The Winner's Response to Local Government Restructuring A Framework for Strategy Led Change

We have read and heard with interest many papers dealing with reform in Local Government in Australia today. What prompts the reform? What impact will it have? What is expected of General Managers in the new environment? What the papers we read did not say was ‘how to do it’. This article by contrast provides a framework that all councils can use to lead change and maximise performance within this environment. Those General Managers in Local Government who are the ultimate winners in the restructured councils will rise to this challenge and respond to their environment by designing and managing organisations that: · Have strategy-driven organisational structures and cultures that support change · Incorporate commercially competitive and market focussed business units · Enable them to satisfy Government directives regarding accountability and competition · Effectively manage relationships with other organisations · Provide extensive opportunities for management development with special emphasis on strategic management, people skills and entrepreneurship General Managers must assist Council in developing a vision for their city or municipality and must harness its organisational resources in achieving this vision. However, they cannot do this alone. They must develop (or recruit if necessary) a key team to drive change through the organisation. Components of the Framework for Strategy-Led Change 1. Analysis of the Local GovernmentEnvironment Change is required to respond to a complex and fast changing environment. Managers must comply with Government directives, satisfy their electorate generally and cater for special groups within it. Council is also expected to operate as a group of diverse competitive businesses. This requires an understanding of competitive forces in the industries in which their service delivery businesses compete. 2. The Council Vision,Council Strategy and Cultural Leadership Nothing commits employees to dramatic change like a clear vision of their organisation's desired future, consistently espoused by its top management. The vision may originate from the entrepreneurial flair of one person. More likely, a team of Councillors and senior managers will develop the vision after an exhaustive analysis of the environment and the options available to Council. The Vision must be right as it is the prime motivational force for cultural change and will drive strategy development, organisational re-design and ultimately the performance of each employee. It is therefore essential that team members have (or have access to) business acumen and have been trained to think strategically. They must also be highly sensitive to the needs of all major stakeholders in the Council's future. Ideally, they will come out of this experience with both a rational and emotional commitment to the vision. This emotional commitment will enable them to lead cultural change by sharing the vision with employees. A skilled consultant can help them to actually envisage the desired state and pull all this information together into an inspiring but credible Vision Statement. If the vision is the desired future state of Council, the Council Strategy explains how this desired state will be made a reality. WE believe that the word 'Strategy' has been misused by many Australian organisations, particularly in the Public Sector. Strategies abound in Corporate and Business Plans but in reality, these are frequently directives, telling business units precisely what they must do to contribute to contribute to Corporate Objectives. In market focussed organisations Strategy has a very different role. It sets the ground rules for the organisation, giving managers a framework within which they can manage their businesses as they see fit. It identifies which businesses the organisation will be in, who will be its clients and which of these needs will be met. It empowers managers to succeed by redesigning the organisation to give them the resources, autonomy and organisational support they need. At the individual level, it ensures the congruence of personal achievement goals without detracting from market focus. Each council will have a distinctive strategy, but from our reading of the environment, it is clear that all Council Strategies will need to contain, as a minimum, clear decisions on: Non-commercial functions that the council must perform to satisfy its obligations to the public The rules of competition for the organisation Which industries Council can (and should) successfully compete in and alternate delivery strategies for services that they cannot deliver competitively, How and under what conditions, Council will use Strategic Alliances The return expected from businesses and budgets available for non-commercial activities. How the council will report to its stakeholders and measure its performance overall Like the vision, the Council Strategy must be right as it puts in place a framework that will drive performance throughout the organisation. No matter how hard people work, the Council will not succeed if it has chosen the wrong strategy. The team that develop the strategy will therefore require similar expertise to that which worked on the vision. However, the Council Strategy team should also have greater representation from lower levels of management and staff. It may also be appropriate to include union or worker representatives in strategy development. 3. Organisational Structures to enable Achievement of Council's Vision and Strategy Achievement of a strategy can be rendered virtually impossible by an inappropriate organisational structure. How then should the councils be structured if they are to succeed in this new environment? The Council Strategy will drive the precise structure for each Council. However, they will have some common features: A flat structure achieves market focus by removing the need for business units to be structured identically. Service Delivery units are staffed to compete effectively in their industry. Client Representative Units will have the choice of using external or internal suppliers. Formerly centralised departments e.g. HRM and IT are replaced by small contestable internal consulting services giving business managers the support they need to compete effectively. A tiny Head Office structure monitors ongoing strategic fit with the environment and ensures accountability to Government. However, Strategy Development teams are drawn from various levels and work areas within Council. Strategic alliances between business units will be formed to manage particular projects. In some cases, these alliances will extend to other organisations. 