City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit Custom Case Solution & Analysis

1. Evidence Brief (Case Researcher)

Financial Metrics:

• Total Traffic Unit budget: Approximately $1.2 million (Exhibit 1).
• Primary cost drivers: Personnel (salaries, overtime, benefits) and equipment maintenance.
• Budgeting methodology: Historically incremental (prior year + inflation/adjustment).

Operational Facts:

• Unit function: Parking enforcement, sign maintenance, signal repair, and traffic studies.
• Performance visibility: Limited. Management lacks data connecting specific budget line items to service outcomes (e.g., number of signs repaired vs. cost per sign).
• Staffing: Unionized environment with rigid work rules and job descriptions.

Stakeholder Positions:

• Mayor Curtatone: Driving a city-wide initiative for data-driven, performance-based governance (SomerStat).
• Traffic Unit Staff: Resistant to change; perceive activity-based budgeting (ABB) as a tool for layoffs or increased surveillance.
• Management: Seeking to justify budget requests through objective performance data.

Information Gaps:

• Granular unit-cost data for specific activities (e.g., exact labor minutes for a standard sign installation).
• Clear definitions of service level agreements (SLAs) for traffic maintenance.

2. Strategic Analysis (Strategic Analyst)

Core Strategic Question: How can the Traffic Unit transition from input-based budgeting to activity-based budgeting (ABB) to satisfy city-wide transparency mandates while managing internal labor resistance?

Structural Analysis:

• Value Chain: The unit currently manages inputs (labor/materials) without measuring output efficiency. Implementing ABB exposes the gap between resource consumption and service delivery.
• Stakeholder Alignment: The primary tension is between the Mayor’s performance mandate and the workforce’s fear of accountability.

Strategic Options:

• Option 1: Full-Scale ABB Implementation. Map all activities to costs immediately. Trade-off: High risk of labor walkouts or grievance filings. Resources: Significant management time and data tracking software.
• Option 2: Pilot Program on Non-Controversial Tasks. Apply ABB to sign maintenance or traffic studies first. Trade-off: Slower city-wide adoption. Resources: Modest; requires departmental cooperation.
• Option 3: Status Quo with Reporting Overlays. Keep old budgeting but report performance metrics separately. Trade-off: Fails to address the root cause of inefficiency; likely to be rejected by the Mayor.

Preliminary Recommendation: Adopt Option 2. Use a pilot to demonstrate that ABB identifies resource shortages rather than just employee laziness. This builds trust before expanding to core enforcement operations.

3. Implementation Roadmap (Implementation Specialist)

Critical Path:

• Phase 1 (Month 1-2): Define unit-cost metrics for sign installation (e.g., labor-hours per sign).
• Phase 2 (Month 3-5): Run pilot program. Compare actual costs against the historical budget allocation.
• Phase 3 (Month 6): Present findings to union representatives to demonstrate that data identifies equipment/process bottlenecks, not just staff performance.

Key Constraints:

• Labor Relations: Any attempt to measure performance will be viewed as a threat unless framed as a process improvement tool.
• Data Integrity: The unit lacks a robust system for tracking time spent on specific tasks.

Risk-Adjusted Implementation:

• Contingency: If union resistance peaks, pivot to a collaborative task-force model where staff help define the time-standards for their own work.

4. Executive Review and BLUF (Executive Critic)

BLUF: The Traffic Unit must adopt ABB not as a budget tool, but as a management tool to identify operational waste. The current resistance is predictable; the strategy fails if it treats labor as a cost-variable rather than a process-participant. Proceed with the pilot-led implementation (Option 2) but tie the data outcomes to service improvements that make the staff's jobs easier, not harder.

Dangerous Assumption: The analysis assumes the union will engage in data-sharing. They will not, unless the data demonstrably proves that the unit is under-resourced or hampered by outdated equipment.

Unaddressed Risks:

• 1. Data manipulation by staff to protect current overtime levels.
• 2. The Mayor's political timeline forcing a faster implementation than the culture can absorb, leading to institutional collapse.

Unconsidered Alternative: Outsourcing non-core maintenance tasks to private contractors to establish a cost-benchmark for the internal team to match.

Verdict: APPROVED FOR LEADERSHIP REVIEW