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Originally published August 2004, www.gmanet.com
Professional Management in Small Cities~ Cost-Benefit Analysis
by Scot Wrighton, Management Development Associate, Carl Vinson Institute of Government, The University of Georgia

Does our small city need a manager, or is our current approach to staffing still the best?

This question is asked more and more by small cities because the financial, regulatory, legal and managerial complexities of local governance affect even the smallest municipalities. For years, the International City/County Management Association (ICMA) has tracked statistics showing that the council-manager form of government is the fastest-growing form of local government in the United States and the most popular choice of municipal structure for cities deciding how to enhance their form of government. However, ICMA's statistics pertain only to towns and cities with populations over 2,500.

Nearly 60 percent of Georgia cities have populations below 2,500, but the combined population of these 320 municipalities is only 3.3 percent of the state's total residents, equivalent to about half the population of Gwinnett County. Fewer than one in eight of these small Georgia cities has a person designated as manager or administrator or by another title denoting that he or she serves as the chief administrative officer. Roughly a third of the individuals in these scattered managerial posts serve simultaneously as city clerk, purchasing agent, code enforcement officer, personnel director or finance director or combinations of these positions.

There are at least four ways to evaluate whether retention of a professional manager or administrator in a small city is appropriate: cost-benefit analysis, lost opportunity cost analysis, process analysis, and goals analysis. A checklist of these components can be obtained from the Georgia City/County Management Association website.

Cost-Benefit Analysis (do the benefits outweigh the costs of a manager?)

A successful manager should be able to point to efficiency improvements, grants received, savings obtained from better contract negotiations, and other measures that collectively total more than the compensation paid to the manager in a given year. A true cost-benefit analysis, however, is more complicated. In smaller communities in which the administrator performs varied tasks and duties, the "savings" can be hard to quantify.

Here Are Some Questions to Ask:

• Can an administrator reduce the amount spent on outside legal, auditing, and engineering fees?
• Do outside consultants draft letters to developers or make non-technical inspections or meet with citizen groups to explain projects?
• Are auditing fees higher because the city's budget, chart of accounts and other financial records are not maintained in exactly the way the auditor directs?
• Can routine ordinances be initially drafted by a non-attorney? Could legal hours be saved if a manager negotiated contracts for the city?
• Could the city save money by tightening its purchasing, leasing and bidding procedures?
• Can the city save money by reevaluating its insurance coverage and managing its risks differently?
• Are there cost-saving possibilities for intergovernmental cooperation that have not been developed or alternative service-delivery options to consider? Is there sharing of equipment, facilities and programs?
• Can the city do a better job of anticipating financial problems before they occur and then make the organizational changes that make the most efficient use of public funds?

Local officials may find that existing staff and elected officials in communities of less than 2,500 population already have some of these skills and the willingness to lend them to the city. If not, a thorough analysis of the costs and savings of a manager would be appropriate.

Lost Opportunity Cost Analysis (does the city miss opportunities without having a manager?)

Analyzing the costs of missed opportunities is more difficult. What does it cost a community if it waits to hire a manager until after unplanned development issues are already causing stress on the city's infrastructure? Community leaders can always plan for the future, but they cannot "plan" retroactively. A close relationship with the regional development commission, or time and effort spent on comprehensive planning using a planning consultant can make up for not having an administrator on staff. Small communities should evaluate, however, the comparative costs of doing the work with an in-house expert versus an outside consultant.

Although a private consultant can often bring a greater level of technical expertise than can a manager or administrator who has been trained in general local government issues, such advisors have no management authority to follow up on their findings and implement them if they are approved by the elected governing body.

Some Questions to Consider:

• What have been the financial and other impacts related to an unexpected departure of a staff or council member who had primary responsibility for a program or project?
• Have there been development projects, land-use planning decisions (to limit or encourage growth comprehensively, reactively or on a site-specific basis), construction project planning, opportunities for intergovernmental cooperation, etc., that have proceeded (or not proceeded) because the community lacked the technical expertise, negotiation skills or ability to assess future impacts?
• Are there other areas of technical expertise that council members and/or staff lack that could be provided by a city manager?
• Does the council have a plan for funding mandated infrastructure improvements?

Process Analysis (can the city do things better with a manager?)

Process analysis has to do with the day-to-day management of city operations and the city council's policy-making functions. It also has to do with the clarity and equity of city decisions, speed of response, coordination of effort, and dissemination of pertinent information. Process analysis also includes conducting proper risk assessments and determining whether the council's decisions have been enacted.

Some Process Questions Include:

• Is vital information communicated to all members of the governing body so that they have the whole "story"?
• Does the council believe that its directives are being implemented in a timely manner by the parties responsible for enactment?
• Does the city budget realistically account for the costs of future needs?
• Does the council believe it spends too much time at council and/or committee meetings discussing small details and technical issues rather than policy, contracts, planning and community improvement?
• Is the city's response to problems, opportunities, requests and complaints timely?
• Is one person charged with the responsibility for making sure that actions of one department are consistent with another?

Goals Analysis (will a manager help achieve goals; what are the motives for changing?)

Are council members perceived by the public as leading or reacting? Does the form of government currently in use advance the council's long and short-term goals and objectives? If not, is the current structure a barrier to the implementation of the same goals and objectives? Changing the form of government should not be seen as an end in itself or as a way of dealing with a problem employee or a difficult elected official. It is a process for achieving the city's long-term goals and objectives. If a change will help the community meet its goals, then it should be considered. If it does not advance the city's goals, then perhaps an administrator is not needed, and the need for certain types of technical expertise can be met instead through additional training of current officials.

If the answers to the questions listed here were objectively presented to local citizens, would a majority support changing to a manager or administrator form of government? That decision rests, as it should, with the city council.