Transformation and Transparency - Managing Local Government Performance

This report explores the role of the finance function in local government, and provides guidance on how to enable effective performance management.

The business of local government is far from straightforward. Local government organisations must juggle fiscal, geographical and demographic challenges while addressing the demands of their many political, regulatory, citizen and business stakeholders. This applies to all types of local government: city, metropolitan, regional or state.
Based on surveys of over 1,000 local government and business leaders across the world, this report outlines a new role for finance in helping leaders address key performance management challenges.
Here are some of the key findings:

Transformation is widespread but its value is not fully understood
We found that, while 70% of local government organisations were undergoing or had recently undergone significant organisational transformation, and a further 20% planned to do so within the next 18 months, one third are having difficulty quantifying the financial benefits.

Local governments are struggling to harness the full potential of new technologies
Technology adoption is recognised by 89% of local government respondents as core to transformation efforts, with the biggest improvements being citizen focused. Yet although three quarters of local governments feel that they are effectively measuring the value of their IT initiatives, 40% struggle to manage data and share insights.
Disconnects still exist between what business needs and what local government organisations are providing
Local government and business have not always seen eye to eye. While 60% of business leaders feel that local government understands their needs regarding regulations, zoning, waste, technology and infrastructure, more than 70% do not consider local government efforts in service transformation, online processes and improved transparency to have added any value to their business.
Business has a new role to play in partnership with local government
Closer alignment between business and government is crucial, whether it is through new models of service delivery operated through public-private partnerships, or by opening up data pools to fuel innovation. Yet businesses say that local government is failing to recognise the investment opportunities which will support growth. The finance function, whose professionals speak the language of business, should take an ambassadorial role.

Transparency benefits internal and external stakeholders
Increased public scrutiny of operational performance brings significant incentive to local governments to deliver better services and outcomes. Yet local government is also reaping internal benefits, with respondents reporting “greater collaboration within our organisation” equally with “citizen trust” and “business trust and engagement”. Over three quarters of local government organisations believe that greater transparency had improved the quality of public service delivery.


Leaders prioritise performance management but fail to recognise the contribution finance can make
There is recognition of the importance of effective performance management, with performance review and improvement processes in place in 79% of local government organisations. 86% of local government leaders agree it is a critical focus. Looking ahead 18 months, there will be a significant increase in the establishment of defined processes to regularly review and improve performance, the use of external benchmarking, rolling plans and forecasts as well as outcome-based planning and budgeting. Yet, despite the need for financial skills within the performance management process, we found that finance plays a limited strategic role. This is a missed opportunity for leaders to build capability and talent within their finance function.
Leaders understand their future skills needs but sourcing talent is a challenge
Most local government organisations believe that they have a well-defined talent management strategy, together with a solid understanding of their current skills shortages and future skills needs. However, almost half are struggling to compete with their private sector rivals.
The Four Ts of local government performance
Sustainable success and effective performance management can be achieved by paying close attention to the “Four Ts”. Local government organisations, supported by strong, integrated finance functions, must address four key areas: the transformation of public services and the supporting technology structure, the demand for greater government transparency, and the challenge of recruiting, developing and retaining talent.