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COVID-
19 and the e-commerce explosion

05.13.21

Read this if you work in an alcohol control capacity for state government.

The COVID-19 outbreak has changed the alcoholic beverage industry significantly over the last 14 months. Restrictions forced people to stay at home, limiting their travel to restaurants, bars, and even some stores to purchase their favorite spirits. In at least 32 states, new legislation allowed consumers the option to buy to-go cocktails as a way to help these establishments stay in business. As a result, consumers took advantage of alcohol delivery services. 

There were two large shifts in consumer purchasing for the alcoholic beverage industry in 2020. The first was a shift from on-premise to off-premise purchasing (for example, more takeaway beverages from bars, breweries, and other establishments). The second was the explosion of e-commerce sales for curbside pickup and home delivery. A study by IWSR, an alcoholic beverage market research firm, stated that alcohol e-commerce sales grew 42% in 2020. The head of consumer insights for the online alcoholic beverage delivery service, Drizly, attributes this growth to the “increased consumer awareness of alcohol delivery as a legal option, as well as an overall shift in consumer purchasing behavior toward online ordering and delivery”. 

How state agencies responded

The move to an e-commerce model has impacted state agencies who regulate the distribution and/or sale of alcohol. States such as Oklahoma, Alabama, and Georgia recently passed legislation allowing alcohol delivery to consumers’ homes. In alcoholic beverage control states, where the state controls the sale of alcohol at the wholesale level, curbside pickup programs (New Hampshire) were implemented, while others started online home delivery services (Pennsylvania). 

In a fluid legislative environment, states agencies are working to meet consumer needs in a very competitive marketplace, while fulfilling their regulatory obligation to the health and safety of their constituents.

How alcoholic beverage control states can adapt

Now is an opportune time for control state agencies to keep pace with consumer demand for more flexible purchasing options, such as buying online with home delivery, or some form of curbside and/or in-store pickup programs. Every one of the 17 alcoholic beverage control states has passed legislation to allow the delivery of either beer, wine, and/or distilled spirits in some form, with some limitations.

While for some the COVID-19 outbreak has necessitated these more distant shopping experiences, the option of these sales channels has brought consumers flexibility they will expect going forward. This calls for control state agencies to act on this changing consumer demand. By prioritizing investing in and taking ownership of new sales channels, such as e-commerce and curbside pickup, control state agencies’ technology and logistics teams can develop strategies and tools to effectively adapt to this new demand. 

Adapting technology and logistics

Through technology, control state agencies can take advantage of e-commerce and curbside pickup sales channels, to drive more revenue. We recommend control states consider the following: 

Define the current capabilities to support an online sales strategy

An important first step is to define how to address constituents’ evolving needs as compared to the current e-commerce capabilities control state agencies can support. Considerations include:

  • Are current staff capable of developing and supporting new website capabilities to meet the increased demand on the website?  
  • How will the current customer support team(s) expand to support concerns from the new channels?
  • How will new e-commerce order volume be fulfilled for home delivery (including order errors, breakage, returns, etc.)?   

Control state agencies should complete current and future state assessments in each area above to confirm what capabilities they have today and which they would like to have in the future; which will allow for an accurate gap analysis and comparison to their future state needs. Once the current state assessment, future state strategy, and gap analysis are complete, control state agencies can define the projects required to support the future state requirements. 

Reevaluate existing fulfillment, inventory, and distribution processes

Each control state has existing product fulfillment, inventory and distribution processes, and information technology (IT) tools for delivering alcohol, to their own or licensed retail stores and businesses. These current processes and IT systems should be assessed as part of the current state capabilities assessment mentioned above, to help define the level of change needed to support the control state agency’s future needs in the e-commerce channel. Key assessment questions control state agencies should ask themselves include: 

  • Can the current IT systems (e.g., inventory management, customer relationship management [CRM], customer support/call center, financial, point of sale [POS], and website infrastructure) support required upgrades?
  • Can retail teams and today’s infrastructure support order taking, inventory, fulfillment, and buy online pickup in store programs?
  • How will warehouse and retail stores track and manage the e-commerce shipments and returns related to this channel?
  • If home delivery is part of the strategy, define how the delivery logistics will be met through state or vendor resources.
  • What staffing model and skill sets will support future business needs?
  • What is the total cost of ownership for these new e-commerce capabilities so that the short and long-term costs and profits can be accurately estimated? 

The answers to these questions will help to inform a future e-commerce strategy and accommodate the cost and staff impacts. 

Bring in online retail expertise

It is important to ensure that the control state agency has website and mobile capabilities to support today’s consumer needs. This includes the ability to order a wide range of products online for either home delivery or buy online pickup in store. The design of the website and mobile transactional capabilities is critically important to the success of this channel, the true growth in revenues. Being marketing focused (e.g., allowing consumers to view and order products, save items for later, and see similar products) will help drive traffic and sales on this upgraded channel. 

