October 13, 1997
Out of the Silos
Failure beckons when organizations fail to adapt to change. Better service and lower prices from a competing organization may cause bankruptcy as customers disappear. Consumers benefit because new operators usually re-deploy the failed entity's assets more intelligently.
This dynamic is often absent in local government organizations. Sheltered from change or alternatives, with little need to keep customers, many municipalities just let their organizations drift along as their costs rise. No one measures how efficiently resources are used. Performance is not a critical component of their operating cultures. This consigns them to mediocrity and decline from within.
Angela Griffin, a high-powered municipal executive from Britain, stepped into the remnants of this environment when she was hired to manage New Zealand's capital city, Wellington, in 1992. During a Frontier Centre seminar in Winnipeg recently, she described the massive changes in New Zealand's local government.
She was brought in when Wellington Council finished purging its top managers following a major internal scandal. What followed was a radical culture shift. Helped along by dramatic local government legislation passed in 1989, a new performance-based culture at city hall was born.
When Griffin arrived in Wellington, the revolutionary nature of the previous Labour government's policies was apparent. To deal with New Zealand's fiscal crisis the Labour Government of David Lange had chosen to thrust many public services into a competitive framework which focused on outcomes, performance measurement, and excellent customer service. Old thinking, which it said created incentives for spending money at all costs, and maximizing internal staffing3/4was shattered.
Griffin credits the 1989 legislation for the stunning transformation of New Zealand's cities. "Our NZ Local Government legislation is empowering legislation. It doesn't specify how you do things, it simply specifies the outcomes that are required."
Getting away from process and the simplistic focus on spending budgets enabled enormous innovation to sweep through New Zealand's local government sector. In Wellington, it meant the end of traditional city departments.
Griffin explained: "Our eight departments operated in silos. Functions like policy, asset management, and service delivery were going on in each department, with insufficient corporate overview. The structure prevented us from being able to ensure that all activities across the organization were delivering on the council's strategic goals."
Wellington replaced its administration-intensive departments with three working groups. The Corporate Office develops strategy and long-term planning. It takes a system-wide overview in terms of finances, communications, marketing, and risk management. A second group, Commissioning, creates the specifications for buying services from in-house business units and external contractors. The mission of the third group, Service Delivery, is to fulfill customer needs in the most efficient and effective way.
This simplified approach reduced management by 38%. "We have team leaders now and we have a very flat structure. Deploying resources more intelligently reduced the number of full-time employees less dramatically than expected, falling from 1650 to 1400 over six years, using attrition, turnover, and severances. Meanwhile, costs have fallen by up to 20% without decreases in services; some service standards have even increased."
Wellington's city government culture now focuses on efficiency and enhanced productivity. Businesslike methods have improved customer service while reducing costs. New library books now arrive on the shelves within nine days compared to 90 under the old model. The city approves building permits in only 6.6 days. Surveys of residents reveal that satisfaction with the council's performance shot up from 70% approval in 1992 to 95% in 1997. More startling, independent surveys show increased satisfaction with the efficiency of employees, up 30% to 90% in the same period.
The employees also like the performance-based system. Seventy-five per cent enjoy their jobs. Eighty-three per cent believe they are always trying to improve customer service, an important concept in the new culture.
Taxes are falling. Services are improving. The city has investments greater than borrowings. Major infrastructure is being upgraded.
Griffin's strategy of removing the silos has worked in Wellington.
The Frontier Centre for Public Policy
is an independent public policy think tank whose mission is "to broaden the debate on our future through public policy research and education and to explore positive changes within our public institutions that support economic growth and opportunity."