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

187 – A high functioning Executive. What would it take?

Posted by Colin Weatherby                                                                                         1100 words

awesome

This is a question I was asked recently by a reader. Having read several posts critical of the behaviour of the Executive (What can a culture survey, an organisational self assessment, and your Executive’s risk appetite tell you?, The Executive. What exactly is their role? , Does your Executive suffer from altitude sickness?, and The Executive: filters, traffic controllers or drivers? ) she wanted to know whether I had a solution. Knowing that it is easier to be critical than creative, I cast my mind to thinking about the nature of the problem and some potential solutions.

I think the starting point is to understand the problem. In a nutshell, I think the following issues illustrate the problem:

  1. The Executive is overloaded with the small stuff handed to them by councillors (not the council). Much of it has to do with the personal idiosyncrasies of councillors and behaviours arising from their inability to work together as a group. It is dysfunctional, urgent and produces little value for the community. There are better ways for potholes to be reported.
  2. The Executive has to deal with high level relations with external organisations and strategic external pressures. These are often CEO to CEO relationships and cannot be readily delegated.
  3. The Executive is not putting enough time and effort into leading the organisation. Their focus on councillors and the external environment takes most of their time and energy. At the same time, they worry about problems 1 and 2 being made worse so they try to control organisational communication and decision making. When this is done ‘efficiently’ by time poor leaders it drives dysfunctional management behaviours.
  4. The Executive operates independently of managers and participates in the Senior Management Team (SMT) episodically. There is frequently no genuine and continuous engagement with the SMT in strategy and decision making. Managers are included in decision making when it suits the Executive – which is usually when they have the time and energy to do it. Managers are effectively isolated from information and the strategy decisions being made continuously by the Executive.

Obviously there are different solutions possible. Continue reading

134 – ‘A new theory of value creation for local government’. Do we need one? Part 4 – Integrating the thinking.

Posted by Lancing Farrell                                                                              1600 words

cutting diamond

This last post in this series (see here, here and here for previous posts) is an attempt to synthesise a new theory of value creation for local government using the ideas discussed in the previous posts.

First, a quick recap on strategy, business models and operations stratgey.

  • The strategy is the position that an organisation takes in relation its market, the value it decides to create, and how it decides to create that value and operate at a surplus.
  • Every organisation explicitly or implicitly employs a business model that describes the design or architecture of the value creation, delivery, and capture mechanisms it will use.
  • The operating strategy then guides decisions about vertical integration, capacity planning, facilities planning, services technologies, and process technologies.

A new theory of value creation for local government will need to integrate these concepts into a cohesive and repeatable approach. Continue reading

132 – ‘A new theory of value creation for local government’. Do we need one? Part 3 – operations strategy.

Posted by Lancing Farrell

Slack operations strategy

Image from Operations Management, 6th Edition, Slack, Chambers and Johnston.

In this third post in this series, I look at the concept of the operations strategy. Every organisation has one. Your organisation does, but do you know why or what it is? And how does it relate to the business model?

This series of posts is intended to make the case that local government needs a theory of value creation – a clear explanation of what local government does to create public value. That theory will require a reappraisal of the operations strategy and the role that operational capability can play in supporting the business model and strategy execution.

Hayes and Wheelwright describe operations strategy as guiding decisions about vertical integration (i.e. the extent to which the council owns the value chain), capacity planning (i.e. how variation in demands will be met), facilities planning (i.e. the facilities needed to deliver services), services technologies (e.g. information systems) and process technologies (e.g. batch or make-to-order).

The academics Nigel Slack, Stuart Chambers and Robert Johnston in their text Operations Management talk about strategy and the connection to operations Continue reading

130 – Another Giant for the Squire – David Maister.

Posted by Colin Weatherby                                                                                         1400 words

david maister

This post continues a series started by Squire to the giants about his giants. David Maister will be best known to anyone responsible for running a professional services firm. In the late 1990’s when he visited Australia his seminars were expensive and quickly sold out. ‘The Professional Service Firm’ and ‘True Professionalism’ are still must reads. Maister retired in 2009 and much of his material is still available from his website.

maister managing the professional service firmDavid Maister was born in Great Britain where he completed his Bachelor’s degree in Mathematics, economics and Statistics at the University of Birmingham (England), his Master’s in Operations Research at the London School of Economics. Continue reading

127 – ‘A new theory of value creation for local government’. Do we need one? Part 2 – Business Model.

Posted by Lancing Farrell                                                                              750 words

walt disney theory of value creation

Image: ‘The greatest theory ever told’ – Walt Disney’s 1957 value creation map.

This is the second post in the series intended to make the case for a new theory of value creation for local government. The first post discussed business strategy. This post looks at the link between strategy and the business model.

Once the strategy has been determined, it leads directly to the selection of a business model that can deliver that strategy. I have chosen the following description of a business model from organisational theorist and academic David Teece to set the scene.

