Untying the Gordian knot left by Covid-19

One thing is for sure. These three things need to be resolved in an integrated way. The resolution process will also give rise to some existential questions. What is our purpose? Will we exist in our current form? Can we be financially sustainable? The phrases “unprecedented times” and “new normal” may now be irritatingly overused, but we should not in any way underestimate how hard this is going to be.

Resolving the three-way dilemma will necessarily be iterative and agile management will be important, but let’s start with the money.

Financial constraints

The crisis has hit councils extremely hard. There have been extra Covid-19 related costs and central government has been forthcoming (so far) with £3.2b in funding support. There are twin issues:

• The cost associated with changing demand arising from economic collapse, poverty and ill health. It is unclear how demand will change, but on the assumption that there is increased economic hardship and a rise in poverty levels then councils will expect increased costs in housing and homelessness, social care, benefits, debt advice and support.The scale will largely depend on the way that Covid-19 affects health, business activity, employment and working patterns over the next 12 months, which is hard to predict with any certainty.

• The loss of income and potential for recovery or replacement of those income streams. Councils experience this differently, but most are already experiencing to some degree a fall in: business rates revenue – as businesses close and potentially fail; council tax revenue – as people lose their livelihoods and ability to pay; car parking revenues – as people and businesses lock down and travel less; leisure, tourism and arts revenues – as venues close and social distancing renders operations unviable; commercial property incomes – as businesses close and fail to pay rent.The return of these revenues is highly uncertain, but there is consensus that they won’t return to normal and that councils will need to consider other sources of income.

Councils have no choice but plan for a range of scenarios. The worst-case scenarios are eye watering and councils genuinely need to consider a wide range of options when they consider their response. We would expect councils to be having open debates about:

• community participation in delivery of local services – addressing dependence on state delivered services and the capacity of communities to look after themselves
• level of service – recognising that decisions will need to be taken about whether some services should be provided at all
• digital transformation – building on the experience of past weeks to rapidly address digital working and to go digital wherever possible
• organisational restructuring – recognising the opportunity to address silo working and organisational flexibility
• use of reserves – and the time horizon for replenishing reserves used in the crisis
• borrow-to-invest strategies – recognising that interest rates will remain low and that councils will have a pivotal role in reshaping the local economy and place to meet a different future
• creating new and different income streams to replace those that might be permanently eroded or lost
• system integration and cross agency working – eliminating overlaps and inefficiencies across health, police, local government and voluntary sectors
• the possibility that government will demand rapid local government reform – accelerating the dismantling of the two-tier system in favour of larger unitary authorities
• the level of government support that is expected – although given all the other demands this will never cover the gap and should not be relied upon

These debates will generate a range of opportunities. Maybe more importantly, the debate will shape the financial envelope a council will need to operate within and crystallise executive and political will to take some extremely difficult decisions.

The debates will also inform the conversation around strategic priorities.

Strategic priorities

All councils have a corporate plan outlining the strategic priorities of members. Some have a crystal-clear definition of the outcomes expected from delivering against those priorities – others less so. What is certain is that there will be very few corporate plans that remain completely intact considering the economic and social upheaval we are experiencing.

Economy and Community seem to be strategic themes that are rising to the top of the pile or significantly changing if they were already there. The green agenda remains a high priority and will span and underpin other themes. Every council will have areas that are important locally.

The challenge now is to rapidly redefine priorities by:

• developing the local view of changes to the economy, employment, mobility, educational attainment, poverty, health inequality etc as a basis for defining the outcomes needed
• taking a view of how much strategic priorities were costing. This is not always straightforward, but it does highlight the true cost of the inputs needed to deliver the outcomes. It needs to go beyond the capital or directly funded expenditure and assess the degree to which each service was contributing to the outcomes, and maybe as importantly, how they were contributing
• developing an early view of the role and purpose of the council and its position in the wider system. There is a widespread view that councils should take on a community enabling role so that services can be delivered from the community itself. Equally, that councils are at the heart of shaping the local economic landscape. This could involve development of the high street and options for people who no longer need to commute to work. It could also embrace more far reaching concepts like Community Wealth Building.
• taking a view on whether the old priorities are still relevant and the degree to which they need to be shifted. This may mean a minor tweak or a complete overhaul
• defining with real clarity the outcomes of any given priority and how that can be measured. This is important as is creates a firm basis for shaping the level of input and cost needed to deliver the outcome. It creates a clear line of sight between cost and outcomes
• creating the forums for assessing the options and making the strategic decisions on the level of investment needed and from which services. Clearly this is ultimately a political decision but executives can help enormously in creating the clarity needed to make realistic decisions. It is likely that wider stakeholder involvement is needed on some priorities so the engagement approach becomes important

