Stephen Fitzgerald: The transformation game

There has never been a time when there has been  greater financial challenge in local government.  According to the National Audit Office local authorities have experienced a 37% real-terms reduction in government funding to local government from 2010 to 2015 and across the country local authorities are facing fundamental questions on how they balance needs and resources in the future.

Recent government announcements on business rates and pensions are changing the aspects of the financial picture and, in particular, the distribution of resources. Nevertheless, the impact of deficit reduction will be with local government for some time presenting extreme financial stress.

Some would argue that the key to success in local government is to maintain established approaches to core business, do the basics and do them well.  Others might say that it is only by challenging every aspect of operations in a form of permanent revolution that long-term sustainability will be achieved.

The current mantra from thought leaders in local government is that traditional approaches to securing budget reductions can no longer deliver and it is only through organisational transformation that local government can deliver for its communities in the long term.

Certainly, I believe that we do need to be creating very different local authority organisations than we have inherited from the last century – however it is important to understand the difference between transformation and wrecking. If a change programme looks like a car crash, it probably is.

For finance professionals in the local government sector the challenge to lead, support and deliver on savings programs is now an essential requirement of the job.  By doing this work some will have developed their own models and approaches. But to stimulate further thought in this difficult area I have identified ten areas that can be looked at when facing the challenge of transformation and budget reduction:

1. Management Structures: Scrutinise your management structures on a pan-organisational basis.  Reduce the number of management tiers, increase the spans of control and apply this universally across the organisation.
2. Demand Management: Identify key service areas and determine how demand can be reduced.  Look to the development of preventive measures in social care and channel shift in customer services. Encourage people to take responsibility for their own outcomes.
3. Transport: Critically scrutinise all provision the local authority is making for transport.  Map it out , reconsider the eligibility criteria, reduce waiting times and bring in proper route planning.
4. Property: Critically consider the authority’s fixed assets, in particular ensure that all buildings and installations add value in term of service to the community. Sell off redundant assets to provide capital receipts and reduce the burden of revenue running costs.
5. Administrative resources: Centralise and rationalise administrative and other support services.  Adopt a generic business partner approach to deliver genuinely flexible and responsive support services.
6. Procurement and contract management: Ensure that all new procurement and existing contracts provide value for money and focus on what the authority really needs.  Understand the nature of partnership and how it can be made to work and have an honest discussion with your private sector partners about the organisation’s needs and constraints.
7. Information Technology: Unleash the power of the digital age to help empowerment of communities and service users.  Use generic applications to take costs out of the business, look at how to save on licencing costs.  Automise business processes and realise the consequential staff savings.
8. Shared services: Consolidate back office functions across the authority and collaborate with other organisations to create genuine shared service solutions to the delivery of back office functions.  Realise staff efficiencies as a result and enhance customer experience.
9. Fees and charges: Actively review all the fees and charges that the local authority collects with a view to increasing (where legislation allows) to a rate that maximises profitability.  Look for trading opportunities – but only where it will deliver a cashable profit.
10. Organisation and culture: Genuine paradigm shift can only be achieved with a vision of how the workforce can be developed to achieve top level performance in the post transformational era.  It is a cliché, but in a service industry such as local government, the quality and performance of the staff define success. Recruit the best you can, invest in their development and treat them well.  Remember, quality always wins over quantity. You can sacrifice on numbers but compromising on the quality of staff will rarely achieve a positive outcome.

I would not claim that any of these ten ideas are particularly new, but that does not mean that they do not have merit and I would certainly be interested in hearing of ideas from readers who are addressing the transformation challenge.

Stephen Fitzgerald is a management and financial consultant working in the local authority sector.

Details of he ACCA Local Government Summit, ‘Taming Transformation’ on October 15 can be found here.