How can local government continue to meet the needs of residents and provide excellence in services, and still stay on budget?

Do services need to be point scored to be considered as core essentials? What are the best ways to drive efficiency?

The pressures on local government to get key investment, resource allocation and delivery model decisions right have never been greater. Increasing demand for services, rapid technology change and the constant requirement to invest in asset construction and renewal are forcing councils to reconsider traditional business models.

In responding to these pressures and re-examining the way the business of local government is run, leadership is contending with three key factors:

1. Limitations on traditional revenue sources

Pressures on local government have been further compounded by the Commonwealth decision in the 2014-15 Budget to pause the indexation of Financial Assistance Grants to local government. The Productivity Commission recognizes that local government is near its maximum capacity to generate its own revenue. Victoria has also seen the introduction of ‘Fair Go rate capping’.

2. The change in residents’ expectations and the move to customer-centricity

The arrival of social media and other new technologies has meant that constituents are not afraid to express themselves vocally if they believe that issues are not being addressed or council services fall short.

This is aligned to the growing perception of residents as customers, rather than merely ratepayers. Customers expect the same levels of service from government as from commercial transactions.

3. New and rapidly advancing technologies

The landscape of available technologies is changing at an increasing rate. Council officers delivering customer-facing services and those in the back office both need to drive efficiency and providing value for money while stretching the dollar further.

KPMG also sees a number of other factors that individual councils must address:

Ageing technology and under-investment

Many councils currently support a large number of outdated IT systems, set within a complex and inefficient infrastructure that is not keeping pace with current practices. This limits their ability to grow.

In addition, the capability and operating models within internal IT departments have not evolved and can no longer meet local government demands.

Historical planning methods

Most councils’ approach to planning has not adapted to the changing environment.It has not caught up with ongoing development and is largely still run on a functional or organisational level, rather than being service-led.

But it is service-led planning that will enable strategic direction setting, realistic cost assessments, individual staff KPIs, and appropriate funding for technology or outsourcing.

To deal with this new landscape, we suggest considering the following key actions:

Place the customer at the centre

As the most granular tier of government, councils have the greatest capacity to identify and respond to emerging community needs. Across Australia, local governments are striving to move towards customer-centric models of service delivery that anticipate and respond to community needs in a sustainable and agile manner.

Re-think business as usual

Changing community expectations requires a continual process of self-reflection and evaluation by councils on the way they do business. This requires fresh thinking, of challenging the way things have always been done.

This involves:

• redesigning operating models and organisational structures
• adopting best practice processes
• driving cultural change
• adopting different and innovative methods for engaging key stakeholders
• considering alternative approaches and models for service delivery
• critically examining every component of the organisation.

Revisit and reshape IT

Councils need to invest in the creation of a future-proof IT architecture, incorporating modern technology principles and practices such as cloud, ‘As a Service’ delivery mofdels, business and process led specification, and agile development methods.

With today’s shift towards cloud-based software as a service solution, systems that were previously out of reach are now affordable to local government. The higher rate of change also requires a greater level of innovation and adjustment in what systems offer to residents.

There is an opportunity to take a fresh look at systems, and to challenge the assumptions that local government is highly specialised, with only limited options available to it.

Think collaboratively

Local governments can no longer afford to only think locally. Regional partners at a local, state and federal level are fundamental to the achievement of better social and economic outcomes within a fiscally constrained environment.

KPMG sees heightened collaboration with like-minded councils around investment in IT service profiling and reviews, operational shared services and innovative knowledge sharing. Leveraging regional and national partnerships is critical to ensuring local investment can be amplified through complementary investments from regional and national partners.

Have an innovation agenda

Innovation is already on the agenda of most councils, but open and effective innovation management requires nurturing and ongoing development.

One area of innovation is what is ‘Smart Cities’. Underpinned by emerging technologies such as the Internet of Things (IoT), cloud computing and ubiquitous connectivity, alongside advances in cognitive computing and machine learning (AI), Smart Cities can enable greater citizen engagement, improve quality of life, provide opportunities for economic development and unlock efficiencies in service delivery.

Does all of this seem daunting? It needn’t be. Challenges are simply opportunities under another guise. As we approach 2020, local councils can take stock, re-evaluate and prepare. They have every chance to get ready for the dramatic shifts and changes in the years ahead.

*Toni Jones is a Partner, Enterprise Advisory, for KPMG. Developed in collaboration with KPMG Partner Paul Low and KPMG Directors Paul Francis and Michael Alf.