Reorganising Council

Marty Grenfell (above) is the chief executive (CE) of Tauranga City Council. The CE reports to the Mayor and councillors. The CE is employed by the Mayor and councillors, and is responsible for employing and managing all other council staff.

The council structure is defined by law in the Local Government Act (the LGA). The structure seems to me to have been designed by a university academic or group of academics. It is very theoretical and sounds wonderful, but to me it works very badly in practice.

The Mayor and the councilors make major decisions which are implemented by the CE. The CE is guided by performance indicators, processes, policy statements and plans which are agreed with the Mayor and councillors. The Mayor and councillors as governance can only direct the CE, and are not supposed to have any direct influence on other staff members. The CE is entirely responsible for managing all other council staff.

Performance indicators sound like a wonderful idea. The Mayor and councillors decide on a set of perfect performance indicators and the CE and staff beaver away to achieve those indicators. The performance of council can then easily be measured by checking the indicators. The indicators are supposed to be easy to measure so that you can grade performance with a number.

The problem is that it is usually very difficult to objectively measure the things that are important and put a number to them. For example one of the statutory requirements from the LGA for the role of the CE is:

ensuring the effective and efficient management of the activities of the local authority

How do you measure effective and efficient management? How do you put a number on that? It is difficult so by default performance indicators usually regress to very simple things which are easily measured. The trouble is that those simple indicators do not really measure what you want to measure. They only measure very arbitrary and usually trivial or even counter productive factors. In addition, they are retrospective based on last year, so if they are changed, if at all, they are usually changed to address last years problems. They can not be easily adapted to changing circumstances. They are very inflexible and in many cases provide a perverse incentive to act against the stated goals. The CE’s bonus depends on meeting the performance indicators so in some cases the CE is being incentivised to act against the goals of council. In many other cases scarce resources are wasted on trivial indicators.

Another problem is that management is reduced to a series of processes. It is as if somebody tried to transfer the principles of assembly line manufacturing to management. It tries to bypass the need for skill, qualifications, experience, leadership and judgement. It is purely a case of following the correct process. And of course if we had these wonderful perfect processes then it would work wonderfully. In practice it doesn’t work very well or works very badly. It suffers from similar problems to the performance indicators.

Processes usually only cover common and simple eventualities, they are often wrong, they are hard to update and are inflexible. Again if they are updated, they are usually updated to solve last years problems. Having said that some level of processes can be useful in an organisation for certain tasks, for example a check list for for rebate claims. Processes are usually not suitable for complex tasks which require knowledge, experience and judgement.

The same or similar applies to policy statements and plans. None of these are a substitute for skill, qualifications, experience, leadership and judgement.

An even worse problem is that according to management theory, the CE does not need to understand the core business of the organisation (Civil Engineering). The CE should be a good general manager who understands all the right management techniques. The CE merely has to follow the performance indicators, processes, policies and plans, and everything will be wonderful.

The trouble is that if the CE does not understand the core business, the CE tends to select general managers for the second tier who also do not understand the core business. But not to worry, they are also guided by the same performance indicators, processes, policies, and plans, so again everything will be wonderful.

Below the second tier, the next layer of managers, the third tier, will also tend to be general managers who also do not understand the core business. But again not to worry, they are also guided by the same performance indicators, processes, policies, and plans, so again everything will be wonderful.

On top of that, according to management theory, as many roles as possible within the organisation should be outsourced. So staff should be laid off or not replaced when they leave, and external consultants used instead. This creates a toxic work environment where competent technical staff leave to work for the consultants, and morale is low for the remaining staff. Council is supposed to be a good employer.

Similarly the contracting strategy seems to be to use lead contractors who manage all the sub contractors on an hourly rate cost plus basis, rather than manage contracts in house via competitive bidding. Jobs are simply awarded to one of the lead contractors with little or no supervision by council staff. A recipe for cost overruns and late delivery. The work mainly goes to large national or international companies, rather than local businesses. Council should give more work to local business.

With the current governance model the Mayor and councillors are not required to understand the core business of the council. They come from a wide range of backgrounds and do not require previous knowledge about the operation of the council. They rely on the expertise of the CE and the council staff for guidance and advice. But the council organisation has lost much of its core competence, and is reliant on external consultants for guidance and advice. In many cases the staff are merely regurgitating the advice and guidance from external consultants. In the worst case the staff are amending or even spinning the advice and guidance from the consultants.

The Tauranga City Council organisation has been hollowed out. The top tiers of management are mostly general mangers, and the council has lost technical staff with suitable training, expertise and knowledge. It has problems with its core business. It has problems making good decisions. We can see an example of this with the debacle over the Cameron road upgrade. The same story repeats with the Bella Vista debacle, and the parking building debacle. The council has conducted internal reviews of what went wrong, but is very reticent to release the reviews. Internal reviews should be managed by the Mayor and councillors so that they are independent of the staff. The results should also be made public.

So what is to be done? We need to get core competence back into the council organisation (this is not a personal attack on any individuals it is about having the right person in the right job). Changes will have to be made by working with the chief executive. This will be a long, slow and difficult process.

The legislative changes to council structure go back to the 2002 Local Government Act. These changes put an extra load on Mayors and councillors in order to overcome the deficiencies in the legislation. It seems to me that successive Mayors and councillors have not understood the problem. They probably realised that there was a problem but did not know what the problem was, what was the cause or how to fix it. If you don’t know the cause of a problem your chances of fixing it are very small.

So the problem has been building for decades, becoming successively worse with each new elected council. In my opinion, the commissioners have only made the problem worse.

From what I can see it appears that most other councils in New Zealand are also struggling with the same problem (Auckland City Council). In an ideal world it should be possible to lobby government to amend the legislation and fix the problem. In the real world who knows. Even if you could convince government to amend the legislation, there is a very high chance that they would go back to the same academic or group of academics who created the problem in the first place.

So it is up to us. Tauranga has to solve its own problems. So please elect a team who are willing and able to fix Tauranga’s problems. We have 20 years of management theories to undo. Doing the same thing, more spending and more borrowing, will only make things much worse. Tauranga council has the lowest approval rating of any council in New Zealand ( see Scoop and The Post).

Council controlled organisations are another very similar story. They also need to be fixed.