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Sunday, December 18, 2011

Leaders, Greed, and Envy

Effective Leaders 

 Leadership is not something that separates one person from the next in a given organization; instead, it is something that unites them. All too often, it has been suggested that a great leader stands apart from the rest of the organization. It is my belief that such a suggestion can only be made by somebody who has never functioned effectively in a top leadership role. Great leaders are the ones that recognize any organization is a product of all the people within it, and that leadership is based entirely upon the willing consent of those who comprise the organization.

 Genuine leadership arrives from the desire and willpower to become an effective leader. The great ones develop these skills through a never ending process of self-study, education, training, and experience. It is unthinkable to suggest that education is not part of the equation. If that were true, then why would every major power, government, or corporation throughout history insist on advancing the education of their leaders? Why would governments and corporations invest so heavily in executive education if it was deemed to be of little value? These questions serve to underscore the universal truth that education is one of the most critical building blocks upon which great leadership is derived.

 Education obviously provides the leader with a more expansive breadth of knowledge and a diverse background from which to consider key issues and devise appropriate strategies. It is also associated with extended critical thought, scientific methodologies, and investment in quantitative and qualitative analysis; skills that are increasingly critical to organizational success.

 The basic precept that leadership requires the consent of those who are being led has a correlation to the willingness of highly educated people to accept the leadership of those who have not made the sacrifices required to attain similar levels of education. This is, essentially, seen by those whom they would propose to lead as a blatant devaluation of their intellectual capital; not well received by investors in intellectual capital. In most corporate, scientific, and leading edge research environments, there are certain minimum requirements that must be met; that mechanism tends to mitigate vast knowledge gaps that, in turn, could create issues in the realm of leadership.

Good leaders are made not born. If you have the desire and willpower, you can become an effective leader. Good leaders develop through a never ending process of self-study, education, training, and experience 
~ Jago 

Leaders And Followers 

 The need for freely offered support and a willingness to follow extends not just to the top leadership team, but to everyone in the organization. Fred Smith, founding chairman of Federal Express, once commented that by no means were all of his company’s 260,000 people leaders, nor that they even had the potential to be leaders. But those who were leaders, including himself, depended absolutely upon the rest of the 260,000 to get the job done. This applies equally to any organization. One of the most important dicta of leadership in any military leadership institution is "Do not give an order unless you know it will be obeyed". It is a dictum which speaks to the willingness to be led even in an organization where very severe punishment can arise from failure to follow orders.

 The Arab Spring is a glittering example of what happens when people no longer consent to leadership by an individual or group. The movement is exemplified by people who are willing to pay the ultimate price to abolish leadership that has been unwillingly extracted. The downfall of Tunisia's President Zine El Abidine Ben Ali, the downfall of Egypt's President Hosni Mubarak, and the downfall of Libya's Muammer Gaddafi are recent examples of consent refusal. The Arab Spring is not yet over; and submission to leadership extracted unwillingly, it seems, creates an incredibly difficult challenge because, as we have seen, some of these dictators have been willing to unleash tremendous violence in order to retain their power.

The worst tyrants rule with the consent of those they govern – even if that consent is extracted unwillingly 
~ Kets de Vries 

Leaders Are Made Not Born 

 To understand the fallacy of born leadership, the annuls of history provide ample records from which to draw; none more prolific than royalty. In observance of royal traditions, leaders are born. So long as some amount of luck and providence might apply, combined with the best education and training possible, subjects may come to know the blessing of a born leader who receives not only willing consent, but who inspires the confidence of their people. We see this in Her Majesty Queen Elizabeth II. The very precept upon which a monarch, such as Her Majesty Queen Elizabeth II, stands on to this very day, is the recognition of their subservience to God. They bow on bent knee to the Master of the Universe, hence the role of defender of the faith taking a paramount place in the ritual of enthronement for the United Kingdom.

 Upon this threshold of celestial power, the basis of moral leadership is enshrined. One might expect the same for all the Kingdoms of the World, but it has not always proven to be so. When royal leadership has faltered, the cause is most often drawn back to the morality of decisions taken.

"In making judgments, the Early Kings were perfect, because they made moral principles the starting point of all their undertakings and the root of everything that was beneficial. This principle, however, is something that persons of mediocre intelligence never grasp. Not grasping it, they lack awareness, and lacking awareness, they pursue profit. But while they pursue profit, it is absolutely impossible for them to be certain of attaining it." 
~ Lu Bu-wei 246 B.C. Chinese Prime Minister under Emperor Ying Zheng 

Leaders And Corporate Greed 

 In corporate environments, the ethos of leadership control is vested in the ability of top leaders to promote and enrich their followers, this has given rise to the unmitigated levels of corporate greed; a most unpleasant subject finally being taken up by a society that rejects and abhors unchecked greed and finds the growing disparity of wealth to be entirely repulsive.

 The sketch of leadership stretching across the millennia arrives at our current station with some number of challenges. Some who are born of leadership assume it with grace and dignity and surround themselves with those who have worked hard to become great leaders; drawing upon the expertise of such people to guide their leadership. They have learned to use the wisdom of others as a graceful scepter. Some are born of leadership learning only to extract subservience through violence; this serves them only to a point.

