219 – Do we value competent management in local government?

By Lancing Farrell                                                                                                        1200 words

Image result for Why do we undervalue competent management hARVARD BUSINESS REVIEW

Raffaella Sadun, Nicholas Bloom and John Van Reenen have written an interesting article (Why Do We Undervalue Competent Management?) that explores a deep and persistent problem in organisations across the world.  This problem also manifests itself in local government.

The article is based on research over the past 16 years in 34 countries involving 12,000 organisations and 20,000 interviews (see more at http://worldmanagementsurvey.org). A strong evidence base is used in providing some clear insights into a problem that is disturbingly common.

The fundamental premise is that competent management practices make a difference to the productivity, profitability, growth and longevity of organisations.

This seems like such an obvious thing to say or write. Of course, the quality of management is critical to the performance of an organisation. After all, aren’t we are all managers and doing something that makes a positive contribution? This is where the story starts to get interesting.

The authors say that competent core management practices can’t be taken for granted and that there are big differences between and within organisations they have researched. Our experience in local government validates this finding. Every time you move to a new organisation you notice differences in how it is managed (either better or worse than your previous council). You also notice differences when you move from managing one functional area to another within the same council. It is one of the benefits of moving to broaden your experience.

Big differences in management practices within organisations, and organisations not being good at identifying and spreading their own best practices, is relevant to local government. Councils often have ‘pockets of excellence’ within them. These are often the services that also rate highly on community satisfaction surveys, for example, libraries and waste management. We tend not to study those services and learn from them. In fact, the opposite often happens, and organisational drag is ratcheted up to contain them because they are seen as higher risk. What makes them better makes them a problem.

The authors see operational excellence as a critical complement to strategy – it provides the capability to act on strategic intent. Core management competence is the platform for more sophisticated capabilities, such as data analytics, evidence-based decisions making and cross-functional communication. In my experience, this is relevant to local government because we frequently over-reach and try to implement complicated management ideas on a poor foundation.

The authors list the characteristics of the organisations with higher scores in their research:

  • Rigorous performance monitoring.
  • Systems geared to optimise the flow of information across and within functions.
  • Continuous improvement programs that support short and long-term targets.
  • Performance systems that reward and advance great employees and help underperformers turn around or move on.

Think about your own organisation. Do you see these things happening? There are reasons that they probably aren’t.

One reason highlighted by the authors is that the costs of improving management practices can be as high as the capital investments organisations make. Imagine a council spending tens of millions of dollars improving management practices – how would the councillors and the community view it? The results are not guaranteed, they are intangible, and the returns on investment are difficult to articulate. Making a building is a lot easier and less risky.

As with many HBR articles, making links between compelling private sector ideas and public sector management takes a bit of imagination. The statement by the authors that operational excellence results in higher profitability, which in turn means firms will grow faster and be less likely to die, started me thinking about a local government equivalent. What can you say about the benefits of operational excellence for a council?

Well, I had a go.

 “Councils that create greater public value through operational excellence will have more satisfied residents with a greater willingness to contribute in providing community services and infrastructure”.

I am assuming that the value that matters is public rather than customer or stakeholder or private value. I am also using satisfaction in terms of expectation and experience. The idea that people who feel they are getting value for their money or effort will contribute more, and the contribution will be for services and infrastructure that benefits everyone not just themselves, is also important. Have a go at a statement yourself.

The last section of the article deals with why every organisation isn’t focussing on their management competence or capabilities and in achieving organisational excellence.

In local government, I think part of the answer to this question lies in believing there is a problem. In my experience, councils tend not to see their problems. In many years spent working as a consultant to local government, I noticed this frequently. In situations where you could see an obvious problem or opportunity for improvement (and, of course, an opportunity to sell a service), councils would not see it.

Sometimes they did, and then the issue could be that they would think it was a problem without a solution, or at least a solution they would be able to implement. As a consultant, I spent a lot of time convincing councils that they could solve these problems (and that I was the person to help them.

The authors list six external and internal reasons for the variations in management competence they have identified:

External

  1. Intensity of competition – a competitive environment it creates a strong incentive to reduce inefficiencies and badly managed firms will die. In local government, the same incentives don’t apply but a general level of dissatisfaction with, and distrust of, government is creating pressure for change.
  2. Labour relations – it can be difficult to give opportunities to more talented staff on merit. This is also true in local government, which has the added problem of difficulty dealing with poor performers.

Internal

  1. False perceptions – managers are unable to observe how badly or well their organisation is being run. They might also over-estimate the cost of introducing new practices or under-estimate how much difference they could make. I am sure local government suffers from both problems.
  2. Governance structures – managers who know what needs to be done and choose not to act for fear that the change will adversely affect them. I have known many leaders who have put their personal ambition and career ahead of the best interests of their organisation.
  3. Skill deficits – this includes basic capabilities in numeracy and analysis. In local government, it also includes more sophisticated capabilities, such as operations management.
  4. Organisational politics and culture – this is evident in resistance to change.

The last dot point is addressed by the authors in some detail. They say that resistance to change is most successfully overcome in the organisations they have researched through top management involvement, constant communication, message reinforcement and visibility. Take another moment to think about your organisation.

I will finish with a quote that captures a key challenge for local government:

 ” … management quality was significantly higher in organisations in which CEOs dedicated a larger portion of their time to employees that to outside stakeholders.”

Sadun, Raffaella , Bloom, Nicholas and Van Reenen, John 2017 Why Do We Undervalue Competent Management? , Harvard Business Review, September –October. https://hbr.org/2017/09/why-do-we-undervalue-competent-management

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207 – Mills, mines, refineries and networks – what do they have to do with local government asset management?