For control state agencies with a more static product website, consider purchasing a commercial off-the-shelf (COTS) e-commerce product with existing retail-focused website features, or contract with a vendor to build a website that meets more unique needs. The control state agency should bring in at least one online retail subject matter expert vendor to help set the direction, design the upgrades or new site, manage the project(s) needed to implement the online capabilities, and potentially manage the operational support of the website and mobile solution.

BerryDunn provides state alcoholic beverage control boards and commissions with many services along the IT system acquisition lifecycle, including planning, needs assessment, business process analysis, request for proposal (RFP) development, requirements development, technology contract development, and project management services. 

For the full list of steps to consider and to learn more about how you can successfully position your control state agency to adapt to the changing alcoholic beverage landscape, contact us.
 

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Editor's note: read this blog if you are a state liquor administrator or at the C-level in state government. 

Surprisingly, the keynote address to this year’s annual meeting of the National Alcohol Beverage Control Association (NABCA) featured few comments on, well, alcohol. 

Why? Because cannabis is now the hot topic in state government, as consumers await its legalization. While the thought of selling cannabis may seem foreign to some state administrators, many liquor agencies are―and should be―watching. The fact is, state liquor agencies are already equipped with expertise and the technology infrastructure needed to lawfully sell a controlled substance. This puts them in a unique position to benefit from the industry’s continued growth. Common technology includes enterprise resource planning (ERP) and point-of-sale (POS) systems.

ERP

State liquor agencies typically use an ERP system to integrate core business functions, including finance, human resources, and supply chain management. Whether the system is handling bottles of wine, cases of spirits, or bags of cannabis, it is capable of achieving the same business goals. 

The existing checks and balances on controlled substances like alcohol in their current ERP system translate well to cannabis products. This leads to an important point: state governments do not need to procure a new IT system solely for regulating cannabis.

By leveraging existing ERP systems, state liquor agencies can sidestep much of the time, effort, and expense of selecting, procuring, and implementing a new system solely for cannabis sales and management. In control states, where the state has exclusively control of alcohol sales, liquor agencies are often involved in every stage of product lifecycle, from procurement to distribution to retailing.

With a few modifications, the spectrum of business functions that control states require for liquor—procuring new product, communicating with vendors and brokers, tracking inventory, and analyzing sales—can work just as well for cannabis.

POS

POS systems are necessary for most retail stores. If a state liquor agency decides to sell cannabis products in stores, they can use a POS system to integrate with the agency’s ERP system, though store personnel may require training to help ensure compliance with related regulations.

Cannabis is cash only (for now)

There is one major difference in conducting liquor versus cannabis sales at any level: currently states conduct all cannabis sales in cash. With cannabis illegal on the federal level, major banks have opted to decline any deposit of funds earned from cannabis-related sales. While some community banks are conducting cannabis-related banking, many retailers selling recreational cannabis in places like Colorado and California still deal in cash. While risky and not without challenges, these transactions are possible and less onerous to federal regulators. 

Taxes 

As markets develop, monthly tax revenue collections from cannabis continue to grow. Colorado and California have found cannabis-related tax revenue a powerful tool in hedging against uncertainty in year-over-year cash flows. Similar to beer sold wholesale, which liquor agencies tax even in control states, cannabis can be taxed at multiple levels depending on the state’s business model.

E-commerce

Even with liquor, few state agencies have adopted direct-to-consumer online sales. However, as other industries continue shifting toward e-commerce and away from brick and mortar retailing, private sector competition will likely feed increased consumer demand for online sales. Similar to ERP and POS systems, states can increase revenue by selling cannabis through e-commerce sales channels. In today’s online retail world, many prefer to buy products from their computer or smart phone instead of shopping in stores. State agencies should consider selling cannabis via the web to maximize this revenue opportunity. 

Applying expertise in the systems and processes of alcoholic beverage control can translate into the sale and regulation of cannabis, easing the transition states face to this burgeoning industry. If your agency is considering bringing in cannabis under management, you should consider strategic planning sessions and even begin a change management approach to ensure your agency adapts successfully. 

Article
Considering cannabis: How state liquor agencies can manage the growing industry

Writing a Request for Proposal (RFP) for a new software system can be complex, time-consuming, and—let’s face it—frustrating, especially if you don’t often write RFPs. The process seems dogged by endless questions, such as:

  • How specific should the problem statement and system requirements be?
  • How can the RFP solicit a response that proves the vendor is qualified?
  • Should the RFP include legal terms and conditions? If so, which ones? 
  • Is there another strategy that can help cut down on size without forfeiting a quality response?

