Reform Stage

Stabilization of finances isn’t enough. The organization needs a vision to become financially sustainable and create value for the public. Leadership in the reform stage involves creating a strategic vision for the organization and putting in place the structures to realize it. A checklist of key tasks is below:

Help the organization articulate its strategic vision. Ideally, this would take place through a formal strategic planning process. The process should result in formal mission, vision, and value statements. It should also create a set of prioritized goals and objectives. These goals should address service and financial issues.  If a formal strategic planning process is not possible, a simplified priority-setting process can work.

Further involve staff in change process. In the Bridge Phase, most of the work is performed by the leader and his or her core recovery team. Other staff is involved, but this tends to be for providing input and data to the leader and the recovery team. In the Reform Phase, the leader can involve staff more intimately. For example, staff teams may be used to analyze the deeper, long-term issues facing the organization and to propose strategies to address them. However, the leader will need to provide a well-defined framework for staff involvement to ensure that discipline is maintained and that the involvement activities produce good results.

Ensure accountability. In distressed organizations, managers are often not held accountable for financial or service results. To address this, the leader should introduce simple performance management systems. For example, develop a set of S.M.A.R.T. goals for each employee. Regardless of the system details, it is critical that the performance management system and the concept of accountability be taken seriously. The leader will have to demonstrate that there are consequences for not doing so.

Focused training. The leader will need to provide training in areas critical to realizing the financial recovery strategies. For example, employees may need training in process improvement methods or on how to use a labor-saving technology. Training in the Reform Phase is especially important if training was reduced or eliminated in the Bridge Phase.

Communicate. The leader must continue to get out the message. Communications should be regular, made to a wide audience, and convey meaningful information. Err on the side of over-communication.

Align rewards and incentives with recovery objectives. In public-sector organizations, especially in one recovering from financial distress, financial incentives are likely out of the question. However, self-interest is part of human nature. Therefore, the recovery leader must develop incentives as best as he or she can. Possibilities for incentives are:
  • Job security. Many people join government because of perceived job security. Play to that interest by making financial recovery about maintaining job security.
  • Mission-driven. Many public employees have a real interest in serving the public. Use the organization’s strategic vision to reinvigorate employees’ passion for the job.
  • Professional pride. Working in government is often described as working in a fishbowl. Use that phenomenon in reverse. When a key public institution in the community is in distress people will pay attention. Employees will want to be seen as helping reverse the decline.
  • Non-financial rewards. Non-financial rewards like award ceremonies, public recognition at a board meeting, or first choice of work equipment can make a real difference in performance.
  • Disincentives. Disincentives may play a role as well. For example, require managers to explain negative variances in their budget to a subcommittee of the board at a public meeting. 
  • Temporary assignments. Assignment to special projects can provide opportunities for valuable new experiences and perhaps eventual promotion.

Simplify and clarify organizational structure. Usually it is better to avoid changing the organizational structure too much in the Bridge Phase unless it is really needed to establish stronger controls. However, in the Reform Phase steps can be taken to flatten the hierarchy and further clarify reporting relationships.

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