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									AHCCCS Virtual
Office Evaluation
  Final Report

  May 21, 2007
1.0 Scope of Evaluation

Purpose: Evaluate results of the Virtual Office Business
  Model implemented at AHCCCS in July 2005

               Interview senior leaders of AHCCCS
               Interview employees, supervisors and managers
               Review AHCCCS documents relevant to Virtual
                Office (VO) and Alternative Work Arrangement
               Identify “best practices” of value to AHCCCS
               Analyze available results data
               Make recommendations based on the above

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   Findings
       Summary   of Interviews
       Summary of Document Review
       Analysis of results data
       Summary of Preliminary Benchmarked Best
 Recommendations
 Next Steps

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2.0 Summary of Interviews
     Recommendation to stop, to continue or to expand
     Value to stakeholders (employees, AHCCCS, State of Arizona,
      members, and partners)
     Impacts
     Challenges and risks
     Recommendations

               Thirty interviews were conducted with senior
            leadership, managers, supervisors, and employees.

         100% of those interviewed said the Virtual Office
       “should be expanded” as opposed to “being continued
                     as is” or “being stopped’.

  “Employees were concerned that AHCCCS might consider stopping VO”

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Summary of Interviews: Value to Stakeholders
    The interviews identified the following benefits to the various stakeholders

    AHCCCS Results                         Employees
    • Improved productivity                • Reduced stress (e.g., being in traffic,
    • Reduced absenteeism                  interruptions, office politics)
    • Reduced facilities                   • Improved job satisfaction
    • Decreased costs                      • Feel respected by leaders
    • Increased capacity for work          • Improved Quality of Life
    • Increased flexibility of workforce   • Performance-based compensation is valued
    • Increased level of talent            • VO valued as a benefit to offset very low
                                           • Stipend offsets increased costs of working at

     Members and Partners                  State of Arizona
     • Improved service quality            • Reduced consumption of fuel
     • Reduced time for service            • Reduced pollution
     • Increased hours of availability     • Reduced traffic on the roads
                                           • Reduced cost of services
                                           • Work opportunities for homebound
                                           • Work opportunities for remote locations
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Summary of Interviews: Challenges and Risks
             The interviews identified the following challenges and risks

               Challenges                                            Risks
   Increased workload for                    Hiring people not suitable for Virtual Office
    supervisors until processes are all        environment
    revised                                   Development of “virtual” employees as
   Difficult to address performance           supervisors and managers for the future
   Employees sometimes cannot                Culture is difficult to sustain without “visibility” of
    access subject matter experts for          role model leaders
    information to do their job               Achievement of needed cultural changes:
   Processes for accessing needed                 Focus is continuous improvement in results
    information (e.g., contract                    Belief in value of a virtual organization to improve
    conditions) not                                 performance
    automated/accessible                           Coach for continuous improvement vs. manage
   Employees not always aware of                   poor performance
    what is happening in the agency           Development of capabilities to coach for
    (political and organizational              continuous productivity improvement vs.
    happenings)                                performance management
   No mechanism to network and               Move attitude towards measuring performance
    build relationships                        from “identifying perfect measures” to
   Current time reporting is time             “managing performance to improve key
    consuming                                  measures of success continuously” for all
   Some organizations/leaders have            positions
    not yet identified opportunities for      Continuous improvement and measurement of
    VO                                         core work processes
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3.0 Review of AHCCCS Documents
               State of AZ Guideline
               AHCCCS Strategy
               Virtual Office Strategy
               Policies
               Technology Plan
               Communication and Training
               Pilot Plan
               Surveys
               Results Process and Reports
               Presentations

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    Review of AHCCCS Documents: Findings

