Local government leaders have had to make some stark and unexpected choices.
Last year, we were told by council chief executives that austerity was breeding creativity and, as a result, business was getting riskier. Now, we are told how risks are more than financial. Trust and confidence is being questioned in reaction to service cuts, an increasing drive towards commercialisation, and a perceived lack of judgement.
These findings are illustrated in Zurich Municipal’s annual feedback of the opinions of senior leaders in local government up and down the country. Launched at the recent SOLACE Conference, the 2017 Senior Managers’ Risk Report offers a revealing insight into the challenges and opportunities faced by decision-makers at the top of the local government sector.
Last year’s report illustrated the regional challenges and varying ambitions and appetites of local government leaders. In 2017, we have seen a shift as decision-makers assess the fundamental role of councils.
There is growing discussion, and in some cases alarm, among council managers about how ethical and commercial priorities fit together within a drive for increased entrepreneurialism in local authorities and growing public sector commercialisation.
These discussions are far from being resolved and, as the report makes plain, most local authorities are between cultures as they consider 'jumping out of the frying pan [of austerity] and into the fire [of commercialisation]'.
What’s changed from 2016?
The major change shown in the report from the previous year is that some councils are now one step beyond austerity. While many are still cutting services to manage new funding realities, others are instead looking at employing new business models, investing in growth and basing their financial futures on new commercial activity.
There is deep concern among some leaders about the balancing act this new direction necessitates and current public perceptions about the role of local authorities. 'The danger is if local councils lose their moral purpose', said one contributor. Another added that 'local government is being vilified more than the bankers were!'
With this commercialisation, and the difficulties it has thrown up, comes a dawning realisation that despite the changes, it is essential councils remain closely involved with the communities they represent.
"Why are we here?”
In this climate, where many local authorities find themselves marooned between two conflicting cultures and an identity crisis, the question 'why are we here?' is looming large.
Most councils have made planned reductions already and increasing demand and demographic changes make further cuts hard to achieve. Commercialisation could be the immediate solution, but does it represent progress in the long term? As some council bosses ask, 'is our main aim to serve the public or make money from them?'
As councils face the challenge of adjusting to a more commercial way of operating, a balance needs to be struck between the pursuit of revenue and responsibility to the public. One senior manager explained: 'Trust and confidence will deteriorate if the public think we are here to make money.'
This balancing act has led conflict, even within single organisations, about what the primary role of a local authority should be. For councils to function effectively, these differences of opinion need to be tackled sooner rather than later.
Building a solid identity
Whether pursuing commercialisation, or combating austerity through alternative means, councils are changing. To function effectively, individual authorities need to establish what kind of organisation they want to be.
Regardless of the approach, most will need to change the skills and cultures of their organisations and adapt to new relationships and accountabilities.
Some CEOs are recognising that a move into new realms of profit-making activity requires an importing of skills and process from the private sector. One council leader summed it up: 'We have to compete with the local private sector. We will stand or fall.'
If the issue of appropriate staffing is not met head on, the complications presented by fresh revenue streams could cause more trouble than they are worth. Without proper consideration fragmented aims and a lack of solid identity and internal culture could make it harder to identity and attract the staff needed to make commercialisation a success.
This personnel challenge also extends to keeping hold of staff. Not only are councils looking to recruit from the private sector, some are looking to poach talent from each other. Keeping hold of staff needs to be just as much of a priority as recruiting and retraining.
Councils should also prepare for the cultural change that incomers can bring. Once contributor put this clash of cultures in stark terms: 'I’m here to run this as a business – my colleagues are here to run public services.'
There is not a straightforward route to take in this brave new world, however the key to success will lie in acting decisively and at an early stage.
With commercialisation already being embraced across the board, councils are now competing with each other in a way seldom seen in the past. Any fragmentation, delay or unresolved disagreement will ultimately impede decision-making and action.
While a crisis of identity can feel almost inevitable given the scale of change being undergone at some councils, the 2017 Senior Managers’ Risk Report illustrates the importance of full and frank discussions aimed at answering the core question: ‘Why are we here?’. Whatever the chosen path of individual councils, local government needs to get its story straight, and according to CEOs, get much better at telling it.
Rod Penman is pead of Public services at Zurich Municipal