Procurement Perspectives: Corporate governance mechanisms within a municipality

A close relationship exists between the introduction of appropriate corporate governance mechanisms within a municipality and the adoption of a proper approach towards strategic planning.

Nevertheless, the two are not the same.

A key consideration in corporate governance is to ensure corporate staff are discharging their office in a manner consistent with the strategic objectives set by the corporation’s ultimate decision-making body.

However, the identification of that goal is not a matter of governance, but rather of policy formation.

Strategic planning within a municipality is a joint responsibility of the municipal council and its senior management. Responsibility for strategic planning is ongoing in nature, rather than a once-and-for-all thing.

A suitable strategy must be pursued on a continuous basis and matched to the changing circumstances of the municipality and the market in which it competes.

Ongoing strategic planning has become more critical as the pace of change accelerates.

At times it requires not simply adjustment by individual municipalities, but changes across the entire municipal sector, for instance due to the recent practice of downloading responsibility to municipalities from senior levels of government.

A key aspect of the strategic planning process is to identify the main problems that a municipality faces and evolve ideas and strategies for solving them.

The formation of a strategic plan for a municipality will normally incorporate:

• assessment of the current position and the opportunities that are realistically open to the municipality from that position (utilizing SWOT analysis: Strengths, Weaknesses, Opportunities, Threats; PEST analysis: Political/Legal, Economic, Social-culture and Technological, each of which involves a consideration of both internal and external factors influencing that position);
• identifying a clear corporate mission. Some organizations possess both a vision statement and a mission statement;
• identification of near term, medium term and long term strategic targets;
• approving the general terms of the tactical plan to achieve those targets, e.g., step-by-step tactical objectives to be accomplished, which are linked to an overall strategic goal, including dates for accomplishment and the procedures for reviewing progress towards targets;
• oversight of the implementation, management and process;
• ongoing evaluation of the results. Reviewing compliance with specified tests to measure success, identifying the point from which the municipality is moving, the intended destination and some way of deciding whether and to what extent it is moving towards those goals; and
• approving departures from previously approved strategic or tactical targets, or the time frame for the attainment of those goals.

To carry out these aspects of strategic planning, the development for a given municipality would normally focus on the following areas:

• organization, structure and development of municipal operations;
• research, evaluation and exploitation of service delivery option;
• performance review and enhancement;
• financial requirements and budget approvals;
• resource identification, requirements and procurement; and
• staff and technology requirements and development.

As the above list makes clear, materials management is only one of several integral elements in the strategic planning process.

It is nevertheless critical for failure to give proper attention to any of the above and to approach all of them in a consistent manner. Otherwise it can completely undermine all efforts to attain a declared strategic goal.

All aspects of planning must be rigorous and must be fully supported by:

• competitive analysis (including benchmarking). Collect data on your own performance, on competitor’s performance and compare the two;
• formulate a plan for catching up with or surpassing the performance of the competitor;
• current state analysis;
• cost benefit analysis;
• risk analysis;
• impact analysis; and
• ongoing review of program implementation.

Strategic planning can be a highly sophisticated exercise, but even a more simplified process is likely to yield profitable results.

Stephen Bauld is a government procurement expert and can be reached at swbauld@purchasingci.com. Some of his columns may contain excerpts from The Municipal Procurement Handbook published by Butterworths.