbers. STAs were asked which factors were most significant in influencing senior leaders to retire early, thus increasing the pressure on leadership development and suc- cession management. Figure 5 reflects the reasons offered by the states and the incidence of occurrence. Note that compe- tition with the private sector ranks first, with 54% citing this as a reason. Both lack of pay raises and early retirement incentives were reported by 46% of the states as key reasons why senior leaders leave state service. One-third mentioned health reasons as a factor. The challenge facing STAs in dealing with such external factors is that in most cases their influence cannot be miti- gated through means internal to the transportation agency. For example, state legislators control salary levels for state employees. In many states these levels are not competitive with the private sector. Depressed salaries, coupled with opportuni- ties in the private sector offering competitive compensation packages, may cause leaders to terminate their state service prematurely and move to these other positions. A strategy used by legislators to reduce pressures on state agency budgets is early retirement incentive programs. These programs are tailored to encourage high-salary state employ- ees to retire earlier than they would under normal circum- stances. The theory is that these individuals will be replaced with lower salary employees and the cost of this early retire- ment will be borne by the states’ benefits programs and not come out of general operating revenue. It is a fiscally logical strategy, but it does not consider the consequences on the leadership needs of a state agency. Some agencies are attempting to halt or at least slow this exodus and have implemented measures to ensure that key leaders remain as long as possible. The responses were var- ied, but the most often mentioned strategies for retention of leaders are the following in decreasing order: • Training, 46% • Flexible work schedules, 38% • Monetary incentives, 21% • Possibility for increased retirement payments, 4%. The overall response from the agencies reflects their limited ability to provide incentives to key senior leaders to entice them to continue their employment. 35% 34% 38% 20% 24% 27% 13% 10% 11% 13% 8% 9% 7% 16% 6% 10% 4% 5% 27% 14% 17% 13% 9% 33% 0% 5% 10% 15% 20% 25% 30% 35% 40% Dir./Com./Sec. Deputy Dir. Div. Mngr. Sec. Mngr. Group Mngr. Dist./Regl. Mngr. Po sit io n Percent Currently Eligible Less than 3 yr Less than 5 yr Less than 10 yr 46% 46% 33% 54% 25% 0% 10% 20% 30% 40% 50% 60% Lack of Pay Raises Early Retirement Incentives Health Conditions Competition Other Pe rc en t FIGURE 4 Retirement eligibility of senior management, by position. Dir. = director; Com. = commissioner; Sec. = secretary; Mngr. = manager; Dist. = district; Regl. = regional. FIGURE 5 External factors influencing leader departures.

13 cases, the appointment of younger and less experienced suc- cessors. The need to shore up leadership development and succession management programs in state DOTs has never been more critical. In spite of these challenges, this change may not be all bad, as new leaders often offer fresh per- spectives on issues and practices. Cultures are altered as new leaders take charge and move ahead. How DOTs respond to changing demographics and current workforce pressures will, in large part, determine their future effec- tiveness as an agency. SUMMARY State DOTs are facing key challenges in the 21st century. Pressure for timely delivery on customer’s demands has never been greater. These organizations have evolved over the years so that agencies are similar in many respects but often have unique business units based on state require- ments. Although agency size varies from state to state and titles may also differ, one issue agencies share is the loom- ing crisis in leadership. Significant numbers of senior lead- ers will leave in the next few years, requiring, in many

Next: Chapter Four - Recruitment and Retention of Leaders in State Departments of Transportation »
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TRB’s National Cooperative Highway Research Program (NCHRP) Synthesis 349: Developing Transportation Agency Leaders examines practices and innovative approaches that address the development of transportation leadership in today’s work environment. The report covers demographics, recruitment and retention, leadership training, and succession management.

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