Having defined the priorities and the costs associated with their delivery the organisation will be in a better position to consider the requirements for a change in the operating model – ie the way priorities are delivered.

Operating model

There is much to learn about our organisations as we emerge from the crisis. Despite the best intentions of “never going back” we run the risk of this learning dissipating quickly as people potentially drift back into old ways of working. Organisational culture is a powerful force and we need to take firm steps to ensure recent changes are given the chance to stick.

Because of the very real financial challenges there will be an urgent need to change the operating model – both to deliver financial savings and to align with priorities. The learning from what changed in the crisis and how quickly it was implemented provides a unique insight that will inform the opportunity to secure a step change in the way the organisation works. Key areas to explore are:

• community response – how did the community step up, how can it be sustained and how far can we go in enabling the community to do more for themselves? This will involve the organisation taking on a more enabling role, letting go of some control and choosing to stop delivering some services
• access – how did we change access for customers, how did people adapt to a rapid shift in available channels, how did volumes change and as a result what can we make permanent? Clearly there will be processes created in haste that need tidying up and there will be further opportunities that translate into a lower cost base for the council
• digital transformation – how much of the journey have we already taken, how many services are genuinely digital and how has that translated into a streamlined and digital way of working for both customers and staff? While some processes will have stood up well to a change in access, there will be others that did not work well at all and will need considerable work. Going fully digital will generate genuine efficiencies and a lower cost base
• flexible workforce – how much did we demonstrate that we can work flexibly across job roles and functional boundaries, what did we learn about our people and, how did they respond to a broader role? Understanding this will open the opportunity for a completely different way of organising the workforce, having broader and more flexible roles and addressing silo working. This shift creates capacity in the organisation, again leading to a lower cost base
• service demand – what services did we discover we don’t need – or at least at the current level, what elements of a service did we discover could be done by different people and what services would we choose to strip back if we were financially constrained? This will highlight some real opportunities to adjust the way services are organised and delivered and hence a lower cost base
• use of assets – working remotely clearly changes the way the buildings are now viewed. Many councils have already declared that they will be consolidating into one building, encouraging people to work remotely and considering alternative uses for the office space. This might translate to income or capital opportunities depending on the market for office space. However, there may be the opportunity to repurpose the buildings to help with the economy or other place shaping priorities
• ways of working – part of this is working from home, but did this change the way of working, or just the location? To what extent did people become more outcome focussed, needing less management, collaborating with colleagues in a different way, being trusted to deliver and being monitored on what they delivered rather than being “present”?
• ways of managing – how did our senior and middle leaders perform and did they respond to the changes in working patterns? In many cases organisations discovered “agile” leadership and management and found that they could deliver extraordinary things at pace. Hanging on to this will be invaluable

All of these areas need to hang together as a coherent whole and a new operating model can be defined so that it underpins strategic priorities and delivers a much lower cost base.

Bringing it together

The challenge is finding the right way of untying the Gordian knot.  There are five ingredients:

• Having a clear view of the current cost base and performance of the organisation – in order to accurately evaluate the financial and headcount implications of changes to strategic priorities or the operating model and to provide a sound basis for then realising the benefits when the changes are made
• Revisiting the role and purpose of the organisation to ensure recovery and renewal is firmly rooted in what key stakeholders want the organisation to become
• Creating a well-shaped workstack of initiatives that can be evaluated against financial objectives, strategic outcomes and operating model design principles
• Creating a suitably engaging process for a range of stakeholders to be involved in evaluating, prioritising and making decisions around a range of potential initiatives
• Creating an agile delivery programme that can be used to manage a portfolio of initiatives ranging from urgent changes that just need to get done at pace through to long term programmes that might be delivered over a series of years. Also recognising that the debate will continue and the programme will change.