Market Trends
A Conversation with John Finan, Executive Director, South Carolina Department of Employment and Workforce
MidlandsBiz:
What is your education and background?
John Finan:
My dad was a B52 pilot for Strategic Air Command in the Air Force so I grew up all over the world. I did my undergraduate degree at the University of Connecticut where I joined the ROTC training program and subsequently decided to follow in my dad's footsteps in the Air Force. I figured that I would spend my four years in service and then move on to other things, but ended up staying until I retired as a general officer. The Air Force offered me a great career with a series of promotions to positions of increased responsibility and even paid for my graduate degree, an MBA from Michigan State University (where I graduated number one in my class).
After the Air Force, I worked for one year as the head of Strategic Planning and Budget for a School District in Maryland. Then, I spent five wonderful years here in Columbia as the Vice President of Business and Administration at the University of South Carolina under then President John Palms. I took a similar role at Rowan University in New Jersey before "retiring" a second time.
MidlandsBiz:
How did you become the head of this new agency, the South Carolina Department of Employment and Workforce (SCDEW)?
John Finan:
My wife and I loved Columbia, SC and had established great friendships here so this is where we decided to retire. I let it be known that I would love to serve at least on a part-time basis for volunteer organizations. One day, I received a call from Governor Mark Sanford's Deputy Chief of Staff, Scott English, about taking on a full-time position as Executive Director at this newly established agency. I took the job in May of this year, and will stay in this position until the end of March 2011.
MidlandsBiz:
Why was a new agency created?
John Finan:
New legislation was created to address concerns and criticisms that had surfaced about the old agency. The former Employment and Security Commission was an organization that fell under the oversight of three Commissioners elected by and answering to the legislature. The Commissioners would hire an Executive Director to run the organization. The newly created South Carolina Department of Employment and Workforce is now a cabinet agency and the Governor appoints the Executive Director.
The new legislation also moved the Workforce Investment Act (WIA) people, who used to be at the Department of Commerce, into the SCDEW.
MidlandsBiz:
What were the criticisms of the Employment and Security Commission?
John Finan:
I was obviously not here during that time, so it is difficult for me to comment on any problems that may have occurred. Hiring in the former agency seems to have been largely politically motivated. As WIA, veteran, unemployment, and training grant money came available to the agency, job openings tended to be filled based on who you knew, not necessarily what you knew. There were a lot of talented people here, but also a few weak spots.
In the new SCDEW, positions will be advertised internally and externally to ensure that we hire the best qualified candidates. We are trying to run this more like a business, analyzing our people based on performance to make sure that we have right people in the right places.
MidlandsBiz:
What is the core business of the agency?
John Finan:
We administer the unemployment system for the state, and now we are also in charge of workforce development.
MidlandsBiz:
What was the reasoning for bringing the WIA people into this agency?
John Finan:
The organizational change means that we can do more than just deliver checks to the unemployed; we can assist with the training, classifying and testing of those people to help them find jobs and get them back to work. Strategically, it made sense to bring those two functions under one roof.
MidlandsBiz:
How do you execute on that strategy?
John Finan:
It's difficult right at the moment because we are still overwhelmed by the sheer volume of people showing up at our One Stop Centers to apply for unemployment. Employees who might normally be engaged in retraining are being called over to help administer the unemployment application process. If we can unclog the One Stops, we can use these centers for what I consider to be their best use - to set up appointments with customers for job placements and training. In order to execute, we have to increase the number of call centers and get people to sign up online. We are looking at best practices that have been implemented around the country and moving very quickly in this direction.
MidlandsBiz:
How is the SCDEW funded?
John Finan:
All of our funding comes from the federal government; we receive very little state money. The money that we receive is based on workload, so as we are currently in a period of unprecedented activity, our agency is hiring.
MidlandsBiz:
How is technology affecting how you deliver your service?
John Finan:
Technology is helping us reduce the volume of paper coming in and out of this office. The first time that I walked through this building with the Governor, we found baskets and baskets of unopened checks. When you combine the unemployment checks that are mailed out of this office with the payments from companies coming in, it is incredibly paper intensive and therefore time consuming. We spend $5M a year just to process checks!
We are partnering with Bank of America to entirely eliminate checks by the end of October of this year. We will use debit cards or direct deposits for the money that is sent out of this office, and we will move companies towards direct deposit or credit card for payments coming in.
The savings created by moving to a paperless system will allow us to make further strategic investment in information technology (IT). We are currently operating in a consortium with four other states to come up with a new software program to deliver our services. We currently operate with an archaic and terribly complex legacy computer program. Each time the federal government makes any change with regards to extensions for unemployment (and there have been several) we have to re-program our entire system. We need a software program that is more flexible and modular.
MidlandsBiz:
With the current state of the economy, how are you financing the unemployment checks?
John Finan:
The trust fund that pays out unemployment insurance has gone from an $800M surplus to a $900 deficit. We are paying unemployment benefits on borrowed money from the federal government. The number of unemployed people in the state grew and the average time on unemployment rose from an average of around 12 weeks to now well over 18 weeks.
MidlandsBiz:
How do you get back to surplus?
John Finan:
We have a plan that will pay back the $900M deficit over the next five years and build the fund to a $1B surplus ten years from now. New legislation has been passed that will make the premiums that a company pays fairer - more closely linked to usage. Companies that are heavy users of the system will pay more, and vice versa. We are also phasing in a series of increases to the wage base for contributions - from the first $7,000 to eventually the first $12,000 in 2012 and $14,000 in 2014. While this might seem high, it is still lower than the current national average.
MidlandsBiz:
A lot depends on the performance of the economy, does it not?
John Finan:
Absolutely. If the economy improves, it will mean fewer unemployment checks going out and also increased revenue. Jobs are coming back in some sectors, particularly healthcare and IT, but the challenge so far is that while GDP growth has turned positive (we are out of the recession), companies are not hiring. Productivity gains have meant that companies can do more with less and are holding back on hiring. We have also seen a continued trend of using temporary workers to meet demand.
MidlandsBiz:
What do you hope to achieve in your time at the agency so that you can hopefully retire a third time?
John Finan:
I want to implement the new legislation and at least start to see an increase in revenue flowing into our trust fund.
I want to implement the organizational changes and to see good leadership in key positions at SCDEW. The next Executive Director should be able to step into this job and hit the ground running with everything operating smoothly.
I want to continue to improve inter-agency support and cooperation. I have been in contact with Converse Chellis at Treasury to come up with innovative ways to finance our current debt. I have approached Ray Stevens at the Department of Revenue, which handles the state's sales and income taxes, about collaborating on revenue collection. We have also reached out to the Department of Social Services (DSS) about an expanded relationship inside our One Stops to serve families in need.
Lastly, I want to see clear evidence of a cultural change inside the organization where our employees are encouraged to constantly ask – how can we do things better and more efficiently.
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