Category Archives: Efficiency

Set up a target, and I’ll hit it every time!

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Local government in Michigan has been operating under the shadow of the Economic Vitality and Incentive Program, or EVIP for the last two years.  The EVIP program has three basic components, transparency, cooperation & consolidation, and employee compensation.  The State of Michigan has set arbitrary requirements that if met, allow local government to get 2/3 of the revenue sharing money they had previously received without any strings. Why did this happen?  The state needs to create incentives for good government, because the locals clearly can’t achieve these objectives without help from above (please note sarcasm).

What has been accomplished through EVIP is nothing short of remarkable!  We have a program that has created new levels of bureaucracy at both the state and local level.  Added additional costs.  Stymied cooperative efforts.  Confused labor negotiations and contract administration.  Most importantly we have established a system that rather than spur innovation, encourages communities to manage to the prescribed targets.

Hitting a target is easy, it’s like checking a box…done.  But is that what we really want?  Take the second leg of EVIP.  It requires one additional  cooperative effort each year to receive funding.  Knowing that I need “ONE” every year, how many do you think I will implement on an annual basis?  When the state tells me to get funding I must publish certain information on my website, what gets published?  Its not what I think my community cares about, I “HIT” the target.  If I am negotiating labor agreements can I maximize my leverage when certain outcomes are predetermined, or do I ensure that I hit the target and receive our funding?

Clearly EVIP is needed. Without the new vision from the state as it relates to transparency, cooperation and managing benefits, local government could never have conceived of such innovations.  The hundreds of examples of cooperation and consolidation that already existed before EVIP should not be interpreted as working together or creating efficiency.   The countless ways that locals shared information previously doesn’t mean that we are being transparent.  And if we aren’t following a one size fits all approach to benefit design, then we must not be managing our benefits.

Fortunately, that has all been figured out for us.  We now have a target to hit, and we will it it every time.

 

Cooperation, Consolidation, Bigfoot, Roswell and other Famous Myths

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If I can figure out how to license the phrase cooperation and consolidation, I could retire tomorrow.  As I travel around the state and country working on local government issues, I find that it may be the most overused, and in my view, over heralded phrase in local government. My concern isn’t that I hear it so much, but rather that there is a belief that this will solve the ills created by of a decade of declining revenues and a couple generations worth of underfunded legacy costs.  I think we are more likely to see Sasquatch flying a space ship than we are to solve a broken financial model with consolidation.

Contrary to popular belief, local governments are for the most part well run and operate fairly lean.  Are their advantages to be gained by cooperating with your neighbors or consolidating services?  Probably.  Economies of scale generally will yield efficiencies that can lower the cost of service delivery, but to what end?  If our starting point is two communities that do not provide services to the level we all expect, isn’t it like combining two cars in need of repair and declaring victory because it drives?  Is this our vision for the future?

I don’t believe that the greatest challenge is being more efficient nor is the greatest benefit in combining departments or merging services.  The single biggest financial burden that our core communities are struggling with are legacy costs. Pending legislation in Michigan will help communities to draw a line in the sand and many already have, but they have no ability change the cost structure for those who have vested benefits or have left service.  More needs to be done.  In many established communities, the ratio of retirees to active employees is more than 2 to 1 with far more being spent on healthcare for retirees than is spent on active employees.  The hurdles both on both the human and political level to address this are substantial, but without real change it is not inconceivable that the only services a community might offer will be to hold elections, collect taxes, and pay and insure retirees.

It’s simply unsustainable.

 

Can you afford to cut training from your budget?

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An all too frequent casualty of tightening budgets are the dollars spent on training.  It seems painless.  There is no immediate manifestation of a service cut, or elimination of a position so it on a relative basis it seems like a good cut to make.  But what is the cost of what you don’t know?  What is the impact of not being aware of innovations that would provide more efficient operations and lessen the budget constraints?  I would suggest that these costs far outweigh the cost of the training.

We are all being asked to do more with less, or as I have heard some folks express recently, to do something with nothing.  How does anyone expect to succeed in this environment without providing themselves the opportunity to train and network with their peers? Elected and appointed officials are tasked with running very complex, multifaceted corporations.  In the case of  elected officials, most begin office with a love for their community but little to no training or experience about the role they are accepting.  That is not a formula for efficiency and innovation, it’s a formula for disaster.

Every successful business understands the fundamental need to train their employees,   but we somehow diminish that same value when it comes to our local operations.  Training and networking are not perks , they are a necessary part of any successful business.  Don’t short change your community by taking a short term solution to a long term problem.  You have a duty to take the necessary steps to be certain you are in a position to succeed. A big part of that is sowing the seeds of innovation and efficiency with appropriate educational and networking opportunities.

Imagine if your community never learned about computers, the internet, or email.  Think about the cost it would take to deliver services without the benefit of these innovations.  Are you up to speed on grants? Economic development laws and practices?  Service delivery models?  Laws pertaining to setting rates and charges?

What’s the future cost of what you don’t know about today?  It might shock you!

Is Failure an Option?

