When someone asks me to review their small business, I have a series of questions that I ask about the business that will give me a brief snapshot about the business before I start to dig deeper. The first two questions are critical: Did you make a profit last year and will you make a profit this year? Businesses can exist for a whole range of reasons and can have lovely flowery motherhood statements about saving the world but, first and foremost, if a business doesn’t make a profit on an ongoing basis then it will eventually cease to exist and you can then forget about all of the other objectives. Even a not-for-profit business needs to see a bottom line in the black rather than in the red. The emphasis on how big that number is will be reduced but a bottom line in the red means that eventually the organisation won’t be able to pay its bills.
After the first hurdle, I like to ask a few more questions to gain some insight into the business. Do you have a plan for the future (call it a business plan if you must)? How much money are you currently owed and what is the age of those debts and what is your process for pursuing that money? How much money do you owe and at what age? Do you have a grasp of some basic business metrics such as your gross profit and your break-even figures? Do you have an employee handbook and documented staff training plan? What do your latest client satisfaction survey results show (I make the assumption that a good business regularly surveys its clients)? What is the future of your particular industry? Do you regularly review ways to decrease expenses and increase revenue?
There are many more questions I like to ask to gain a ‘feel’ for a business. Asking twenty or thirty questions starts to give you some indication of the state of a business but then it is critical to actually speak with the staff and some clients of a business. I want to know what the culture in a business is. Some numbers on a report can give me some indication but there is nothing like a one-on-one discussion with the leader of the organisation to gain deep insight into the culture within. Further discussions with staff quickly peel back the public veneer and reveal what makes an organisation tick and give a much greater indication of future success. Similarly by speaking with some randomly selected clients an indication of how a business is perceived is revealed.
This is the process I would take with a small business with even just a few employees and a few hundred thousand dollars in turnover.
I have therefore found it interesting that the current ‘Fit for the Future’ review of the local government sector has chosen a desktop review of all 152 councils in NSW based on answers to seven questions. IPART were chosen to review the paperwork submitted and deliver a result on each Council as either a ‘Fit’ or ‘Not Fit’ Council.
Although Dubbo was regarded as ‘Fit’, I struggle with the process. I have described just a small component of the way I would review a small business. Councils across the State are large organisations. Combined, the 152 Councils in the State are custodians of $137 billion worth of assets; employ 47,193 people; maintain 164,564km of roads and have 1,475 Councillors as the ultimate decision-makers across these Councils.
I am yet to be convinced that a desktop review of paperwork submitted to the State Government can deliver a resounding yes or no as to the future viability of these Councils. In particular when only seven criteria had to be addressed. If a Council could meet the seven criteria and was additionally deemed by IPART to have the scale and capacity to engage effectively across community, industry and government to deliver key priorities then the Council was ‘Fit’.
Even the seven criteria were questionable. Those seven were: Infrastructure backlog ratio; Asset maintenance ratio; Debt service ratio; Operating expenditure per capita; Operating performance ratio; Own source revenue and Building and infrastructure asset renewal ratio.
Where was the judgement on the management ability of the Council? Interviews with key personnel? What about community engagement and satisfaction? Cash flow? So many items that a normal business would be judged on were simply not a part of the assessment process.
Now Councils have thirty days to submit their submissions – with a strong encouragement on how you see your Council as part of some merger. Even if you have been classified as ‘Fit’ but you neighbour a Council that is ‘Not Fit’ the State Government would like to know your merger preferences. Despite IPART assessing 52 proposals as being ‘Fit’, I could only manage to find two of those Councils who didn’t neighbour a ‘Not Fit’ Council.
There is certainly a lot left to be desired in the process that has occurred but, the 152 Councils in NSW are just a whim of State Government with no official recognition in the constitution so, in my experience, I predict that Councils in NSW will fight to the death; accept the final decision and then get on with providing great services to the local communities that we serve in whatever form we end up existing.
Tell me if you think amalgamations are the answer – or if indeed there is a question that needs answering – at mayor@dubbo.nsw.gov.au.