A Flawed Governance Model

Who do we call when the council goes wrong?

This is an article I have submitted to City Watch NZ. See also my following article Performance Indicators Don’t Work.

You don’t have to look hard to notice that councils all over New Zealand are having major problems. And those same problems seem to repeat all over New Zealand. We can all see those problems, but what is the cause? If we cannot identify the cause of those problems, it is almost impossible to find a solution. Using Tauranga City Council as an example, I would like to lay out what I think is the major cause of those repeating problems.

We have an elected Mayor and Councillors. The elected members are drawn from many different backgrounds. They are not expected to have a detailed understanding of the inner workings of the council. They rely on the chief executive and his staff to provide good advice. Their role is to make decisions on behalf of the community, based on the advice from the staff.

The Tauranga City Council at its core, is a civil engineering organisation. Water, roads, facilities, and planning are all civil engineering activities. The council therefore needs strong civil engineering competence inside the organisation. You need competent civil engineers to do good civil engineering.

But, the existing governance model has promoted the idea that the chief executive does not need to have a civil engineering background. He or she is simply responsible to manage. The Tauranga chief executive is an ex policeman, with a management degree. That is completely acceptable, in fact even desirable under the existing governance model. Below the chief executive, most of the lower tier managers, also have no civil engineering background. Again this is completely acceptable and in fact promoted under the existing governance model.

As a further step, and again promoted by the same governance model, Tauranga City Council has actively outsourced most of the technical staff positions. So the Tauranga City Council are now almost totally reliant on external consultants for technical advice, and to perform technical work. The Tauranga City Council organisation has now been hollowed out, with almost no technical expertise inside the organisation. There are a lot of generalist managers who do not understand civil engineering, and below them junior staff. This has several major consequences, and you will see the same major consequences in councils all around New Zealand.

One consequence is that the Tauranga City Council has lost the competence to perform its core business. They cannot perform core council functions. They cannot manage projects. They cannot manage contracts. They cannot manage the consultants. So we get badly managed projects which are wildly expensive, poorly executed, usually gold plated, and often unnecessary. There is no ability to prioritise, and stick to the essentials. We have a lot of vanity projects which are not essential. At the same time essential projects are being ignored because the managers do not understand the core business. There is also massive waste.

Another consequence is that the managers tend to avoid doing what they don’t know, which is water, roads, facilities and planning, and instead concentrate on things that they do know. The mangers have learnt about Council Controlled Organisations in management school, so Tauranga City Council has a plethora of Council Controlled Organisations (CCO’s). They spring up like mushrooms after rain. We are all the same, we all tend to do what we know, so the managers are doing what they know. Council Controlled Organisations are also a convenient way for the managers to offload the things that they don’t like doing, like water, roads and facilities etc, onto somebody else. However, that just compounds the problem, creates more managers, and more costs, and usually without improving anything. In fact it makes everything even harder to manage.

A further consequence, and perhaps the most debilitating, is that the culture of the council organisation has been destroyed. For the staff at the bottom, there is a concrete ceiling. Only generalist managers are allowed above that ceiling. So for technical staff, there is no career pathway. Their career can advance to a certain level, and then they will have to leave the council to go any further. As a result, the council finds it very difficult to recruit and retain competent technical staff. Of those they do recruit, the best are forced to leave to advance their careers, leaving only those who are happy to stay. Competent technical staff have to watch while inexperienced generalist managers are parachuted into the senior positions above them. Those managers are often not able to lead the staff below them because they do not understand the work that their staff are doing. The managers and their staff talk a different language, and they do not understand each other. The concrete ceiling has created a toxic staff culture, with low staff morale.

Another consequence, is that the concrete ceiling has broken the interaction and information flow on projects. Any well executed project requires constant interaction between the managers and the staff doing the work. Now a lot of the work is managed by non technical managers, and performed by outside consultants. It is difficult for a non technical person to manage that process properly. To get good results, you really do need to have a very good understanding of what is happening. So the result is that the external consultants are often being given a poorly conceived scope of work, with little or no ongoing input. The consultants scuttle off, and beaver away to produce the final result. This is a recipe for disaster. You need constant input and interaction to get a good result. You really do need managers who are technically competent.

All of this has broken the ability of the council staff to provide good advice to the elected members. The elected members are often getting bad advice, and consequently, they often make bad decisions. This is the result of a flawed governance model.

I have described an outsiders view of what is happening in the Tauranga City Council, and please bear in mind, that it is only what I can see from the outside. My outsiders view will not be completely accurate. Having said that, can anyone not see these same problems in all or most of the councils in New Zealand? That flawed governance model makes it very difficult for the elected members to do their job properly. It means that the elected members have to work extra hard, to make up for the deficiencies in the governance model.

So what would I recommend?

In an ideal world, councils would lobby the government to change the Local Government Act (LGA). The faulty governance model is largely driven by the Local Government Act, However, in the real world, that is not likely to happen, so it is up to the individual councils to try and resolve the problems for themselves. Unfortunately this puts a lot more responsibility on the elected members.

I would strongly recommend that the elected members employ chief executives with a civil engineering background. To me, a battle hardened civil engineering project manager would be an ideal candidate for chief executive. They should then support their new chief executive to restructure the council staff, and appoint competent managers all the way through the organisation. The council organisational culture needs to be restored. Competence needs to be brought back into the organisation. The career pathway for technical staff needs to be restored.

How would we know that if it is successful? Costs would drop dramatically. Projects would be done on budget and on time. Staff morale would be restored. The toxic culture would disappear. Council staff numbers would drop dramatically, along with improved service. Council spending would fall. Things would start getting done. Council would have enough money for more projects without more debt and massive rates increases. There would be very little waste.

Most importantly, we would see the senior managers leaving one by one to take up chief executive roles in other councils. We would also see junior managers leaving to take up senior management roles in other councils. That would create a virtuous cycle. The exit of those managers would create promotion opportunities for the staff below. That would attract good quality junior staff, because they have good opportunities for career growth and advancement. Most job candidates prefer to be part of a successful and well run organisation.

Note that I have used technical staff as an example, but the same principle applies to all council staff; technical, legal, accounting, financial, services, libraries, facilities, help desk etc.