I attended my last week-long Executive Leaders Program (ELP) session through Zoom. Great not fun to participate virtually, but better than being in California right now.

As part of the preparation for this week’s course, we read a book by Michele Wucker, The Gray Rhino: How to Recognize and Act on Obvious Dangers We Ignore. Michele also served as the presenter for our Wednesday session. I find the subject of risk assessment fascinating. Not from a simple risk assessment point of view, but from the idea of ​​identifying, addressing and managing it.

Michele coined the “Gray Rhino” metaphor to describe the challenges we see in the distance, but often do nothing to avoid them. A ‘Black Swan’ event is defined as something that no one could have predicted. In contrast, a gray rhino is not only predictable, it is easily identifiable. Below, I’ll cover three of the most basic ways to deal with gray rhinos.

The first is that they ignore the threat completely. It is not a tunnel vision problem, but rather a problem of ignorance or a feeling of “This is not my problem”. These individuals don’t even try to step aside.

The second is called interference. Confusion refers to making small movements to avoid the rhino, but not doing anything substantial enough to actually step aside. People can use a confused approach for several different reasons; one, to make it look like they’re doing something, even if they really don’t have the gut courage, or the ability, to make the necessary changes. Second, it may be that the problem is simply so large that only small steps can be taken to limit the impact.

The third way people can deal with a gray rhino is to identify, assess, move resources, and take immediate action to cut the rhino before it can charge. This method requires not only vision, but also resources and maybe a little courage.

So you might ask – Chief, what’s this got to with us and why are you bothering us with this bullshit? Valid question – I needed a topic for this week. In fact, no, I would like to talk about two examples of gray rhinos that we are currently facing as an organization and how we are working to address them.

The first example of CAFMA concerns the PSPRS, or our retirement debt. What we have been doing over the past five or six years could be described as confusing. I think that would be a fair description of the steps we have taken given the complexity of the issue. The PSPRS is a huge financial avalanche that has been gathering momentum for years. Like a snowball, with each spin it grows bigger and bigger as it runs to run over us – a gray rhino. Identifying the threat hasn’t been the problem, it’s easy. Our challenge has been to understand what the PSPRS system does, how they apply their assumptions and the lack of financial tools / options available to allow us to solve the problem.

Staff have met numerous times over the years with PSPRS representatives to understand their calculations, amortization schedules, investments and strategy – which they did not have until more recently. What we didn’t want to do was throw extra income into the abyss.

It took a radical change in the leadership and staff of PSPRS to finally get the answers we needed. Armed with the answers, we now needed to determine the best strategy for our organization to begin to manage the inevitable increases in our unfunded liabilities. How to settle a financial debt? You must have the financial resources to pay it back. To that end, we were armed with answers, but nothing else. As a fire district, we have strict tax limits and, until the last few months, we had no financial tools available to settle retirement debt. Our only option had been to raise the tax rate to unsustainable levels, which, by the way, would not please our constituents, nor generate enough money to pay down the debt.

Now that Certificates of Participation (COP) are an option, we finally have a tool available that allows us to maneuver into a position to deal with debt without crushing our taxpayers. The issuance of COP will allow us to refinance our current debt at a much reduced interest rate, for example going from 7.3% to 3% or less. Refinancing the debt does not increase the tax rate because we were using the money we already put into PSPRS to pay the financiers. However, just like when you finance a home, we pay a lot more in principal, which saves us money over the life of the loan. Current estimates indicate savings for taxpayers between $ 19 million and $ 22 million.

If we do nothing more than what we are currently doing, that is, we do not use the COP option, our annual contribution to the SRPSP is expected to reach $ 8-10 million over the next 10 million. years – our current annual payment is approximately $ 4.5 million. This level of annual contribution is simply not sustainable. Given our inherent distrust of the PSPRS, we have invested in our own actuarial software. Based on the program we are using and actual historical data, our estimates for future payments are much higher than what the PSPRS predicted. In my opinion, the actual amount is probably somewhere in between, which is irrelevant because we can’t afford either.

COPs should cap our annual contributions to PSPRS and COP holders at $ 5.5 million per year for the term of the loans. This is a good thing, and makes planning a lot easier. Are the COPs the ultimate end? No, there is a certain level of risk as we have to use some of our properties to secure the loan. As long as we make the payments, the leases are not a problem. In my opinion, this is an acceptable risk. Not straying from the burden of this gray rhino is a much greater risk to our community and our organization.

Another gray rhino for us is recruitment and retention over the next five to ten years. We have identified a significant number of potential retirements that will open up many positions. Pensions are only part of the equation. Given the growth of our region and the increase in call volume, we will need to expand services in the years to come, which will require hiring beyond simply replacing our retirees. Filling seats isn’t that hard, hiring and promoting the right people is the challenge. Yes, we are looking for better avenues to advertise and promote employment within our organization.

We hope our efforts will provide a larger pool of applicants. Why a larger pool rather than focusing on a smaller pool with more talent? Because there’s really no way to say we want a small pool of applicants, but only quality applicants can apply. For ease of comparison, let’s assume that typically 10% of our applicants are hired. That would mean that out of 30 applicants, three would be deemed worthy of hiring. However, if we have 100 applicants, we would probably have 10 that fit the organization well.

We all understand that the 10% estimate is a WAG at best. In reality, there are times when we end up with a number of people we want to hire, but not enough positions. Other times we have more positions than we have good candidates. We are currently accepting applications for new firefighters. There are between 7 and 8 open positions, and we know that we are already understaffed, so we have to recruit people. However, if we go through the process and find only four candidates that we feel are suitable for our organization, we will only recruit four and start another process in the first part of 2022.

If we’re hiring for the “butt in the seats” rather than the right people with the right character, where does that leave the organization in 10 or 20 years? We must be aware that the decisions we make today have short and long term impacts on the Agency and our community. Our intention is not to create another gray rhino, but rather to treat the existing one and avoid creating a secondary problem.

Obviously, there are more examples of Gray Rhino than these two. If we wanted to really dig deeper, we would visit the topic of behavioral health. We are going, but not this week, to this place.

Remember, Gray Rhinos can be both organizational and personal. Looking ahead for yourself and your family, what do you see? If you see something charging you, even if it seems far away, don’t ignore it, start planning to fix it. You never know, you can just create additional opportunities by facing challenges head-on. For you newbies, think of retirement like a gray rhino and start planning it today. This career is going faster than you might think.

At least to this day I have graduated from the Executive Leaders (ELP) program at Naval Post Graduate School! And now? I can’t stop learning, so I think I’ll apply for their Homeland Security graduate program… I’m helping set the bar for senior executives.

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