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Jay Kiedrowski, Humphrey School of Civic Affairs,

and John Gunyou, Minnetonka City Manager

Civic Caucus, 8301 Creekside Circle #920, Bloomington, MN 55437

July 28, 2011

Present: Verne Johnson (chair), David Broden, Janis Clay, Paul Gilje, Ted Kolderie, Dan Loritz, Tim McDonald (phone), Wayne Popham (phone)


Summary of meeting: Two former state finance commissioners and current advocates for public service reform describe a need for public managers and administrators to be given the freedom and incentive to innovate. Those providing the services are most likely to identify new ways of doing things and have the final control over whether changes will be implemented well. State policy should be to set the goals for public services and then to step aside allowing local authorities to determine how to meet those goals.


A. Welcome and introductions -


Jay Kiedrowski is a Senior Fellow in the Public and Nonprofit Leadership Center at the University of Minnesota's Humphrey School of Public Affairs.


Before coming to the University in 2004, Kiedrowski was Executive Vice President of Wells Fargo and Company (successor to Norwest Corporation). He was responsible for leading institutional trust, institutional brokerage, and trust operations for the merged Norwest / Wells Fargo organization.


Kiedrowski served as Minnesota Deputy Commissioner and Commissioner of Finance from 1983 to 1987 and budget director for the City of Minneapolis from 1978 to1982. He also served as a researcher and committee administrator with the Minnesota State Senate between 1973 and 1977.


Kiedrowski earned a B.S.M.E. in industrial engineering from the University of Minnesota and a master of arts from the University's School of Public Affairs. He also earned an Ed.D. from St. Mary's University of Minnesota.


John Gunyou is City Manager of Minnetonka, a large suburban community recognized as one of the best-run cities in the nation. He served as Minnesota's Commissioner of Finance from 1991 to 1995.


Gunyou also served as the first Finance Director for the City of Minneapolis under Mayor Don Fraser. During his time with the city Gunyou was honored with the United States Conference of Mayors' Financial Leadership award, and was named the best City Finance Officer in the country by City and State Magazine.


He is a former partner with a large economic consulting firm, an executive at Minnesota Public Radio, and a former middle school math and history teacher. He is a graduate of the United States Air Force Academy, and has master's degrees in economics and public administration from UCLA and the University of Colorado.


B. Discussion -


Jay Kiedrowski: I have been working on redesign issues for 18 months at the Humphrey School of Public Affairs. During that time I have worked with local government officials in cities, counties, and school districts to develop over 100 examples of redesign of local government services (see a report on the HHH website:


John Gunyou: I have been working on innovation primarily at the local level since leaving the state, both as a manager and on various committees.


Those who provide the services should be the ones to redesign them.


Gunyou: One of the things we have done in Minnetonka is to spend most of our time in recent years developing and implementing service plans to deal with the challenges of the "new normal." My theory is that the people who are actually running the place should design and administer the services. When we developed our most recent twenty-year comprehensive plan, we laid out the future trends and challenges, and then let our middle managers come up with the strategies to meet our vision-we didn't come in with proscriptive directives they had to follow.


The result was a lot of very specific business decisions about how we were going to provide services within the resources we would have, given the evolving demographics. Let me give you an example. Like most suburban areas, we're becoming an older city. We think there's value in maintaining age diversity, so our recreational facilities and programs are emphasizing family-related activities. We recently updated our Williston Center to include a large indoor play structure and a zero-depth wading pool to serve children. As a result, our family memberships increased from 25% of the total to 40% in just a few months.


We're also expanding our collaborative arrangements with neighboring cities. We have long operated a joint recreation program with Hopkins. We now share inspectors with St. Louis Park, and provide those services to many smaller communities. We initiated and spun off an affordable housing land trust that serves the western suburbs. A group of western city managers get together at least quarterly to discuss "things we can do together."


The innovations are not huge in themselves, but they can be quite consequential.


Look to bureaucrats and middle managers for leadership.


Kiedrowski: I've got to think that bureaucrats are well intentioned. Most of the change occurs in the middle of the organization-it's not at the top, and it's not at the level of the secretaries. There are plenty of ideas for change out there, but there need to be incentives for people to make changes. There are hundreds of examples we discuss in my report, from wastewater treatment being shared by three communities to improved housing.


Gunyou: Local officials have always been in the business of coming up with good ideas. The laboratories of democracy aren't the exclusive province of states - far more innovation occurs in cities, counties and schools. School districts are involved in joint purchasing because it's a good business practice-they don't do it because the state tells them to.


We've talked a lot about the "new normal" in recent years. At Minnetonka, we made all the necessary downsizing decisions back in 2009 to get well ahead of the wave. And we did it by "repositioning" our operations in such a way to allow us to meet the changing needs of our community-not through arbitrary early retirement and furlough incentives, but through specific reorganizational strategies. As a result, we strategically and permanently cut our staffing by six percent, coincidentally the same downsizing done by private businesses nationwide.


The state gets in the way of local innovation.


