TO:  Board of Regents

From:  Richard A. Crofts, Commissioner

RE:  State Employee Incentive Program

Date:  November 21-22, 2002

This memorandum is in response to the following motion that was passed at the September 19-20, 2002 Regents' meeting.

It is the board's objective to actively encourage innovations that contribute to the efficiency, economy, or other improvement of the university system. The board, therefore directs the Office of the Commissioner of Higher Education to present to the board for its consideration at the November, 2002 regular meeting, a review of the existing Employee Incentive Program for the Montana university system, solicit suggested improvements for the Program, and set forth the steps necessary to revise the program beyond employees to include students.

The Employee Incentive Program (EIP) is a statutory program that was enacted in 1981 to help reduce costs and improve the effectiveness of state government operations. The EIP has been modified several times since its inception. Originally, the Department of Administration developed and centrally administered the EIP to award state employees for cost savings proposals. Since 1993, each agency has administered its own program.

The EIP legislation (2-18-1101et. seq. MCA) authorizes an agency head to grant incentive awards of up to $500 or 40 hours paid leave time for ideas or innovations for which a documented savings cannot be calculated. If an achievement or outcome produces cost savings that can be measured or projected accurately, the agency head may determine the amount of the award (up to a maximum of $17,000) using a graduated formula that is included in statute. The general public may also submit ideas to improve governmental operations.

Attached is a summary of the incentive awards that state agencies have granted in the past five years. This program has not been widely publicized of late. Only two agencies participated in the program during the past two years. Nonparticipating agencies reported that they either did not receive ideas that merited awards or did not have the staff and resources to administer the EIP. Even with this limited participation, however, there is evidence that the EIP has considerable cost savings potential.

In the eighties, units of the university system participated in the statewide employee incentive program. There have not, however, been any awards given to university system employees under the EIP program in recent memory. The UM-Missoula campus has had an EIP policy in place for quite some time but the program has not been actively promoted, until recently. There are presently five incentive award applications/suggestions being evaluated under the UM-Missoula program. The UM policy is presently limited to UM employees and does not include students or the general public. Steps are currently underway however to expand the UM-Missoula EIP policy to include students. In response to the Regent's motion, the remaining units of the university system have committed to the development of an employee/student incentive policy and it is anticipated that such policies will be in place throughout the university system by March, 2003.

Bonuses of up to $1,000 are authorized for employees who are participating in the Montana Achievement Project (MAP). One of the criteria for a MAP bonus is: The product or service will create a substantial, documented cost-savings or revenue generating effort for the University. Six (out of a total of 29) of the bonuses awarded under MAP thus far were based on cost-savings or revenue generating efforts of employees. Employees may not receive a bonus under MAP and an award under the EIP for the same cost-saving idea.

The Human Resources/Personnel Directors discussed methods to improve the success of employee/student incentive programs within the university system. They believe that increased publicity and the endorsement and support of these programs by campus CEO's and other high level administrators would be the best methods for increasing the level of participation by students and employees. These suggestions are consistent with the experiences of other state agencies. The State Personnel Division indicated that state agencies that actively promote the program have the highest level of participation in the state employee incentive award program. Participation in the state program has dropped off considerably in the last decade. This is thought to be because state agencies are struggling with tighter budgets and have not devoted as much time and resources to promoting this program as in the past.