In this article, Peter Nichols compares the advantages and disadvantages of two different approaches to municipal organizational improvement: the incremental approach to making change and the "big bang" restructuring approach.

As a normal matter of doing business, many municipal councils and administrators regularly examine specific opportunities for reducing costs, avoiding expenditure, or reorganizing or restructuring municipal operations to achieve greater efficiency or improve service effectiveness.

Those examinations are often precipitated at budget time, when the fiscal balancing act requires a review of service needs and priorities and a search for savings. But they can occur as well at other times during the year, as programs and services are regularly reviewed, staff needs are reassessed, and individual restructuring opportunities identified. They are an inherent part of any continuing improvement process.

There are a number of advantages to this regularized, piece-by-piece approach to change: the initiatives can be focused and carried out quickly, and they are generally less disruptive to the overall organization than are more comprehensive restructurings.

The problem with this approach is that the changes are typically made in relative isolation from the rest of the organization and they may overlook opportunities for broader or intra-organizational savings. They also may not involve a conscious choice or trade-off vis-à-vis other alternatives elsewhere in the organization: for example, a decision to reduce costs in the road maintenance area may be admirable but perhaps the municipality would be better served by reduced costs in some other area. The danger is that changes made in isolation may be suboptimal from the standpoint of the overall organization.

Yet another problem with the "micro-level" and piece-meal approach to municipal improvement is this: the changes adopted are often made incrementally and, after some time, the additional benefits and savings that accrue from further changes "at the margin" begin to fall. It becomes more and more difficult to squeeze out further improvements -- in economists' jargon, a case of diminishing returns.

The other approach taken to municipal organizational improvement and restructuring involves a "big bang" process in which a more holistic and comprehensive reexamination of the organization is carried out. The recent City of Edmonton restructuring initiative -- discussed in last month's Urban Perspective article -- would likely fall into this category. The major advantage of these more infrequent but comprehensive reexaminations is that they tend to consider broad, organization-wide objectives and priorities and intra-organizational relationships and trade-offs. They can yield major organizational improvements and cost savings. A disadvantage of these more fundamental reevaluations is that they can be costly to undertake, and threatening and disruptive to the organization.

The two approaches to change are similar in some ways to the alternative uses of zero-based budgeting versus the more conventional incremental approach to budgeting. The zero-based approach reexamines from the perspective of a "blank sheet" all expenditures from the bottom-up and the top-down while the conventional budgeting process tends to focus on net changes from the current budget.

In fact, the two approaches to organizational improvement should not be mutually exclusive. There is a need for municipalities to carry out regularized and continuing reviews of their operations, to identify incremental opportunities for improvement, and to fine-tune. There are also significant benefits to be achieved by "stepping back" periodically and taking a comprehensive systems approach to the organization. These more comprehensive reexaminations are unlikely to be required more frequently than once every three years or so.