DISCUSSION Organizing an Effective Program to Reduce Costs MARCH 2013

The Perfect Storm Workforce Tsunami Decreasing Budget/ Revenue Reductions Increasing Citizen-Centric Service Expectations Generational changes Increasing retirements Talent drain - loss of institutional knowledge Workload increases Increasing skill needs Increasing knowledge requirements Headcount reductions Resource reductions Reduced contracted support Changing workforce demographics, the cumulative effects of years of budget driven belt tightening, and increasing demands and expectations compels new approaches to gain more widespread operational economies while driving headcount reductions. Confidential and proprietary to North Highland,

Budget Reduction Strategy Options Workforce Management Strategy Cost Reduction Strategy Business Transformation Strategy While leveraging attrition as a tactic for reducing budget may be expedient and convenient in the short- term, it typically results in either degraded service/mission delivery – or – a return to original workforce levels in the long-term. Consolidating departments, reassigning resources, succession planning, re-training. Cost management, lean six-sigma, department or process-level redesign. Radical and holistic mission, people, process, technology redesign. Confidential and proprietary to North Highland,

ROI Major savings in months 6-12Major savings in months 12-18Major savings in months Emphasis/Drive Emphasis on all or selected parts of the HR life cycle -recruitment to retirement Driven by challenges/ opportunities created by turnover and attrition Emphasis on cost accounting of programs, services or operations with quantifiable savings Driven by priority savings targets where staffing is a part of but not only component of the savings. Emphasis on underlying organizational, process and technology realignment based on citizen centric view Driven by fundamental realignment of organizations, programs and tech Benefit Departments and agencies stay largely intact Minor changes in process and technology Strategic attrition, planning and selection of critical workforce Includes rebalancing where staffing is sourced – contracted, in-house, or hybrid models based on P3 or privatization analyses Focus on incremental organizational, operational, process driven, and administrative opportunities Involves concentrated effort to identify major quick-hit and near- term saving opportunities Focuses on major cost centers including back office functions, procurement, support operations. Wider path of evaluation and results May reshape the locus and role of Departments and agencies in providing services Relies on process improvements, consolidation of support services, and technology investments to replace work effort. Takes additional time and effort, and while more permanent, the recommended changes Consider Solely applying a Workforce Management Strategy to address budget reductions can result in the return of workforce levels long term. Applying Cost Reduction can result in more sustained workforce and budget reductions long-term but does nor achieve optimum savings Transformational Strategy drives the greatest long-term workforce and budget reductions but requires an initial investment Budget Reduction Associated Workforce Impacts Workforce Management Strategy Cost Reduction Strategy Business Transformation Strategy Confidential and proprietary to North Highland,

Sequencing Strategies to Address Short- and Long-Term Needs Time There may be a path that leverages Workforce Management Strategies in the short-term but positions the organization for more substantial Cost Reduction or Business Transformation Strategies in the long- term. Long-Term Mid-TermShort-Term Workforce Solely applying a Workforce Management Strategy to address budget reductions can result in the return of workforce levels long term. Cost Reduction Strategy Applying a Cost Reduction Strategy drives incremental improvement that can result in more sustained workforce and budget reductions long term. Workforce Management Strategy Business Transformation Strategy Workforce Mgmt Strategy Cost Reduction Strategy Business Transformat ion Strategy ++ Applying a strategy that employs all three strategies by reinvesting a portion of savings from the first into the next succeeding strategy can result in more slowly declining but sustained workforce reductions. Investing in a Transformational Strategy drives the greatest long term workforce and budget Confidential and proprietary to North Highland,

Sequencing Strategies to Address Short- and Long-Term Needs Size of Cost Reduction There may be a path that leverages Workforce Management Strategies in the short-term but positions the organization for more substantial Cost Reduction or Business Transformation Strategies in the long-term. Significant Driven by Permanent Changes in Organization Driven by Operational Improvements Driven by WF Size Time Applying a Workforce Management Strategy to address budget reductions can result in the return of workforce levels long term. Cost Reduction Strategy Applying a Cost Reduction Strategy drives incremental improvement that can result in more sustained workforce and budget reductions long term. Workforce Management Strategy Business Transformation Strategy Workforce Management Strategy Cost Reduction Strategy Business Transformation Strategy + + Applying a strategy that employs all three strategies by reinvesting a portion of savings from the first into the next succeeding strategy can result in more slowly declining but sustained workforce reductions. Investing in a Transformational Strategy drives the greatest long-term workforce and budget 6-12 Months Months Months Confidential and proprietary to North Highland,