“Whenever a business enterprise is established, it either explicitly or implicitly employs a particular business model that describes the design or architecture of the value creation, delivery, and capture mechanisms it employs.

The essence of a business model is in defining the manner by which the enterprise delivers value to customers, entices customers to pay for value, and converts those payments to profit.

It thus reflects management’s hypothesis about what customers want, how they want it, and how the enterprise can organize to best meet those needs, get paid for doing so, and make a profit.”

As with strategy decisions, the difficulties for local government are again apparent. Continue reading

126 – ‘A new theory of value creation for local government’. Do we need one? Part 1 – Strategy.

Posted by Lancing Farrell                                                                              850 words

value diagram shaded

This is the first post in a series  exploring the relationship between business strategy, the business model and operations strategy. It is an attempt to pick up on the ideas in Colin Weatherby’s previous post discussing Henry Mintzberg’s ideas about different models for government organisations. Hopefully the series of posts will make my case for a local government theory of value creation.

I will begin with business strategy. To set the scene, I have chosen the following quotations from management consultant and academic David Maister  to highlight the strategy problem for local government.

“A strategy is not just choosing a target market, but is about actually designing an operation that will consistently deliver the superior client benefits you claim to provide.

However, each decision you make to be more effective at delivering the preferences of those you target will (inevitable, inescapably, unavoidably) make you less attractive to clients or market segments that look for different benefits.

You could try to design your operations to meet a wide variety of preferences and needs, serving each client or customer group differently, according to their individual wishes.

Your market appeal will then come down to ‘tell us what you want us to do for you and we’ll do that. We’ll do something different for other people tomorrow!’

The very essence of having a strategy is being selective about choosing the criteria on which a firm wishes to compete, and then being creative and disciplined in designing an operation that is finely tuned to deliver those particular virtues.

An operation designed to provide the highest quality is unlikely to be the one that achieves the lowest cost, and one that can respond to a wide variety of customized requests will be unlikely to provide fast response and turnaround. Any business that tried to deliver all four virtues of quality, cost, variety and speed would be doomed to failure.”

Maister may not have had local government in mind when he wrote this piece, but he provides an insight into the challenges in determining what provides value to people receiving services. He calls it ‘superior client benefits’. In the public service context, academic Mark H. Moore has called it public value. It is the same idea Continue reading

108 – Melbourne City Council: Organisational Capability Review, May 2015.

Posted by Colin Weatherby                                                                         1300 words

Melbourne capability review model

The public release of this critical report has been something of a surprise. Commissioned in March 2015 and released in May, the report prepared by Jude Munro, Dr Bronte Adams and Steve Parker has looked at three key capabilities; leadership, strategy and delivery. Each has been rated on a four point scale for several elements. Out of the ten attributes rated, six were seen as a ’development area’ and one as a ‘serious concern’. The remaining three were seen as ‘well placed’ and none were seen as ‘strong’ (p.14). So what does this mean?

melbourne assessment criteria ratingsThe report states that this is the first time that this review model has been applied to local government in Australia. Its intention is to provide a forward looking, whole of organisation review that assesses an organisation’s ability to meet future objectives and challenges.

 

“This review provides the opportunity and impetus to take a very good organisation and make it even better.” Ben Rimmer, CEO

Continue reading

92 – Strategy execution – why do we make it so hard in local government?

Posted by Whistler                                                                                                          570 words

laurel and hardy

Lancing Farrell’s posts have been interesting. Some good connections have been made with the research conducted by Donald Sull, Rebecca Homkes and Charles Sull. I am sure that evidence of each of the myths would be available for local government, but are they the only reasons strategy failure is common?

There is no doubt that lack of cross-functional cooperation, sticking to infeasible plans, under-resourcing plans, ineffective communication, and disempowerment of the distributed leaders by top management are widespread. There is no doubt that they all contribute to failure to implement strategy in local government. But are these the only factors?

I think that failure begins with lack of clear strategy to implement. Continue reading

90 – Local government strategy implementation. Myth 5: Execution should be driven from the top.

Posted by Lancing Farrell                                                                                              700 words

the Executive

This is the last post in a series of five. The first post discussed the myth that strategy execution equals alignment, the second post discussed the myth that strategy execution means sticking to the plan, the third post covered the myth that communication equals understanding, and the fourth post covered the myth that a performance culture drives strategy execution.

Sull, Homkes and Sull say that top-down strategy execution has a number of draw-backs, including ‘unravelling’ after the loss of a strong CEO. This is because strategy implementation in large, complex organisations ‘emerges from countless decisions and actions at all levels’. The leaders closest to the situation are best positioned to make the required decisions. Top-down implementation may boost performance in the short-term but it reduces the organisation’s capacity over the long-term. Continue reading