The public RFP process can be onerous for both the issuer and the respondents, as they can reach lengths upwards of 100 pages. And, while your procurement department would probably never let you get away with developing an RFP that is only one page, we know a smaller document requires less labor and time devoted to writing and reading. What if you could create a lean, mean, and focused RFP? Here are some tips for creating such a document: 

Describe the problem as simply as possible. At its core, an RFP is a problem statement—your organization has a particular problem, and it needs the right solution. To get the right solution, keep your RFP laser-focused: adequately but briefly convey your problem and desired outcomes, provide simple rules and guidelines for respondents to submit their proposed solutions, and clarify how you will evaluate responses to make a selection. Additional information can be white noise, making it harder for respondents to give you what you want: easy-to-read and evaluate proposals. Use bullet points and keep the narrative to a minimum.

Be creative and open about how vendors must respond. RFPs often have pages of directions on how vendors need to write responses or describe their products. The most important component is to emphasize vendor qualifications. Do you want to know if the vendor can deliver a quality product? Request sample deliverables from past projects. Also ask for the number of successful past projects, with statistics on the percent deviation to client schedule, budget, including explanations for large variances. Does your new system need to keep audit trails and product billing reports? Rely on a list of pass/fail requirements and then a separate table for nice-to-have or desired functionalities.

Save the legal stuff until the end. Consider including legal terms and conditions as an attachment instead of in the body of an RFP. If you’re worried about compliance, you can require respondents to attest in writing that they found, read, and understand your terms and conditions, or state that by responding to the RFP they have read and agreed to them. State that any requested deviations can be negotiated later to save space in the RFP. You can also decrease length by attaching a glossary of terms. What’s more, if you find yourself including language from your state’s procurement manual, provide a link to the manual itself instead.

Create a quality template to save time later. Chances are your organization has at least one RFP template you use to save time, but are you using that template because it gets you the best responses, or because you’re in the habit of using it? If your answer is the latter, it may be to time review and revise those old templates to reflect your current business needs. Maybe the writing style can be clearer and more concise, or sections combined or reordered to make the RFP more intuitive.

Qualify providers in advance and reduce the scope. Another time-saver is a pre-qualification, where solution providers propose on an RFP focused primarily on their experience and qualifications. Smaller statements of work are then issued to the qualified providers, allowing for shorter drafting, response, and award timelines. If procurement rules allow, break the procurement up into a requests for information (RFI) and then a smaller RFP.

Need additional RFP assistance?
A simplified RFP can reduce long hours needed to develop and evaluate responses to RFPs, while vendors have more flexibility to propose the solutions you need. To learn more about how BerryDunn’s extensive procurement experience can help your organization develop effective RFPs.
 

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The one-page RFP: How to create lean, mean, and focused RFPs

Read this if you are a timber harvester, hauler, or timberland owner.

The USDA recently announced its Pandemic Assistance for Timber Harvesters and Haulers (PATHH) initiative to provide financial assistance to timber harvesting and hauling businesses as a result of the pandemic. Businesses may be eligible for up to $125,000 in financial assistance through this initiative. 

Who qualifies for the assistance?

To qualify for assistance under PATHH, the business must have experienced a loss of at least 10% of gross revenue from January, 1, 2020 through December 1, 2020 as compared to the same period in 2019. Also, individuals or legal entities must be a timber harvesting or timber hauling businesses where 50% or more of its revenue is derived from one of the following:

  • Cutting timber
  • Transporting timber
  • Processing wood on-site on the forest land

What is the timeline for applying for the assistance?

Timber harvesting or timber hauling businesses can apply for financial assistance through the USDA from July 22, 2021 through October 15, 2021

Visit the USDA website for more information on the program, requirements, and how to apply.
If you have any questions about your specific situation, please contact our Natural Resources team. We’re here to help. 

Article
Temporary USDA assistance program for timber harvesters and haulers

Read this if you are a State Medicaid Director, State Medicaid Chief Information Officer, State Medicaid Project Manager, or State Procurement Officer—or if you work on a State Medicaid Enterprise System (MES) certification or modernization efforts.

You can listen to the companion podcast to this article, Organization development: Shortcuts for states to consider, here: 

Over the last two years, the Centers for Medicare and Medicaid Services (CMS) has undertaken an effort to streamline MES certification. During this time, we have been fortunate enough to be a trusted partner in several states working to evolve the certification process. Through this collaboration with CMS and state partners, we have been in front of recent certification trends. The content we are covering is based on our experience supporting states with efforts related to CMS certification. We do not speak for CMS, nor do we have the authority to do so.

What organization development (OD) shortcuts can state Medicaid agencies consider when faced with competing priorities and challenges such as Medicaid modernization projects in flight, staffing shortages, and a retiring workforce?