4. Cultural Change in Local Government Organisations It has long been accepted that an organisation is doomed to fail if its culture is incompatible with its strategy and environment. Many attempts to reform an organisation by a restructure alone have failed because the existing culture drives employees to ignore the new design and simply operate as before. However, Cultural change is not easy. Cultures are composites of people's deep-seated values, beliefs and assumptions about what their organisation should be doing. Training or simple reasoning will not change this view of their organisation even if it is clearly no longer appropriate. Transformational leadership can in some cases achieve rapid and major cultural change. These leaders create a Vision of the future organisation and employees form an emotional commitment of this vision. The power of this vision is such that employees need minimal direction or control as they willingly strive towards its achievement. The recruitment of such a leader would seem to be the answer for achieving rapid and painless change in Local Government. Unfortunately, our review of the Local Government environment revealed two conditions that can, if present, render transformational leadership either unsuitable or unsuccessful. The first of these is that Councils may be prevented by their regulators from grasping opportunities for expansion of their activities. Employees who are 'willingly striving toward achievement of a Vision' will be totally demotivated by such constraints on their performance. The second condition is a combination of the scarcity of transformational leaders and the existence of strong resistance to change in some councils. It simply cannot be assumed that every council in need of a transformational leader will find one. The only viable alternative for these Councils is the more traditional and painful restructure which centralises power, destroys the culture and downsizes to concentrate on core business only. However, WE have shown above that a centralised structure cannot maintain a true market focus. Furthermore, it is extremely stressful and demotivating for employees. Therefore, once the restructure has achieved its purpose, WE believe the management team should develop and use some of the competencies employed by transformational leaders to create a new culture and rebuild morale. Their new Vision for the organisation must signal change to decentralised management and at least a slight expansion of activity. Involving managers in the development of the Council Strategy and new structure will reinforce this signal. Incremental change appears to be an easier option when time permits gradual cultural change. (Well-managed Continuous Improvement programs achieve incremental cultural change). But, in the absence of hard performance data, internal managers who are part of that culture cannot make the decision as to whether major cultural change is needed. Alternatively, an outsider can be used to objectively measure cultural values and test these against strategic goals and an analysis of the environment. Once change is achieved the new cultural values can be continually reinforced by Council's performance management systems, recruitment and promotion decisions and role modelling by senior managers, Council can also send strong symbolic messages to reinforce these values via, for example, Quality Awards, public statement of success of change and framed Vision and Mission Statements. 5. Manage Performance to Implement Council Strategy Again, the diversity of Council businesses requires different Performance Management processes across the various units. Service Delivery Units and Support Units should produce commercial business plans. They will include performance measures relating to their outputs (against which their ongoing viability will be judged) and process measures that they will use to continually improve their performance. In Client representative areas, Performance Management will focus on outcomes achieved for Council's clients and stakeholders. Their plans and Performance Measures will be based on program management and evaluation processes. Objectives and performance measures in the business plans will filter down into personal development plans and appraisal targets for individuals. Individual performance management will also create opportunities for reinforcing constructive cultural values and allowing employees to identify constraints on their performance. Conclusion Our paper identifies that Councils have opportunities for winning as well as surviving the changes sweeping the Local Government industry. Short-term survival tactics will not enable managers to embrace these opportunities. WE believe the winners will have the foresight to take a longer-term view of their Council's potential for development. They will truly understand what is best for their community and use this understanding to make Strategic Decisions as to which industries they should enter into, remain in or leave. They will then design and manage their organisation innovatively to empower employees to achieve both financial success and above all a satisfied community. Can you rise to this challenge? 1. Analysis of the Local Government Environment 2. The Council Vision,Council Strategy and Cultural Leadership 3. Organisational Structures to enable Achievement of Council's Vision and Strategy 4. Cultural Change in Local Government Organisations 5. Manage Performance to Implement Council Strategy Click here for middle management's role in Strategy-Led Change. Extract from a paper by Kerry Feldman and Leone Shueler published in the Institute of Municipal Management Bulletin March 1996 For further assistance visit the Change & Perform website or contact Kerry Feldman