Excelling in Times of Fiscal Distress

There are no miracle cures. The key is focusing on the strategic big picture.
by | October 1, 2008

During my 30-plus years of experience in the public and private sectors, I have developed a theory that well-run organizations not only survive economic downturns but also create the momentum required to excel.

Six characteristics distinguish successful government organizations from the rest of the pack. These include:

1. Establishing an early-warning system to discern which environmental trends and factors will have an impact on strategy and timing.

2. Reacting quickly to those trends and factors.

3. Having "migration" strategies in place early to weather the storms of changing environments.

4. Understanding community values and making choices based on priorities.

5. Applying the rigor required to determine whether programs are working.

6. Never being satisfied with the current level of performance.

Establishing an Early-Warning System

Most of us can articulate the early-warning signs that preceded the current economic downturn: Global forces that dramatically changed the local, state and federal playing fields. Skyrocketing fuel costs. A failing housing market that robbed our neighborhoods of vitality and our organizations of the ability to generate sufficient revenues. Property tax limitations.

Yet, many of us failed to correctly interpret these early-warning signs in relation to their impact on our government organizations. Having a system in place to track and analyze changes in the environment that signal a potential downturn and the need for course corrections is essential to sustaining and improving our organizations.

Reacting Quickly to Environmental Changes

Changing course quickly can help an organization survive and even thrive during bad economic times. A cost-cutting strategy poll conducted by the International City/County Management Association in August revealed that many local organizations moved quickly to manage revenue, service delivery and personnel challenges:

o The majority (68 percent) added or increased user fees and charges for services.

o Fifty-five percent froze vacant positions.

o Nearly 40 percent rescinded previously approved capital expenditures, while 39 percent reduced services, and 38 percent contracted out at least one service.

o Thirty-six percent implemented shared services.

o More than a third increased utility, sales and property taxes.

o Twenty-seven percent used volunteers to provide some services.

To align programs with current and future community priorities, 27 percent of responding jurisdictions also conducted a performance audit of one or more departments or processes to ensure that they were the right programs and that they yielded the desired results.

Implementing a Migration Plan

In the June edition of ICMA's Public Management magazine, and in an August ICMA audio conference, Chris Fabian and Jon Johnson of Jefferson County, Colorado, described how the county moved from double-digit growth in population, tax revenues and spending in the 1990s to recognizing that the county's immediate and future fiscal well being were in jeopardy.

The prognosis for the county's fiscal recovery was poor, with significant slowdowns in revenue, economic and population growth; a projected exhaustion of reserves within two years; and an estimated general-fund shortfall of $10 million within a year.

To stop the bleeding and to stabilize the county's fiscal health, Fabian and Johnson convinced county commissioners that they needed to migrate to Plan B. This meant such changes as starting to spend within their means; establishing and maintaining operational reserves; understanding budget variances that led to fiscal volatility; being transparent about the "true cost of doing business"; and using trend data, economic analysis and long-range planning to forecast revenues and expenses and monitor the impact of decisions on the county's overall fiscal health.

Using Community Values and Rigorous Program Evaluation to Make Choices Based on Priorities

Pessimistic about the prospect of increased revenue, Fabian and Johnson convinced the Jefferson County board that it should make future resource allocations based on the highest priorities of county constituents. This was achieved by carefully evaluating each service the county provided; understanding those services better within the context of local priorities; providing a higher level of understanding among decision makers, enabling them to rank services based on community priorities; and articulating to county employees and the public how services are valued and funded and how lower-priority services are divested.

Jefferson County eventually moved beyond stabilization to an ongoing state of fiscal health. The result was a $13.7 million reduction in the 2008 budget, without a single layoff.

Never Being Satisfied with the Status Quo

In my March Management Insights column, I discussed the importance of using performance data to make sound management decisions. Implementing broad performance measurement and management strategies is also essential to ensuring an organization's ongoing improvement. Never accepting the status quo means focusing on the strategic big picture and linking that picture to departmental objectives. It requires monitoring and adopting leading practices. It is about not only survival, but continually striving to move beyond where you are today.

There are no miracle cures for addressing the ills of our fiscally challenged governments. However, demonstrating leadership by recognizing and reacting quickly to environmental changes, switching course when necessary, evaluating and prioritizing programs to ensure ongoing success, and focusing on continuous improvement can move a government organization from life support to a state of good health, and a community to a new plateau when the recovery happens.

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