The shortcuts include rapid development and understanding of the “why”. This requires the courage to challenge assumptions, especially around transparency, to allow for a consistent understanding of the needs, data, environment, and staff members’ role in impacting the health of the people served by a state’s Medicaid program. To rapidly gain an understanding of the “why”, state Medicaid agencies should:

  1. Accelerate the transparency of information and use of data in ways that lead to a collective understanding of the “why”. Accelerating a collective understanding of the why requires improved communication mechanisms. 
  2. Invest time to connect with staff. The insistence, persistence, and consistency of leaders to stay connected to their workforce will help keep the focus on the “why” and build a shared sense of connection and purpose among teams.
  3. Create the standard that planning involves all stakeholders (e.g., policy, operations, systems staff, etc.) and focus on building consensus and alignment throughout the organization. During planning, identify answers to the following questions: What are we trying to achieve, what are the outcomes, and what is the vision for what we are trying to do?
  4. Question any fragmentation. For example, if there is a hiring freeze, several staff are retiring, and demand is increasing, it is a good idea to think about how the organization manages people. Question boundaries related to your staff and the business processes they perform (e.g., some staff can only complete a portion of a business process because of a job classification). Look at ways to broaden the expectations of staff, eliminate unnecessary handoffs, and expect development. Leaders and teams work together to build a culture that is vision-driven, data-informed, and values-based.

What are some considerations when organizations are defining program outcomes and the “why” behind what they are doing? 

Keep in mind that designing system requirements is not the same as designing program outcomes. System requirements need to be able to deliver the outcomes and the information the organization needs. With something like a Medicaid Enterprise System (MES) modernization project, outcomes are what follow because of a successful project or series of projects. For example, a state Medicaid agency looking to improve access to care might develop an outcome focused on enabling the timely and accurate screening and revalidation for Medicaid providers. 

Next, keeping with the improving access to care example, state Medicaid agencies should define and communicate the roles technology and staff play in helping achieve the desired outcome and continue communicating and helping staff understand the “why”. In Medicaid we impact people’s lives, and that makes it easy to find the heart. Helping staff connect their own motivation and find meaning in achieving an outcome is key to help ensure project success and realize desired outcomes. 

Program outcomes represents one of the six major categories related to organizational health: 

  1. Leadership
  2. Strategy
  3. Workforce
  4. Operations and process improvement 
  5. Person-centered service
  6. Program outcomes

Focusing on these six key areas during the analysis, planning, development, and integration will help organizations improve performance, increase their impact, and achieve program outcomes. Reach out to the BerryDunn’s Medicaid and Organization Development consulting team for more information about how organization develop can help your Medicaid agency.
 

Article
Outcomes and organization development, part II

Read this if your facility or organization has received Provider Relief Funds.

The rules over the use of the HHS Provider Relief Funds (PRF) have been in a constant state of flux and interpretation since the funds started to show up in your bank accounts back in April. Here is a summary of where we are as of June 14, 2021 on HHS’ reporting requirements. Key highlights:

These requirements apply to:

  • PRF General and Targeted Distributions
  • the Skilled Nursing Facilities (SNF) and Nursing Home Infection Control Distribution
  • and exclude:
    • the Rural Health Clinic COVID-19 Testing Program
    • claims reimbursements from HRSA COVID-19 Uninsured Program and the HRSA COVID-19 Coverage Assistance Fund (CAF)

This notice supersedes the January 15, 2021 reporting requirements.
Deadline for Use of Funds:

Payment Received Period

Deadline to Use Funds

Reporting Time Period

Period 1

4/10/20-6/30/20

6/30/21

7/1/21-9/30/21

Period 2

7/1/20-12/31/20

12/31/21

1/1/22-3/31/22

Period 3

1/1/21-6/30/21

6/30/22

7/1/22-9/30/22

Period 4

7/1/21-12/31/21

12/31/22

1/1/21-3/31/23

Recipients who received one or more payments exceeding $10,000 in the aggregate during each Payment Received Period above (rather than the previous $10,000 cumulative across all PRF payments) are subject to the above reporting requirements 

Responsibility for reporting:

  • The Reporting Entity is the entity that registers its Tax Identification Number (TIN) and reports payments received by that TIN and its subsidiary TINs.
  • For Targeted Distributions, the Reporting Entity is always the original recipient; a parent entity cannot report on the subsidiary’s behalf and regardless of transfer of payment.

Steps for reporting use of funds:

  1. Interest earned on PRF payments
  2. Other assistance received
  3. Use of SNF and Nursing Home Control Distribution Payments if applicable (any interest earned reported here instead), with expenses by CY quarter
  4. Use of General and Other Targeted Distribution Payments, with expenses by CY quarter
  5. Net unreimbursed expenses attributable to Coronavirus, net after other assistance and PRF payments by quarter
  6. Lost revenues reimbursement (not applicable to PRF recipients that received only SNF and Nursing Home Infection Control Distribution payments)

PORTAL WILL OPEN ON JULY 1, 2021!

