All indications are that this local budgeting cycle will be one of the worst in decades. City and county managers have been making adjustments, minor and major, for months now in an effort to stave off draconian measures.
Sadly, one of the most common and press-worthy ideas is also one of the worst and shows a remarkable lack of management. Hiring freezes have become one of the most popular ways in which local managers and elected officials deal with lean times. Newspapers love to rush to print with it, and local leaders say it shows how tough times are and that they’re prepared to deal with it. And it does save money, but is it really effective? Why is it a bad idea?
Managers are quick to point out that the No. 1 cost to local government is staff, so it follows that not hiring new people or replacing those who leave will save money. It does save money, but a freeze lacks true effectiveness from a taxpayer standpoint.
A hiring freeze is simple and easy to understand. Managers are simply told that they cannot fill open positions, ask for new ones, or fill vacancies created by people who retire or leave. Any positions that must be filled go before the local elected board, and everyone thinks they’re doing a marvelous job.
If one were to take this approach to business, the ineffectiveness becomes obvious. Let’s say that a team of widget makers decides to enact a hiring freeze. They have 20 widget makers, five widget sellers, and two administrative staff that take care of paperwork. They’re having a tough time, and sales are down. Several of their sales guys retire because they can. So the company then has virtually no sales force and enacts a hiring freeze. Does that help? Absolutely not, unless the remaining sales team can ramp up sales by itself. It might very well leave lots of widget makers sitting around doing nothing.
The same criticism can be leveled at “across-the-board cuts” which do little to address whether one department or group is more effective than another. Such cuts simply cut the good and bad equally.
Obviously, local government is far more complex, but the analogy still holds. The point is that hiring freezes require no thought and therefore no forethought as to the consequences of such an action. A far better approach is for managers to ask department managers to determine ways to cut costs. Maybe they don’t fill a position, maybe they merge some positions, or maybe they trim down a program that isn’t effective. The point is that the approach should be about trimming costs and still providing services.
It also puts the onus of performance on the people who are leading the departments within local government. Such an approach is easily explainable and has many long-term benefits. When such approaches are enacted, cost-cutting can be carried forward. If a local government can save 5 percent without sacrificing levels of service to the public, such savings are recurring and benefit the community when economic times get better.
Local government should be about providing the highest level of service for the lowest possible cost. Leaders in local government often lose sight of such approaches to satisfy temporary shortfalls. And while this is a serious time of shortfalls for local government, it is also the time they should be most wary of making bad decisions. In North Carolina, tough times can be an opportunity for creative approaches. I won’t hold my breath.
Chad Adams is director of the Center for Local Innovation and vice president for development at the John Locke Foundation.