Posted by Lancing Farrell                                                                          1000 words

disruption

I was talking to a colleague who recently attended a well organised and highly informative national conference on asset management. It was a pity that only three people of the three hundred attending came from local government. The rest were from sugar refineries, steel mills, manufacturing, energy supply, defence, food production, mining, ports, railways, airlines, telephony and numerous other organisations from across Australia. Apparently there was a lot to be learned. So why was local government absent?

Part of the explanation lies in the competing asset management conference run annually by the sector in Victoria. It is well attended by staff from many councils as part of their professional development and to support a sector initiative. I suppose councils don’t see any value in sending staff to a conference that doesn’t focus specifically on local government assets or the way councils have chosen to manage their assets.

A conference theme was disruption. Often it is outsiders who create disruption because they see things differently.  Sometimes it happens when insiders are frustrated by the status quo and they venture outside the organisation’s comfort zone.  Unfortunately, many organisations and industries are incapable of disrupting themselves.  Attending conferences run by your industry is much more comfortable.

It was interesting to hear from my colleague about how other industries view their assets and what they expect from them in the way they are managed. One key difference is that private sector has productive assets that are owned and managed to create shareholder value (i.e. make profits). The value created by those assets is captured by the organisation that owns them. It is different for most public sector assets. Continue reading

206 – ‘The Outstanding Organisation’ by Karen Martin.

Posted by Colin Weatherby                                                         870 words

the outstanding organisation

This is a forthright and practical book full of inconvenient truths for local government. I suppose its relevance to local government depends on whether or not you believe that becoming an outstanding organisation is either possible or desirable. Karen Martin says that people know excellence when they see it and they know when they are not excellent. But do our leaders in local government?

This is another book (and I am repeating myself here) that everyone reading it who works in local government will wish they had read years ago. The key idea is that it is chaos that prevents organisations from becoming excellent. Martin says that managers and workers often don’t see the chaos or its causes. In many cases the behaviour causing the chaos is habitual and invisible. Typically, she says organisations respond to chaos by:

  • Becoming accustomed to it so that they think it is normal.
  • Recognising it but thinking that there is nothing that can be done about it.
  • Embracing it as a good thing and developing skills in coping with it.

Councils do all three to a greater or lesser extent. Continue reading

202 – Essay No. 6 – Local government and public value.

Posted by Lancing Farrell                                                                                              6500 words

bureacracy

Value is often mentioned in local government when talking about services, particularly ‘best value’. However, there is often inadequate understanding about the different types of value, the difference between private and public value, and how value is actually created and managed by an organisation. Sometimes there is the assumption that because we have been busy, that we must have created something worthwhile.

This essay brings together ideas from several earlier posts and is constructed around four hypotheses:

  1. That there are different types of value created by organisations and for local government public value is the most important.
  2. Public value is the primary value that must be understood and delivered if councils are to deliver what is expected by the community.
  3. Value-led management is a way of managing that could transform local government and make it more responsive and effective in serving the community.
  4. There are simple and effective tools that can be used to improve value creation in local government.

Hypothesis 1: There are different types of value and public value is the most important for local government.

Private value

In a metaphorical sense the value that you add is what you ‘bring to the party’. This is determined by what other people think you have contributed and by thinking about what the party would have been like if you hadn’t arrived.

There are different types of value and it is worth briefly considering the difference between private value and public value. Public value is the collective view of the public or community about what they regard as valuable, especially with regard to the use of public money and authority. Moore describes this as occurring along a spectrum from value that is obtained from public services that is essentially private value, similar to the concept of customer value, to public value that reflects the aggregate value expectations of citizens.

Moore degrees of publicness

At the private value end of the spectrum, the focus is on the individual service recipient and delivering value that satisfies their expectations.   At the public value end of the continuum, the focus is on achieving the social outcomes sought by the community or public. Continue reading

194 – Essay No. 4 – Local government and customer service.

Posted by Lancing Farrell                                                                              4500 words

basil fawlty

Customer service is, and should be, a major concern for local government. After all, councils are service organisations. Sometimes there is confusion about exactly what customer service means, how it relates to public service delivery, and what aspects of service are most important to get right in local government.

This essay focuses on three hypotheses:

  1. That ‘customers’ in local government are different to the customers described in most customer service literature and encountered by most service organisations.
  2. There are six main opportunities for local government to improve service to customers.
  3. There are simple tools available that can assist councils in getting service delivery and customer service right.

Continue reading

188 – The council value proposition – what could it be?

Posted by Colin Weatherby                                                                                         1100 words

Kano model and brand

There have been a number of posts on value. In the context of imminent rate capping in Victoria it is timely to revisit some concepts of value relevant to local government. It is easy to overlook the fact that public service expenditure is about creating public value.  Especially when revenues are being constrained and thinking is turning towards making savings and cutting costs.

In the diagram above I have used the Kano model from Wikipedia and positioned three key council services that many regard as ‘core’ services – the provision of public parks, waste collection from residential properties, and provision of roads. Each has been placed in a different place on the diagram and I will explain why. Continue reading

171 – A series: Managers as designers in local government. Part 3.

Posted by Lancing Farrell                                                                              500 words

design and thinking

This is the third post in a series of four. It addresses some of the challenges to design-thinking.  Jon Kolko has identified several.

His first challenge is accepting that you will be dealing with more ambiguity.

“It is difficult if not impossible to understand how much value will be delivered through a better experience or to calculate the return on investment in creativity.”

He says that ambiguity doesn’t fit well with organisations that value ‘repeatable, predictable operational efficiency’. This will be an issue for councils seeking to use design-thinking. For councils, there is an expectation that value will be created through efficient use of resources without any waste. The strong risk aversion of local government reinforces elimination of uncertainty, or at least pretending it has been eliminated. Embracing a culture or experimentation, customer value creation and risk taking will be very challenging. Continue reading