Access the full update from HHS: Provider Post-Payment Notice of Reporting Requirements.

Article
Provider Relief Funds: HHS Post-Payment Notice of Reporting Requirements

Read this if you are a community bank.

The Federal Deposit Insurance Corporation (FDIC) recently issued its first quarter 2021 Quarterly Banking Profile. The report provides financial information based on Call Reports filed by 4,978 FDIC-insured commercial banks and savings institutions. The report also contains a section specific to community bank performance. In first quarter 2021, this section included the financial information of 4,531 FDIC-insured community banks. Here are our key takeaways from the community bank section of the report:

  • There was a $3.7 billion increase in quarterly net income from a year prior despite continued net interest margin (NIM) compression. This increase was mainly due to higher noninterest income and lower provision expenses. Provision expense decreased $1.4 billion from first quarter 2020. However, it remained positive at $390.1 million. For non-community banks, provision expense was negative $14.9 billion for the first quarter 2021.
  • Quarterly NIM declined 28 basis points from first quarter 2020 to 3.26%. The average yield on earning assets fell 76 basis points to 3.64%, while the average funding cost fell 48 basis points to 0.37%.
  • Net operating revenue increased by $3.9 billion from first quarter 2020, a 17.1% increase. This increase is attributable to higher revenue from loan sales (increased $1.3 billion, or 126.4%) and an increase in net interest income (up $1.8 billion from first quarter 2020).
  • Non-interest expense increased 7.6% from first quarter 2020. This increase was mainly attributable to salary and benefit expenses, which saw an increase of $838.1 million (9.6%). That being said, average assets per employee increased 18.5% from first quarter 2020.
  • Noncurrent loan balances (loans 90 days or more past due or in nonaccrual status) remained relatively stable from a year ago having slightly increased by $19.3 million, or 0.2%. However, despite the slight increase in noncurrent loan balances, the noncurrent rate decreased 8 basis points from first quarter 2020 due to strong year-over-year loan growth.
  • The coverage ratio (allowance for loan and lease losses as a percentage of loans that are 90 days or more past due or in nonaccrual status) increased 30 percentage points year-over-year to 180%, a 14-year high.
  • Net charge-offs declined 7 basis points from first quarter 2020 to 0.04%, a record low. The net charge-off rate for consumer loans declined most among major loan categories, having decreased 41 basis points.
  • Trends in loans and leases showed a moderate increase from fourth quarter 2020, increasing by 1.4%. This increase was mainly seen in the commercial and industrial (C&I) loan category, which was driven by an increase in Paycheck Protection Program (PPP) loan balances. Total loans and leases increased by 10.8% from first quarter 2020. The majority of growth was seen in C&I loans, which accounted for approximately three-quarters of the year-over-year increase in loans and leases. However, keep in mind C&I loans include PPP loans that were originated in the first half of 2020, with additional funding provided by the Consolidated Appropriations Act in December 2020.
  • Nearly all community banks reported an increase in deposit volume during the year. Growth in deposits above the insurance limit drove the annual increase while alternative funding sources, such as brokered deposits, declined. However, even when doing a quarter-to-quarter comparison, deposits were up from fourth quarter 2020 by 5.6%.
  • The average community bank leverage ratio (CBLR) for the 1,845 banks that elected to use the CBLR framework was 11.15%.
  • The number of community banks declined by 29 to 4,531 from fourth quarter 2020. This change includes two new community banks, five banks transitioning from community to non-community banks, 24 community bank mergers or consolidations, and two community bank self-liquidations.

First quarter 2021 was a strong quarter for community banks, as evidenced by the increase in year-over-year quarterly net income of 77.5% ($3.7 billion). However, tightening NIMs will force community banks to either find creative ways to increase their NIM, grow their earning asset bases, or find ways to continue to increase non-interest income to maintain current net income levels. Some community banks have already started dedicating more time to non-traditional income streams, as evidenced by a 45% year-over-year increase in quarterly non-interest income. The importance of the efficiency ratio (non-interest expense as a percentage of total revenue) is also magnified as community banks attempt to manage their non-interest expenses in light of declining NIMs.

Despite the strong first quarter, there is still uncertainty in many areas. For instance, although significant charge-offs have not yet materialized, the financial picture for many borrowers remains uncertain, and payment deferrals have made some credit quality indicators, such as past due status, less reliable. The ability of community banks to maintain relationships with their borrowers and remain apprised of the results of their borrowers’ operations has never been more important. This monitoring will become increasingly important as we transition into a post-pandemic economy. For seasonal borrowers, this summer could be a “make-or-break” point. If strong demand does not materialize, the economic consequences of the pandemic may not be reversible. 