    State of AZ Guideline: State supports movement to
     Alternative Work Arrangements (AWA) including VO
    AHCCCS Strategy: Organization defined
     comprehensive strategy which uses VO to realize its
     purpose and to add value to all key stakeholders
    Policies: A combination of state guidelines and
     AHCCCS policies govern the VO Business Model
    Pilot Plan: A structured and rational plan was used to
     conduct and evaluate a pilot to determine if there is
     value in a VO Business Model
    Results Process and Reports: Measurable results
     were identified, targets set, and data collected in areas
     of productivity, quality and costs
    Evaluation: A combination of approaches including
     surveys, collection of results and data collect were
     used to assess the pilot
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    Review of AHCCCS Documents: Findings
    Communication and Training: Used to align and enable employees
     moving to VO arrangement; the next opportunity is to support improved
     performance management for the future
    Presentations: Executive presentation have been used as a way to
     communicate the opportunity, strategy, approach, and results
    Technology Plan: Included addressing the needs for Virtual Office
     requirements; consider moving to a focus on technology for a Virtual
     Organization for the future
    Documentation & Knowledge: Current documents are in a database;
     develop Website to become the portal for the future for sharing
     business knowledge

          AHCCCS has used a strategic and
        systematic approach to designing and
           implementing their Virtual Office
                   Business Model
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4.0 Summary of Benchmarked Best Practices

                      Benchmarking can be used to identify
                         opportunities and define best
                        practices to bring into AHCCCS

               Fortune: Top 100 companies using AWA and VO (2006)
               Jet Blue and Call Center Studies
               Research Studies: Culture, Effective Teams, etc.
               AT&T and IBM: 20 years of practice
               American Express

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Increasing Number of VO Workers and Savings

   Nearly 27 million folks will be working from home offices
    by year's end, according to research firm International
    Data Corp.
   These employees will save an average commute of 24.3
    minutes each way, according to U.S. Census data
   They will save money: less visits to the gas pump, less
    to drop off at the dry cleaner, fewer takeout lunches.
   Those working exclusively from home can often take tax
   Source: Money Magazine Online (September 19, 2006)

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    More Companies Using Various Forms of VO
                                  Company                 Best      % of people who
Fortune Magazine: Top 100                                 Company   telecommute or
   companies to work for (2006)                           Ranking   are VO regularly

                                                          11        90
Of the 82 Best Companies          Cisco Systems
that allow employees to           Bain & Co               45        76
telecommute or work at
home at least 20% of the          AstraZeneca             71        75
time, these 10 have the
                                  Bright Horizons         92        60
highest percentage of
telecommuters.                    Genentech               2         57
ines/fortune/bestcompanies/       Booz Allen Hamilton     63        54
                                  Capital One Financial   84        35
                                  BC Johnson & Son        7         34

                                  American Fidelity       47        26
                                  Qualcomm                14        20
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Some Companies Have Used VO for Years
   AT&T and IBM: 20 years of practice
   A range of alternative forms of Virtual Office or
    Alternative Work Arrangements (AWA)
   Annual increasing performance targets
   Continuous improvement in processes
   Turnover reduced 50%
   Increased satisfaction with jobs and personal life
   Comprehensive training for implementation and critical

        AT&T employees spread out over a geographical area limited
       their exposure to Hurricane Katrina disaster. Those workers
       not affected by this natural disaster picked up the areas for
       those that were affected and productivity was not affected.
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    New Call Center Trend:
    Moving from Outsourcing to Home Offices
Jet Blue
     Role model of a “virtual business”
     All call center employees work out of their homes
     Standardization of equipment
     Reduction/avoidance of real estate
     Financial success due to virtual organization approach
     Natural and manmade disasters do not impact sales and service
     Call center employees come into a meeting one day a month
     Turnover rates in call centers are only 4% per year compared with
      call center averages of 50 to 100% in many other companies

Farmers Insurance and Proctor and Gamble also
  support call center employees working at home

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    New Call Center Trend:
    Moving from Outsourcing to Home Offices
Benefits from a research study by Nova Amber, LLC, a virtual
  research firm
     A measurable reduction in capital and operational expenditures
     Improved customer satisfaction
     Faster time to market
     Improved focus on company’s core business

Studies from IDC (sister company of Network World), Booz Allen
   Hamilton, and Purdue University identify expansion in home
   office workers for call center
     Traditional call center employees cost $31 per hour including overhead and
      training; work at home employees cost an average of $21 per hour (IDC
     Uses range from Jet Blue (100% virtual call centers) to 1-800-Flowers (uses
      virtual workers for peak periods)
     Average savings to teleworkers reported at $4000 per year
     Improvement in productivity of up to 20% has been realized

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      Companies Use Technology and Leadership
                   to Enable VO