Kiedrowski: We tried to move the redesign discussion at the Legislature out of the area of cost cutting to productivity and quality increases. It has been frustrating. We don't run our government to measure systems and performance; we run the government for political returns.


Gunyou: Those of us that are actually providing services at the local level often find that the state gets in the way more than they provide any support for service reform. Here's one example. My city provides health inspection services under contract for Wayzata. The state Health Department is fine with that arrangement for restaurants, but the state Agriculture Department refused to approve the same arrangement for groceries - simply because they would lose the fee revenue. We could have provided twice the level of inspections with more qualified inspectors and responded on a minute's notice to local emergencies, but the state bureaucrats didn't want to lose the fee revenue.


Kiedrowski: One example of state policy disrupting the local managers is the policy allowing open enrollment among K-12 school districts.


Gunyou: I think there's also a downside to such competition. Faced with a declining student population and the attendant decline in state formula funding, the Minnetonka School District has been extremely successful in growing their attendance through open enrollment. While that's certainly good for the Minnetonka school district's budget, it occurred at the expense of other public districts. I'm not sure that the result of the interaction between the school per-head funding formulas and open enrollment policy is necessarily in the best overall public interest.


Implementation works best if driven from the inside.


Gunyou: There's no shortage of ideas, there's a shortage of implementation. I believe that the real problem is how to implement the ideas, and implementation has to be driven by the people inside the organizations - not the policy officials.


Regardless of what a newly elected official might want to achieve, the bureaucracy ultimately decides everything - whether anything eventually gets done. The bureaucracy always wins in a question over whether an innovation will work. That's not necessarily bad. I always encourage policy officials to meet with those who are going to be responsible for actually implementing the change to make sure their visions are aligned. That's how you can get things done - two willing partners.


When I tried to implement a statewide performance budgeting system as Finance Commissioner, the legislative auditor declared that it didn't work, because the Legislature didn't use the data to make decisions. They missed the fact that it was used by many departments to make their budgeting decisions. Change is more often than not accomplished at the micro level.



There is disagreement on the nature of the problem.


Kiedrowski: Another major problem is that there is little agreement on what exactly the problem is that's to be solved. There are still those who believe that we just need to tax or that we just need to cut our way out of this-or, that a combination is sufficient. We believe that there needs to be redesign too. Until we get some agreement we will have a difficult time moving forward.


The state should set outcomes, and then get out of the way


Q: What would you most like to have from the state?


Gunyou: To get out of the way. Seriously.


Kiedrowski: The state needs to express the desired outcomes clearly, and then get out of the way. Let people figure out how to do it locally. Let the public officials learn how to be policy officials and then let the managers manage. I've got two students working with the Legislature's redesign efforts; I look at the list they're working on and it does not bode well for encouraging innovation at the local level.


Let the state define the problem, define the goals, and ask where are the state-created barriers impeding the attainment of those goals. We define problems as not enough roads. The problem is moving people from point A to point B while avoiding the state-imposed roadblocks.


Gunyou: There's another challenge at the local level. We're more often than not survivors; we don't innovate by taking risks. Or we innovate as politicians do-we produce what looks good on our resumes, rather than what might have been truly transformative, so that we can move onto the next job - or to the next elective office.


The governance systems nurturing consensus are broken.


Kiedrowski: Our systems for finding a consensus have totally broken down. How are you going to do any big system reforms without Republicans and Democrats talking?


Gunyou: We first have to "stabilize the patient," so to speak. We are so far away from stabilizing the patient - by structurally balancing the state budget - that it's difficult to focus on the necessary service reform. In fact, we've violated the Hippocratic oath this session, the part that admonishes: "first do no harm."


C. Closing


Gunyou: I'd like to stress that the focus for redesign needs to be on middle management. It's through the internal workings of government agencies that reform happens.The state typically defines the problem, then from on high, tries to tell management what to do.The state needs to do a far better job in collectively defining the problems we are trying to solve, and then have more people at the implementation levels work out the solutions. There is an intrinsic incentive for dedicated public servants to do problem solving well, and we need to more effectively engage them in that process.


Kiedrowski: If I have a message at all it is that we have to create a better context, a better communication of expectations, so people know it is okay to innovate.


The environment tends to be political-there is a bias on the part of the bureaucracy not to take risk, because they will get their heads chopped off if they do something wrong.


The interesting thing I've found is the more local you get in government the more innovation there will be. Because these are people that are elected locally, they work together to get things done.


The Civic Caucus   is a non-partisan, tax-exempt educational organization.   The Core participants include persons of varying political persuasions, reflecting years of leadership in politics and business. Click here  to see a short personal background of each.

   Verne C. Johnson, chair;  David Broden,  Marianne Curry, Bill Frenzel, Paul Gilje,  Jim Hetland,  Marina Lyon,
Joe Mansky, John Mooty,  Jim Olson,  and Wayne Popham 

The Civic Caucus, 01-01-2008
8301 Creekside Circle #920,   Bloomington, MN 55437.
Verne C. Johnson, chair, 952-835-4549,       Paul A. Gilje, coordinator, 952-890-5220.

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