Additionally, as offices start to open employers will start to reassess their office needs. Many employers have either created or revised remote working policies due to changing employee behavior. If remote working schedules persist, whether it be full-time or hybrid, the demand for office space may decline, causing instability for commercial real estate borrowers. Recent inflation concerns have also created uncertainty surrounding future Federal Reserve monetary policy. If an increase in the federal funds target rate is used to combat inflation, community banks could see their NIMs in another transitory stage. As always, please don’t hesitate to reach out to BerryDunn’s Financial Services team if you have any questions.

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FDIC Issues its First Quarter 2021 Quarterly Banking Profile

Read this if you are a State Medicaid Director, State Medicaid Chief Information Officer, State Medicaid Project Manager, or State Procurement Officer—or if you work on a State Medicaid Enterprise System (MES) certification or modernization efforts. 

The companion podcast to this article, Organization development: Preparing for Medicaid Enterprise Systems (MES) modernization, can be found in our virtual library.  


What is organization development (OD)? 

The purpose of OD is to improve organizational performance and outcomes. OD focuses on improving an organization’s capability through the alignment of strategy, structure, people, rewards, systems, metrics, and management processes.  

OD is a science-backed, interdisciplinary field rooted in psychology, culture, innovation, social sciences, quality management, project management, adult learning, human resource management, change management, organization behavior, and research analysis and design, among others.  

OD typically starts with a clear sense of mission, vision, and values that answers the question “what we are trying to be?” OD develops the culture and behaviors that reflect the organizational values.  

OD facilitates the transformation of the workplace culture to become strategic, meaning: vision-driven, values-based, and goals-aligned. This may include talent development for leaders and staff and redesigning organizational infrastructure. 

What is the scope of an OD effort? 

OD efforts are most effective when they encompass the entire organization becoming the basis for a strategic plan. OD can be just as effective when applied to a MES modernization project. In this application of OD, we facilitate stakeholder engagement with the intent of person-centered service, concurrent design for operations, processes, and training side-by-side with the systems design and development. This approach is also referred to as human-centered design (HCD).  

Regardless of the scope, OD reinforces benchmarks of high-performance organizations including: 

  • Transparent and data-informed decision making 
  • Developed leadership building connections with consistent expectations 
  • Culture of continuous improvement and innovation 
  • Team-based success and ownership for outcomes 
  • Person-centered service 

What does OD look like in action? 

We facilitate leaders to assess their organization through the eyes of stakeholders, particularly staff and people served. Collaboratively, with no blame or shame, the leaders articulate where they are today and where they need to be in the future, and build a roadmap or strategic plan to get there. In the assessment and roadmap we use the following six focal points of the organization:  

  • Excellent leadership 
  • Effective strategy 
  • A workforce that is confident, competent, consistent, and compassionate 
  • Quality operations and process improvement 
  • Person-centered service that results in a positive client experience 
  • Quality program outcomes for the communities served 

The roadmap or strategic plan typically includes talent development, and redesign of the infrastructure, including structure, processes, communication mechanisms, performance management processes, deployment of resources, and job skills development approaches.  

Talent development ensures that your leaders are aligned, prepared, and most importantly leading and inspiring their people toward that vision and the development of the workforce. Talent development provides staff with the skills, knowledge, and abilities needed, and reinforces positive attitudes, beliefs, and willingness to work together towards common goals. This might also include restructuring business process redesign, it might include expanding roles or shifting roles.  

Principles of lean are an important component of organization development when redesigning processes and helps organizations, such as state Medicaid agencies, do more with the current resources. With so many constraints placed on organizations, the lean approach is a critical component of optimizing existing resources and finding cost savings through changing “what we do” and “how we do it”, as opposed to cutting “what we do” or “changing who does it”. Resource optimization is just one of the benefits of organization development. 

Why is it important to redesign your organization and develop your staff when you're implementing a new technology system, such as a new Medicaid Enterprise System module? 

For state Medicaid Agencies, the organization goal isn't to modernize a system, the goal is for competent and compassionate staff serving clients and providers to improve health and wellness in our communities. Our goal is streamlined processes that improve accuracy and timeliness. Look at the outcomes of the program, then design the systems that enable business processes and the people who make that process happen every single day. We go back to why we are doing anything in the first place. Why do we need this change? What are we trying to accomplish? If we're trying to accomplish better service, a healthier community, and streamline processes so we are cost effective, then it leads us to modernizing our enterprise system and making sure that our people are prepared to be successful in using that system. Aligning to the organizational goals, or what we call the North Star, sets us up for success with the enterprise efforts and the human efforts. 

What can clients do to navigate some of the uncertainties of a modernization effort, and how can they prepare their staff for what's next? 