    American Express Human Resources Technology Team
    Team scattered throughout the world
    Vision: helping technology experts of American Express partner
     with business leaders to grow the overall company
    HR Technology Team goal: valuable technical support in a world
     of virtual work
    Leadership capability important to success
    Mutual and individual accountability established
    Groupware supported various work processes: videoconferencing,
     chat rooms, e-mail, threaded discussions, document sharing,
     project management

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       Use Business Leadership Model to Enable
       a Performance Improvement Focus
    Experts’ models can
     identify approaches to
     changing the culture,
     building a focus on
     measurement and
     results, coaching people
     for continuous
     improvement, building
     virtual teams and a
     virtual organinization
    Example: The Discipline
     of Teams identifies a
     model for creating a
     performance and
     accountability discipline
     in teams (VO and non-

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Summary of

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     Impact of Virtual Office is Significant
AHCCCS                                    Employees
• Improved productivity (>10%)            • Reduced costs ($80/employee/week)
• Reduced absenteeism (50%)               • Reduced commuting time (>280 hr/yr)
• Reduced facilities ($5000 per office)   • Reduced turnover (>10%)
• Increasing capacity (10% per year)      • Feel respected by leaders
• Increased flexibility of workers        • Reduced stress
• Increased talent                        • Value performance-based
Members and Partners                      State of Arizona and Environment
• Improved service quality                • Reduced fuel consumption (>250
• Reduced time for service                gal/employee/yr)
• Increased hours of availability         • Reduced pollution (>4500 lb Carbon
                                          • Public and environmental savings
                                          (>$5200 per year per employee)
                                          • Work opportunities for homebound
                                          • Work opportunities for remote cities

       Many areas of impact can be measured and tracked over time
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Example: Improvement in KIDSCARE Productivity
     Group         No of       Aug-06       Sept-06        Oct-06       Nov-06
                  People        Mean         Mean          Mean         Mean
                              (Range)       (Range)       (Range)      (Range)
 1.Moved VO          11     78.9%         102.8%         108.7%       118.5%
 in Aug-06                  (43-133%)     (53-140%)      (71-193%)    (71-218%)
 2.Moved VO          12                                  101.1%       112%
 in Oct-06
                                                         (51-163%)    (62-184%)

    Productivity numbers were not available for the month prior to going to a
     Virtual Office environment
    Productivity improved about 10% per month for the 4 month period
    Continuous improvement in productivity realized for the 4 months
    About 80% of the employees showed significant improvement over the 4
     month period; 20% did not show significant improvement

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Example: Improvement in Productivity and
Quality for Adjudication Group
              Claims/Week   Claims/Week    Improvement      Error Rate   Error Rate   Improvement
                 Pre-VO       Post-VO     in Productivity    Pre-VO       Post-VO       in Quality

Person 1      665           831           25%               0.18%        0.02%        89%

Person 2      1018          1063          4.4%              0.06%        0.01%        83%

Person 3      960           1101          14.7%             0.15%        0.01%        93%

Mean                                      14.7%                                       88.3%

       Data was only readily available on three people
       Average improvement in productivity was over 14%
       Average improvement in quality was 88%

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Example: Improvement in Productivity and
Quality for Comm Center Group
              Productivity   Productivity    Improvement        Quality    Quality   Improvement
                Pre-VO         Post-VO      in Productivity     Pre-VO     Post-VO     in Quality

Person 1      75.92          98.08          29.2%             90.82       94.71      4.3%

Person 2      99.63          98.60          -1.0%             94.34       97.67      3.5%

Person 3      87.03          100.55         15.5%             89.95       87.29      -3.0%

Person 4      92.97          99.55          6.58%             99.82       99.52      -0.3%

      Data was only readily available on four people
      Average improvement in productivity was over 12%
      Average improvement in quality was over 1%

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Example: Savings in Real Estate Costs

Annual Cost Savings for Closing 12th St Location: $303,000
           Rent: $252,000
           Electricity: $48,000
           Gas: $600
           Water: $2,400

      Dollars saved are essential to being able to fund the
       needed improvements in the infrastructure to realize
       further savings

