Strategy First, Services Second

When organizations face a crisis or challenge, the results of resolving the crisis are of critical importance. What gets highlighted is often pretty reactionary. The organization is already in a defensive mode, and what gets addressed are often short term quick fixes to stem the bleeding. Sadly, in many cases these don’t do much to solve the underlying problems in the longer term. Doing so requires a different level of thinking and a different perspective. And perspective in a crisis is often in extremely short supply.

I was reminded of this in responding to a request for proposals for a Canadian municipality recently. The identify of the municipality is less relevant, in that their problems are not unique. But they provide a useful case study in what to do—and what not to do—when finally forced to confront organizational challenges that can no longer be ignored. Whether public or private sector, the symptoms are often the same, the default reactions are generally short-sighted and the optimal approach responds to a common pattern.

The municipality in question has reached a point where crisis is imminent. Growth has flatlined, revenue sources are shrinking, and the demand for services—and the costs of service delivery—are escalating. While the organization has previously thrived, economic downturns and the loss of critical industries have taken their toll. Inflation, increasing standards and the consequences of previous investment decisions are in the meantime ratcheting costs up significantly. The operating budget has increased 50% in the last seven years, with no corresponding growth in population. Without question, it is an organization in crisis, where the status quo is no longer sustainable.

The RFP that I responded to sought to undertake a comprehensive review of the services of the organization, and benchmarking of these services against ‘best in class’ examples in other organizations. The expectation as a result of this exercise is straightforward: find ways to structure the organization, streamline roles and realign processes in order to deliver current services in a more cost effective manner.

Our proposal offered to do this, but only in part. The reason we didn’t just respond to what was being asked for is because we didn’t believe that it was the solution the municipality needed, and doing what they asked for wouldn’t help. At least, not enough. It’s important to understand services, of course. An organization needs to know what services it provides. Organizations need to understand the levels of service that are being delivered. There needs to be an understanding of the cost structure and sustainability of these services. And identifying improvement opportunities is unquestionably a useful thing.

Solely focussing on services, as the municipality requested, is unlikely to deliver any significant degree of savings over the status quo. An objective review of how services are being delivered will undoubtedly offer some savings. In some instances, these will be modest – maybe 1 or 2%. In others, savings of 5% might be possible. In a few instances, you might get all the way into double-digits. But that will only get you so far. Even if you realized 7-8% improvement overall, your cost structure will still be massively larger than what it used to be. Worse, getting those savings will be hard. Making the changes required, overcoming resistance and realizing the benefits will be hard, time consuming and expensive. And next year, you’ll likely still see your overall budget go up once again.

Not that the reaction to my comments should be despondence or despair. There are ways out of the current situation, but an end-to-end services review is not the optimal solution. The problem is understanding and identifying where it is most appropriate to look for savings and improvement opportunities. What the municipality in question is hoping for is that someone else has already done the heavy lifting, figured out the problems and found the answers. By benchmarking, they are hoping that there will be great big indicators pointing to where they can realize great big savings. The appeal of this solution is understandable. The reality is that it’s a fantasy.

What is really required, first and foremost, is identifying what is important to the organization. The municipality needs to understand why it exists. It needs to understand its unique place and purpose. It needs to know who it serves, what those citizens and business value most, and how it can best support them. It needs to connect first with why; there needs to be a clear and compelling sense of identity and purpose that guides everything that it does. From there, it can figure out how to fulfill that purpose and deliver on that mission. That will in turn lead to what services it should provide well, what services it should provide adequately and what services it shouldn’t provide at all.

In other words, the municipality needs a clear, compelling, viable, realistic strategic plan. By being clear about strategy—where it is, where it needs to go and the path to get there—it can effectively engage in reviewing its services. From there, it can identify what it should do, and what it should not. That will lead to some difficult conversations. There are services that people rely on today that it should probably not be in the business of providing. There are services that it delivers at levels today that are unsustainable and inappropriate, that the municipality should probably back away from. And there are services that are so essential, so vital, that more investment is required, not less. In a political environment like a municipality, these are hard conversations to have and difficult decisions to make. In any organizations, these are critical choices that determine ultimate, long-term success or failure.

What the organization needed was a strategy first, and a review of relevant services to support that strategy second. That’s what we proposed. Unfortunately, our proposal wasn’t successful. I don’t believe that’s because we were wrong. And I hope that the successful candidate proposed the same solution, but simply made the case better than we did. What I fear is that they gave the customer exactly what they asked for.

Crisis is when we feel least capable of thinking strategically. It is also when it is most essential to think strategically. And if we can’t be strategic on our own, we need the guidance and support of those who can bring objectivity, perspective and insight to the table. Those who provide advice and expertise also have an obligation, however. They need to deliver the answers that their customers need to hear, even if—sometimes—it’s what they don’t want to hear. That is a mindset I have committed to since I became a consultant. It is one I won’t back away from now. In the short term, that may lose me some opportunities. In the long term, it’s what I believe will make me successful. Because that is my focus, my purpose, and my why.