First articulate the goals or why you want the modernization, and build a foundation with aligned, and effective leaders. Assess the needs of the organization from a “social” or people perspective and a technical or systems perspective (note: BerryDunn uses a socio-technical systems design approach). Then, engage staff to develop a high-performance, team-based culture to improve lean processes. Design and develop the system to enable lean business processes and concurrently have operations design standard operating procedures, and develop the training needed to optimize the new system.  

Leaders must lead. If leaders are fragmented, if they are not effective communicators, if they do not have a sense of trust and connection with their workforce, then any change will be sub-optimized and probably will be a frustrating experience for all.  

If the workforce is in a place where staff live with suspicion or a lack of trust, or maybe some dysfunctional interpersonal skills, then they are not in a place to learn a new system. If you try to build a system based on a fragmented organizational structure or inconsistent processes, you will not achieve the potential of the modernization efforts and will limit how people view your enterprise system. The worst thing you can do is invest millions of dollars in the system based on a flawed organizational design or trying to get that system to just do what we've always done. 

By starting with building the foundation of engaging employees, not just to make people feel good, but also to help them understand how to improve their processes and build a positive workplace. Do we have the transparency in our data so that we understand what the actual problems are? Can employees articulate the North Star goals, the constraints, the reasons to update systems, then the organizations will have a pull for change as opposed to a push.

Medicaid agencies and other organizations can create a pull for change by engaging with their resources who can identify what gets in the way of serving the clients, i.e., what gets in the way of timeliness or adds redundancy or rework to the process. The first step is building that foundation, getting people leaning in, and understanding what's happening. By laying the foundation first, organizations help reduce the barriers between operations and systems, and ensure that they're working collaboratively toward organizational goals, always keeping the ‘why’ in mind and using measures to know when they are successful. 

How does a state focus on organization development when they are facing budget and staffing constraints? 

It is too easy to say, "invest in your people". In reality, the first thing that state Medicaid agencies or other organizations need do is redefine their sense of lean. Many inaccurately believe that lean means limited resources working really hard. Lean is tapping into the potential creativity and innovation of each staff member to look for ways to improve the process. Organizations should look at everything they do and ask “Does this add value to the end recipient of our service?” Even if I'm processing travel reimbursement requests, I still have a customer, I still have a need for timeliness and accuracy. If state Medicaid agencies can mobilize that type of focus with every single employee in their organization, they can achieve huge cost savings without the pain of cutting the workforce.   

In one state where BerryDunn’s organization development team provided this level and type of organizational transformation, there was a very deliberate focus on building this foundation prior to a large-scale system modernization.

By developing the leaders and training the employees in how to improve their processes, improve teamwork and trust, and align to the goal of a positive client experience, they were able to effectively implement the new system and seamlessly move to remote pandemic conditions. Once the state Medicaid agency had aligned the technical systems and the people systems to the organizational goals, they were successful and more resilient for future changes.   

If you have any questions, please contact our Medicaid consulting team. We're here to help.

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Outcomes and organization development 

Read this if you are a division of motor vehicles, or interested in mDLs.

Successful acquisition and implementation of a mobile driver’s license (mDL) program requires knowledge of the specific functional needs mDLs must satisfy to help ensure mDL programs provide security and convenience to mDL holders. These functional needs span mDL-reading equipment, issuing authorities (e.g., departments of motor vehicles), law enforcement and other mDL-reading establishments, and mDLs themselves.  

Per the American Association of Motor Vehicle Administrators (AAMVA) Functional Needs White Paper, functional needs span eight broad categories: operations, trust, identity, cross-jurisdictional/vendor use, data privacy, remote management, ease of use, and other. The table below organizes these categories, briefly explains associated functional needs, and assigns a level of criticality to each functional need. Critical functionality must be accommodated by mDL programs in some manner. Desired functionality is optional, but heavily encouraged.