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6.0 Recommendations to Expand Potential
       Based on the value created by VO, the risks and challenges
     identified, and the results of benchmarking, the following items
    need to be addressed to continue to expand the impact of the VO
   Define a strategy for the degree and nature of “Virtual Office”
    or “Virtual Organization
   Use a Business Case/Pilot Approach for Forecasting
    Opportunities and Reporting Actual Results
   Expand Virtual Office Implementation
   Modify the Process for Collecting Business Impact and
    Performance Results
   Create a “Virtual” Structure to Continue to Share Best Practices
    with the State
   Continue with the Current High Level of Communication

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Recommendations to Expand Potential Impact
   Develop a Formal Talent Management Process
   Modify Staffing Process to Select for Attitudes and Skills for
    VO Environment
   Partner with State Agencies to Increase Diversity Including
    Homebound and Remote Locations
   Continue to Improve Learning and Development
   Create a Learning Architecture for a “Virtual Organization”
   Continue to Enhance Technology Training and Support
   Continue to Bring in Applications to Support Creating a Virtual
    Organization Infrastructure
   Continue Process Projects Essential to Doing the Work
   Expand Approaches to Rewards and Recognition
   Use High Performing Studies to Achieve the Next Level of
   Re-evaluate Current Ratio of Employees to Supervisors in VO

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  7.0 Next Steps to Implement Recommendations
Revise and communicate the Virtual Office strategy to the entire organization
  through a series of top down meetings
        Virtual Office or Virtual Organization is the AHCCCS model
        Expectations to move to a form of Virtual Office
        How the strategy is enabled through this organizational business model
        Measurement focuses on identifying the few key measures
        The need for continuous improvement as a survival strategy
        Different models for going virtual (VO, hotelling, mobile worker, telecommuter, etc.)
Create tool for leaders to help expand Virtual Office by helping them in
        Identifying groups with potential to move & provide various AWA models
        Identifying how to develop performance measures for staff and operations positions,
        Developing the business case to forecast opportunities and impact AND report actual results
        Forecasting productivity and quality improvements for the following year
Modify the process for collecting business impact and performance results
        Collect actual results as well as normalized results
        Report year over year improvements
        Include productivity, quality, absenteeism, turnover and costs
Establish a state-wide group of resources to support all agencies
Design a Talent Management Process
        Identify capabilities for leaders, managers and supervisors
        Develop a talent management and development process integrated with performance

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  Next Steps to Implement these Recommendations

Modify staffing process to ensure selecting for right attitudes and capabilities
  for the future and increase diversity of the workforce
       Define future capabilities
       Revise staffing interview process
       Partner with other state agencies to increase diversity remote, disabled, and older workers
Develop the Learning Architecture Model to be the basis for Learning and
  Development in the organization
       Blend of content on the intranet, live virtual classes with Microsoft Meeting
       Development of skills through application projects and experiences
       Create one-page picture of the approach, expectations, and eLearning system
Design workshops needed to realize recommendations (Coaching for
   Continuous Improvement, Using Measures for Continuous Performance
   Improvement, Working in the Virtual Office, Managing in the Virtual Office)
Identify groupware that can be used to support communications, knowledge
Expand approaches to rewards and recognition
       Identify a range of rewards and motivational approaches
       Create rewards and recognition document and tools
Complete internal best practices (high performing groups) study
       Identify specific best practices within AHCCCS in high performing groups and individuals
       Identify practices to be moved to other groups to continue to improve performance

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8.0 In Conclusion
   AHCCCS took a strategic and systematic approach to the trial and
    evaluation of VO as a key move to improving the performance of the
    organization for the long term
   The pilot and rollout have demonstrated VO can add significant value to
    their stakeholders and improve performance of the Agency
   Productivity improvement ranged from 10 to 40%
   Error rates reduced up to 90%
   As a result of this project the organization has built various best practices
   There is an opportunity to systemize the knowledge and best practices to
    ensure continued improvement in performance and value creation
   There is an opportunity to further improve performance and create value by
    expanding VO within the Agency and to other agencies in Arizona
   There is an opportunity to collect actual impact on results with a business
    case/pilot approach to data collection
   There are various enhancements needed in the various components of the
    organization to enable the full benefits of Virtual Office and other Alternative
    Work Arrangements … or to move ultimately to a Virtual Organization Model

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