Each year, the City of Melbourne provides services and delivers programs for those who work, live or visit our municipality. For our almost 70,000 ratepayers, those services are consistently delivered with the lowest rate rises in the state – at or below CPI for the last seven years.
Over the past decade, the City has undergone an urban renaissance. The number of people living in the city today has more than doubled, to around 70,000 residents. The municipality has more than 12,500 businesses and 328,000 workers. At least 700,000 people a day visit the city.
This exponential growth provided a timely opportunity to review the services and programs we deliver, and the way we are delivering them.
That is why I commissioned Ernst & Young to conduct an Operational and Efficiency Review - to examine the way the City conducts its business, and to see if ratepayers are getting the best value for money.
In summary, the review found the organisation was like an elite athlete who hadn’t exercised for more than a decade. We have the potential of an extremely high performer, but our operations are clumsy, fat and slow. Now is the time for us to lace up our running shoes and get back on the track.
Critics will undoubtedly ask – why did you have to pay a consultant $300,000 to tell you that?
That is a fair question, and my response is, as the Chief Executive I decided to independently assess the performance of the organisation – to put it under the microscope. This was, in part, to ensure I exhausted absolutely every option available to find ways of making the City of Melbourne the most efficient organisation I could.
Ernst & Young’s review confirmed my long-held belief – that essentially, there are no new significant revenue streams available to Council. Only $700,000 in potential new revenue sources was uncovered. In a $300 million operating budget, that is a drop in the ocean.
In short, we have almost strangled the golden goose, so we have to make certain we use the eggs much better than we currently do.
To that end, I intend to review every service we deliver to ascertain whether we should be acting as the provider, the deliverer or the facilitator of that service. We need to make certain we continue to meet the changing demands of the City’s core business requirements, and deliver those in priority.
Recommendations will be put to Council to see if we can gain political support for a complete review of all our business priorities.
We will maintain the outstanding services we currently offer ratepayers, workers, students and visitors – but we will review the way we deliver them.
And it goes without saying that if we are reviewing our services, we need to review the staff model required to deliver those services – starting at a management level, and continuing through all levels of the organisation.
The Ernst & Young report found the organisation is ‘disaggregated and top-heavy.’ I agree with that. As I have explained to our 1100 staff today, we will reduce the size of our management team. This will see a net loss of 12 executive roles, including two directors. I have also immediately identified a reduction of 14 permanent staff as a consequence of the management team review.
This means that some branches will be merged, reducing the total number of branches from 35 to 28.
The restructure will lead to a net savings of approximately $1.55 million in the 2007-08 financial year, once the organisation’s obligations around these changes have been met.
But this is just the start. Ernst & Young’s assessment of our workforce is that we have the capacity to achieve up to $5.7 million annualised cost savings in our labour budget. At this point, until the full analysis is done, I can’t tell you the exact impact on our workforce. Initial estimates indicate around $4 million in savings in the 2008-09 financial year due to these workforce changes. And I can assure rate-payers, I am committed to achieving these savings across the organisation by reviewing our services and how we deliver them.
Roles that are no longer efficient or effective will be made redundant. Staff in these roles will be offered extensive support services for redeployment or redundancy.
I would like to clarify that the $4.2 million efficiency dividend relates to the 2007-08 draft budget which has been adopted in principle by Council.
On 22 June 2007, I will present to the Special Finance and Governance Committee specified savings of $4.2 million which will reduce the proposed budget by that amount, generating a small surplus. This will balance the budget.
These decisions are not just about reducing the labour budget. Ultimately, they are about making our organisation more streamlined, responsive and relevant – great news for ratepayers.
No one likes to see staff go. But in the end, it is my responsibility as Chief Executive to make the tough decisions. This is undoubtedly the most appropriate course of action to undertake to ensure accountability and efficiency in all levels of the organisation. Quite simply, it is the right thing to do.
The net gain for ratepayers will be a leaner Council, more responsive to their needs.
This brings me to address recent statements questioning the City’s economic credibility. We have achieved a AAA credit rating each year for the last five years. This confirms we have a strong balance sheet with low financial liabilities and a sound economic base with solid growth prospects. This rating demonstrates our commitment to prudent financial management.
Let me make this clear - the city is not in the red. We are not funding an overspend. This is about driving ratepayer dollars further.
The Ernst & Young review identified potential operational savings of at least $11.4 million annually. Some of the areas will be one-off savings this year, but in the long-term we have to generate a different premise that delivers against these numbers. I believe these savings are attainable – but realistically, will take at least two financial years to fully achieve.
When I started as Chief Executive more than three years ago, I made some headway into shifting our focus towards a service-oriented organisation, but soon realised this was not enough – that a comprehensive review and analysis of our services and operations was essential to build momentum for change.
The findings and recommendations of the Ernst &Young review provide the framework for a way forward. I will adopt this report as a blueprint for how we change the organisation – with a focus on personal and corporate accountability from the CE down.
The City of Melbourne is a great organisation that has helped position Melbourne as the world’s most liveable city. That is why I sought to be re-appointed to the role of Chief Executive. I had commenced this review process, with the full support of Council, and I wanted to be here to oversee its implementation. Two months ago, Council was unanimous in its decision to re-appointment me. I look forward to this unanimous support continuing as we work together to make our organisation even greater for those who live, work, study or visit our city.
View the Operational and Efficiency Review reports