Table 1: Key Terms and Definitions
mDL Functional Needs Breakdown
Category Description Required/Desired
Operation – Online and Offline mDL holders must be able to validate their identity when either the mDL holder, the mDL reader, or both lack access to the internet.  At a minimum, offline use must allow citizens to confirm their identities, driving privileges, age, and residence. Critical
Operation – Attended mDL holders and mDL-reading establishments must be physically present when an mDL holder’s identity is established as credible, typically using the mDL portrait image. Critical
Operation – Unattended mDLs must function when the mDL-reading establishment is not present during a transaction with an mDL holder. Desired
Trust mDL holders must be able to establish that data comprising the mDL was issued by the relevant issuer and that information has not been changed, unless via an update through the relevant issuer. Critical
Trust mDL-reading establishments must employ readers they trust to obtain and validate information from mDLs. Critical
Identity – Portrait Image mDLs must have portrait image of the mDL holder. Critical
Identity – Portrait Image mDLs must have the ability to retrieve the portrait image from the issuing jurisdiction using a one-time token. Critical
Identity – Portrait Image mDL readers must read portrait images from mDLs, retrieve it from the issuing jurisdiction, and display the image. Critical
Identity – Portrait Image Law enforcement must have mobile mDL readers in order to review the mDL portrait image and mDL holder simultaneously. Desired
Identity – Biometric mDL-reading establishments must have trusted equipment to obtain the mDL holder’s biometric information. Desired
Identity – Biometric mDLs and readers must support a one-to-one  comparison of the mDL and holder biometric information, executed by the mDL-reading establishment or mDL issuer. Desired
Identity – PIN mDLs must support the use of a personal identification number (PIN) to authenticate the legitimacy of an mDL and its holder. Critical
Identity – PIN mDL holders must trust that mDL readers will not compromise their PIN when entering it.

mDL readers must trust that the PIN accurately validates mDL holder information when the authentication process occurs on the mDL holder’s device.
Critical
Cross-Jurisdictional & Vendor Use mDL readers must be able to read mDLs from multiple issuing jurisdictions and multiple vendors. Critical
Cross-Jurisdictional & Vendor Use mDLs require interfacing with the relevant issuer, with the ability to control how mDL data is uploaded to holder devices and updated. Critical
Cross-Jurisdictional & Vendor Use mDLs require in-real-time interfacing with the holder’s device and the reader. Critical
Data Privacy As with physical DLs, mDLs require a process for granting holder consent prior to information release. Critical
Data Privacy mDL holders must be able to release selective information (e.g., age, driving credentials) without releasing all personal information stored on the mDL (data minimization). Critical
Data Privacy Issuing authorities must be able to allow unrestricted access to an mDL, without the holder’s consent, in cases where the holder is unconscious, nonresponsive, etc., e.g., following a major car accident, law enforcement might need to verify whether an individual is an organ donor. Desired
Data Privacy mDLs must be linkable to the government-related transactions they are used for (e.g., interacting with the DMV, law enforcement), allowing local and state officials to review the history of transactions related to a specific mDL. Desired
Data Privacy mDLs must be unlinkable from the private-industry transactions they are used for, preventing mDL-reading establishments from tying mDL holders to specific transactions. Desired
Data Privacy The mDL should grant the mDL holder visibility into all personal data contained in the mDL. Critical
Remote mDL Management1 mDL issuing authorities must have the ability to perform the following actions to mDLs remotely:
  • Add, update, and revoke (temporarily and permanently) driving privileges.
  • Update the application storing the mDL.
  • Revoke the mDL entirely (in the case of suspected fraud)
Critical
Remote mDL Management mDL holders must have the ability to remotely update their mDL data, including revoking their mDL in the case of a lost or stolen mDL. Critical
Remote mDL Management mDLs with combined offline/online functionality must expire should the mDL holder not connect their mDL to issuer’s system within a defined period of time. Critical
Remote mDL Management mDLs must support the ability to be returned to the issuer prior to the issue of a new mDL to a holder.

mDLs must support the ability to be returned to the issuer, marked as void, and returned to the holder prior to the issue of a new mDL to the holder.
Optional
Remote mDL Management mDLs must allow law enforcement officers from a holder’s home jurisdiction to suspend a holder’s mDL under specified circumstances. Critical
Remote mDL Management mDLs must support the ability for issuing authorities to change mDLs to IDs (in the case of driving privilege revocation) and change IDs to mDLs (when driving privileges are gained). Desired
Remote mDL Management mDLs must support the ability to transfer devices, either online (desired) or by visiting issuing authorities in person (critical). Desired/Critical
Ease of Use mDLs must not require mDL-reading establishments to handle the mDL holder’s device during a transaction. Critical
Ease of Use mDLs must operate during different weather conditions (rain, snow, intense sunlight, etc.) Desired
Ease of Use mDLs must function at all times, regardless of the level of ambient light. Critical
Ease of Use mDLs must function in various environments (office, traffic stop, etc.) Critical
Ease of Use mDLs must minimize the amount and cost of additional equipment that law enforcement and other mDL-reading establishments require when processing mDL transactions. Desired
Other – Processing     Time mDL readers must be able to process an mDL transaction with comparable time to physical DL transactions. Critical
Other – Non-reliance on Device Security by Consumer mDL readers must be able to authenticate mDL data without relying on the security of an mDL holder’s device (e.g., biometric readers). Critical

1Remote mDL management assumes at least a partial level of online mDL functionality. mDLs cannot be remotely managed in offline scenarios.

If you have questions about mDLs or about your specific agency, please contact the team. We’re here to help.      

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Functional needs for a successful mobile Driver's License (mDL) program