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The benefits of reengineering in Amalgamated Councils

November 27, 2020

It's been a big year for all of us, but especially for the 20 Councils in NSW that were amalgamated in 2016. These Councils have faced additional challenges that were brought to the public’s attention via some recent adverse media coverage:

The NSW government's controversial council merger policy is in crisis, with the 20 amalgamated councils losing $1.03 billion in three years and ratepayers facing hikes in rates and cuts in services. And as some merged councils battle for survival, others are under fire for overspending and mismanagement of questionable projects.

SMH 31/10/20

The reality of creating these merged Councils has precipitated the need for new approaches to almost everything - from strategies and policies to creating teams and organisation structures, new identities and branding. It has also resulted in new approaches to community relations, systems and service standards, and creating new operational procedures for delivering programs and initiatives.

Unrealistic expectations lead to disappointment

The recent negative press referred to above blamed the merged Councils for their financial woes. But blaming the Councils for their financial losses doesn’t factor in the almost complete reinvention that needs to happen in order to create the new Council. In fact, history shows that the claims of financial savings that are often made by proponents of amalgamation are often over-inflated.

For example, McKinlay Douglas (2006) reports that amalgamations in South Australia in the mid-1990s were projected to save $150m per annum. But in practice, the changes saved only $19m. The Queensland Treasury Corporation (QTC) also reviewed the 2007-2008 amalgamation process, which reduced the total number of councils from 157 to 73. The QTC found that the costs were substantial, reporting a total cost of $184.71m across the 24 Councils involved.

Unfortunately, some of rationale given by state governments for amalgamations set up unrealistic public expectations of financial savings that may never be delivered. This is not because of mismanagement, but rather because of the practical realities involved in their implementation, including:

  • When there are disparities, both service and salary levels tend to harmonise upwards in response to community and workforce expectations
  • Replacement of IT systems and equipment is hugely expensive and disruptive
  • Employment protection provisions in NSW have prevented the shedding of staff for three years
  • Some services offer economies of scale across a larger area, but some are in fact more expensive to run
  • The government policy of freezing rating paths has prevented merged Councils for applying to increase their rates
  • The reworking of policies and processes occurs on top of business-as-usual service delivery and therefore requires some additional resources

The good news

The good news is that amalgamations have delivered and will continue to deliver some exciting benefits for those Councils and their communities. The post-amalgamation business process reengineering that many Councils have conducted has also highlighted previously unidentified risks and blind spots. Many of these had the potential to negatively impact on the previous Councils’ financial and community service performance capabilities.

Merged Councils offer more ‘clout’ in advocating for their communities, with more political strength and influence as a result of their size. Finding new ways to operate and harmonise their policies and procedures tends to generate innovation and improvements. The creation of bigger councils generates improved purchasing power, more equitable delivery of services and the capacity to employ more specialist staff. This in turn has resulted in these Councils being able to deliver more cost effective and improved services and programs to their communities.

Centium is pleased to be working with the amalgamated councils in identifying and addressing the inevitable challenges of creating new council entities and in realising the exciting new possibilities of a larger new council. We will continue to work in partnership with our merged Council clients to consolidate and deliver on their new strategic vision, to identify and address their operational and reputation risks and to reengineer key processes.

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McKinlay Douglas Limited (2006) Local Government Structure and Efficiency, report prepared for Local Government New Zealand

Queensland Treasury Corporation (2009) Review of Local Government Amalgamation Funding Submissions: Final Summary Report, prepared for Department of Infrastructure and Planning – Local Government Services

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