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I was reading a great Blog Post by Jeffrey Baumgartner, on the cost of not implementing new innovations.  While the motivations are different for business, the idea is as true for local government as it is for business.  The cost of the status quo can be profound, and no one keeps track of the innovations we chose not to implement.  We all need to assess our ability to innovate, and much of that “ability” hinges on communication, empowerment, and a willingness to fail.

That’s right willingness to fail.  The biggest impediment to innovation is the fear of failure.  Unlike a business, we all live in a world where a bad day can be on the front page.  Local leadership has to ensure that our staffs believe that they will be supported for trying new things, and that we recognize that not all ideas are good ideas.

Thomas Edison was quoted as saying, “I have not failed. I’ve just found 10,000 ways that won’t work.”  We need to create that type of environment if we want to spur innovation.   Sticky notes were created by trying to invent a new type of super glue, so you never fully know where the next great idea may come from.

What does your internal communication look like?  Does your staff feel that they have the real ability to influence change and bring forth ideas?  Do you have a good system, formal or informal, to get ideas from the trenches to the people with the ability to make it happen?  These are all key questions that you need to ask yourself.  Too often when looking to identify new opportunities we fail to look in the most obvious places.  The people that we rely on to perform the day to day functions will quite often have the greatest insight on where the opportunities lie.  We need to tap that resource and maximize the benefits.  Our ability to do more with less has never been more important.  We need to be certain that we have done our part to identify and implement that next great idea.

Better, Faster, Cheaper

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Better, Faster, Cheaper.  It is the battle cry of any good government reformist.  How can you argue with the premise?  Shouldn’t we all strive to reach this lofty goal? I certainly think we should.   In reality though, it seems that the focus as of late is really only on cheaper & faster when we talk about government services.  Better never enters into the dialogue.  If something costs less, then that becomes the default answer.  We talk about, but our policies don’t back up the rhetoric.

I’ll be the first to admit that many of the processes that we have engaged in are not cheapest or fastest, but let’s not forget that part of this is by design.  So why would we intentionally have inefficient processes?  Well, another rallying cry of any good government reformist is transparency and accountability.  Everyone needs to know everything at all times.  Is this better, faster, cheaper?  Well it is certainly not faster or cheaper. The need/desire to be open and transparent leads to a slow, costly, cumbersome bureaucracy.  Is it open and transparent?  Yes it is.  Is it efficient?  No, it is not.

Now this does not absolve us of the need to be the best at what we do.  I would also suggest that the best is rarely if ever the cheapest.  The old adage that you get what you pay for is true in the private sector, your home, and in local government.  Ask any successful business person, what is the most important ingredient to a successful enterprise?  The answer will uniformly be talent.  Hire the best people you can and let them do their thing.  I would suggest to those who believe that the best way to save money is to impose further restrictions on locals consider this concept.  By employing a top down, control filled environment as a way of controlling costs: they are in reality making every government less efficient.  We need to attract the best and brightest people possible and let them lead.

We must remember good people always have options.  If we create an environment where the best and brightest choose not to serve locally because we have made it untenable, have we won because it’s cheaper? Are we better off if we have degraded the talent we can attract because of the environment we have created?  Would any business survive with this approach?  Clearly not.  Why then would we use this as our model of success for local government?  In the phrase better, faster, cheaper:  better comes first for a reason.  We should be striving to make Michigan’s communities the best, not the cheapest.

Is it as simple as cutting costs?

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So much is being made about the need for government to be more efficient. Consolidation and collaboration are the buzz words of the day, and are presented as the cure all for the financial challenges that all local governments are facing. So is it really that simple? Is it true that all we need to do is cut costs to some hypothetical number we can afford?

It occurs to me that the simplest challenge that locals face is matching costs to revenues. It’s something anyone with simple math skills can do. What I am bringing in must exceed or equal what goes out, simple stuff. Why then do so many locals have financial issues? The answer lies in the paradoxical nature of local government services. Every time you cut services you reduce the earning capacity of the city.

So why would service cuts diminish a cities earning capacity? While it is easy to understand that police cost money, in fact a lot of money. It’s harder to understand how cutting costs, a.k.a. services, reduce a cities ability to raise revenue. Think about it like this: what is the cities equivalent of a manufacturing company’s factory? Or to say it another way, how does a city generate revenue? It’s the properties located in that city, and taxes assessed against the “value” associated with those properties. So a simple query: would you pay more for a house in a community with “more” services or “less” services? Great parks or no parks? Good roads or poor roads? Adequate public safety or minimal public safety? I think the answers to all these questions are obvious. Better services equate to better property values, and increased revenue to provide critical services.

Turn around companies make a very handsome living by helping companies be more efficient, and shed themselves of losing components of their business. I am quite certain that as part of that quest for efficiency they would not eliminate the fundamental earning capacity of the company. If the books were balanced by eliminating the manufacturing capacity of the company, then there is no company. The same holds true for cities. Any effort to restructure and reduce costs must preserve the earning capacity of the city. In other words, if our cost cutting only approach leaves a place where people don’t want to live, then we have failed. Herein lays the challenge before us. Increase efficiencies to be sure, but retain the character and fiber of our communities. If not, we have only exacerbated the very problem we set out to solve.