In the Flow : Cutting Local Body Cost

Over the past year or so, Central Otago District Council (CODC) has saved its ratepayers about $700,000 in roading costs alone. It’s also reduced the time taken to process consents from over three weeks to under eight days; fields fewer complaints and has happier staff.
All this at time when CODC has been shooting rapidly up the growth curve – making the top three fastest growing councils in the country for the past three years.
What’s its secret – and could Auckland’s super city planners learn thing or two from this small South Island council?
When John Cooney took the helm at CODC seven years ago, the organisation he was employed to manage looked very different to what it is today. Back then it only had to handle about 50 dwelling building consents year, the total housing stock totted up to 8800 and the rate take totalled around $12 million. Those figures have respectively climbed to 250 consents, 11,000 stock and $19.2 million in rates.
But the change doesn’t relate just to numbers. Central Otago’s District Council, says Cooney, is completely different organisation.
“The path we took was not about tweaking the organisation – you’re actually creating new organisation.”
That path started back in 2005 when Cooney was looking for solutions for handling what was proving to be significant and ongoing growth spurt in council work.
“Our initial response was very traditional – we started functionalising our organisation. So we took an end-to-end process like building consent, for instance, and chunked it up into different pieces of work – and it got whole lot worse.”
The time taken to process consents blew out because the relevant documents now had to travel through more in-trays as they traversed the different functions from administration to planning to building control…
“Because we broke the job down into quite specific parts, it ended up being handed from one person to another with the potential to sit with each for up to week while the customer got four separate communications from us saying ‘you haven’t given us the right information’.
“Because the work we do is fairly multi-faceted, we thought we could break it down into different bits and that would make sense but it’s not like that at all.”
For Cooney, the penny dropped when he read the work of UK systems-thinking guru John Seddon whose company Vanguard Consulting specialises in applying what’s known as the “Toyota way” to service sector work. That inspired trip to check out how systems thinking was being applied to organisations in the UK ranging from power companies to the police.
Amongst the learnings – and this is good news to all those frustrated by the apparent lack of “service” in service organisations – is to look at the organisation from the outside in and identify what is “value” (actually providing what the customer wants) and what is “waste” (all the stuff that doesn’t provide value).
The sad reality is that when all the various areas of work are thoroughly scrutinised, the value piece doesn’t amount to much.
“In every process that Central Otago District Council has dug up so far and understood in detail, the value work has never totalled more than 10 percent of the entire process,” notes Vanguard consultant Sarah Benjamin, who has spent several months in New Zealand working with CODC.
Okay, some of the “waste” relates to things like legal requirements and you can’t eliminate all of it, but unless you’re pretty stringent with the thinking, waste does tend to creep back in, she suggests. As to waste you can eliminate – well when you analyse all the actions taken in process, it is rarely anything less than 50 percent.
“Our own engineer was initially quite cynical about that but having been through the process, she sees where the opportunities are and believes the waste is in that 40 to 60 percent level,” says Cooney.
He notes that once you start looking thoroughly at each of the functional areas – building, planning, roads, utilities – you become more aware of where and how they interconnect. “By the time you get to utilities, you’re looking back at planning and saying – ‘why not do such and such’. You suddenly start seeing the organisation as flow rather than series of discrete parts.”
And one of the things you discover then is that many of the actions taken to save money in one area actually add cost across the flow – often because those making decisions don’t look at the impact beyond their own functional area.
Outsourcing work, for instance, might look like cost-saving option in one area, but it also might create greater “demand failure” (when customers don’t get what they want or asked for) in others. That’s when road users complain that the remedial work that was done either didn’t solve the problem or created new one. Interestingly, Cooney is happy to admit that the input from service users is usually spot on.
“Farmers tend to know bit about road-building because they build tracks so they’ve always got something to say – and the more we got into this process, the more we realised they were closer to being right than we were. They understood how the road performed because they were using it all the time. We had all the systems and decision-making processes out here that led to particular programme happening over there… and they’re asking ‘why are you doing that?’”
Now user input can be woven into the work, either before or as it is happening, and this inevitably saves money – or re-work, which turns out to be major element of waste. Digging up the road over and over again is sure sign that functionalism rules and the right information isn’t being accessed when it’s needed. That’s often because traditional top-down, centre-out organisational structures don’t have the full picture, which means they either address the wrong problem, tackle the right problem in the wrong way, or initiate work that just isn’t necessary.
And if at first it doesn’t work, they often keep trying to do the ‘wrong thing righter’, says Benjamin wryly.
“For instance there’s belief that standardisation is good – if you standardise things, they are going to be easier and cheaper to administer. That might apply to manufacturing but not to service. If you apply that thinking to service, it just completely inhibits your ability to absorb variety.”
And that not only adds cost but increases frustration levels for both customers and staff. Often the latter know very well that the service they’re providing isn’t delivering the sort of value customers want – and in systems-thinking approach, they can get to do something about it. One of the mantras of this approach is that if things aren’t working, it’s safer bet to blame the system than the person.
But first, you have to earn their buy-in. That, says Cooney, can be bit of hurdle.
“You have to get past the belief that this is just another crazy idea. But because of the nature of the method, as you go through the step-by-step analysis, things start to become clear. Then those involved get really interested because they get an understanding of their work in completely different way and can see the potential to deal with things differently.”
One of the best attributes to bring to the task is curiosity. The only way you can understand your organisation as system, says Benjamin, is to understand the thinking, logic and context that created it in the first place.
“Once you understand that, then you start moving into culture change because you change the way you think about it. You suddenly understand that if you viewed this process in functions you’ll only every get results in functions, you will only risk making decisions within functions. And once you’ve clearly seen the effects of that and start to see it as an end-to-end process, then you start to challenge the basis on which you make all decisions about it.”
Doing the work and improving the work should always “be the work”, says Benjamin – but traditional command-and-control wor