Re-engineering America's water companies has only just begun. Over the past ten years, the average number of customers per employee is estimated to have improved only 6 percent, a much smaller increase than the 16 percent realized in the banking industry, or the 22 percent obtained in the telecommunications industry. While significant improvements have been made in the quality of drinking water, management still needs to be flattened, decisions delegated, technology adopted, and productivity improved. The key is to better utilize computers, to empower better trained managers, and to be tougher about under-utilized assets, particularly employees. The impediment to re-engineering is inertia, which may take the form of regulators' unwillingness to allow a fair rate of return, management's reluctance to adopt new technology, labor's insistence on antiquated work rules, or a reluctance of all parties to eliminate overstaffing and waste.
Consolidation is both inevitable and desirable.
Just like community banks, the industry needs to consolidate into larger units where a critical mass of expertise can be sustained and a large customer base can absorb the cost of infrastructure improvement. The Safe Drinking Water Act will push consolidation along the way, but the driving force will be consumerism and the media. In one industry survey after another, consumers have signaled their desire for better service and more involvement in the trade-offs faced by the industry. The impediment to consolidation is frequently rigidity of thought of the water utility owners, their executives and municipal managers. Owners are not yet ready to consolidate their holdings into larger, more economically viable organizations.