 For most of us, the great leaders we know are made and not born... but how do they arise to the top of their career ladders? How is it that some great leaders never arise past a certain level? Is it because their greatness is overrated or could it be due to obstacles placed in front of them by the levers of greed inspired by lesser people? Could it be that a huge rush of great leadership focused on correcting the misguided corporate inequities of the day is, in fact, thwarted by nothing more than the power of greed itself?

The wheel of greed applied to corporate profit, wealth inequity, and political reform

  The relentless pursuit of profits results in a tremendous amount of capital being made available for corporate leadership to disseminate. This leads to vast payouts and typically results in a substantial disparity of wealth. In turn, this disparity of wealth, and the uncontrolled spiral of wealth accumulation, has caused in some part, the necessity for massive layoffs and corporate bailouts. Once the corporate bailouts are placed upon the backs of taxpayers, it incites public backlash.

 Because soft money exerts substantial influence over political campaigns, the legislative branch remains beholden to the influence of the fabulously wealthy. Corporate interests influence political leadership through contributions and, this in turn, has a substantial influence upon elections. This, in turn, reduces the proclivity of incumbents to disassociate themselves from their financial backers. The legislative process becomes obviously influenced, which in turn, links back to the status quo. The entire circle is both repeatable and predictable.

 The core problem is those who profit from the status quo are able to influence what may or may not be done to modify the status quo. In other words, it seems logical that scientific management should entail the quest for logical and empirical facts and embrace their unprejudiced and objective analysis. Upon this foundation, policy and administration should be enacted. This does not occur because of an uncompromising maintenance of the status quo and, more accurately, because of the financial power that holds sway over the status quo. At the end of the day, who is going to vote to give themself a huge pay decrease? This is a question which holds a reply that is self evident and has precipitated much political strife.

There are two levers to set a man in motion, fear and self-interest 
~ Napoleon Bonaparte 

Growth and Envy 

 Another difficult problem with leadership is often uncovered when leadership groups are comprised of individuals with great disparity of ability. This often brings forward the emotion of envy. Not jealousy, as that emotion involves losing something one may already have. Envy, on the other hand, is the desire to have something another person has or feeling as though one does not measure up to another. The age old act of comparing to others creates predictable outcomes, one of them is growth; another is envy.

 Let us first examine growth... upon this pillar we find most of the time tested precepts of great leadership. Valued growth can be sustained by effective leadership mechanisms. All of the actions of a healthy leadership group centre around growth. Growth under the guidance of moral and capable people creates the most cherished outcomes of good leadership.  Rejection of envy and embracing growth facilitates many positive outcomes.

 The flipside is an organization where envy proliferates. This is often caused by failure to build a strengths based organization, exacerbated by leadership teams with substantial qualification inequities. It is, perhaps, more rarified to see this particular state in Fortune 500 corporations or in leading edge scientific endeavors where leadership is assumed primarily from within the ranks of qualified personnel. It is, obviously, more prevalent in organizations where a large disparity of qualifications exist by virtue of organizational design.

 In shaping a strengths based organization, one builds upon individual strengths or passions, attempting to create a balance where each leader is accepted due to their expertise and wisdom related to a specific area of assignment. Ignoring the powerful emotion of envy is almost certain to result in lost capacity due to the fallout from schadenfreude, or the pleasure derived from the misfortune of others; the most aggressive form of envy.

What cowardice it is to be dismayed by the happiness of others and devastated by their good fortune 
~ Montesquieu 

Inspirational Leadership

 A leader is someone who inspires a following. Those who wish to become great leaders are faced with one incontrovertible truth, the road to leadership is one with many obstacles and it requires commitment and sacrifice to obtain the skills necessary to become a leader. Groups will only willingly follow leaders, they will not follow managers without the perquisite skills to be a leader.  While it is true that willingness to follow may be inspired by threats or intimidation, such tactics function to send the best and most promising leaders to seek employment elsewhere. As mentioned above, while it is true that some organizational structures may leverage coercion that requires people to follow leaders, in a free society, such tactics will never succeed.

 On the grass roots level, the budding leader must recognize that a genuine leader never seeks to oppress those who wish to learn from their abilities, but rather, they wish to create success for others. There is nothing more gratifying for a leader than to see their protégés elevated in the organization or even in other organizations. This is the basis of genuine reward for a great leader.

 If an individual desires the following that a great leader has, but the group does not follow them and, instead, follows their chosen leader, the envious person will likely be disposed to attack that leader in an attempt to destroy or remove them. That path results in diminished organizational capacity because followers, and the attacked leader, will often seek to find other organizations or other departments within the same organization that prosper through the bounty of genuine leadership.

The best leaders in the world will fail unless they have the trust and willing support of those around them 
~ Witzel 

 Moral Leadership 

 Understanding yourself, your motives, and your moral compass elevates leadership. One of the self evident truths of life is that there will always be those who have greater skills. The great leader recognizes the skill sets of their followers and they embrace those skills. They draw attention to the special skills of their followers and elevate them as integral components of a more successful organization. The weak leader views this as a threat to their own position. Thus, the two waterfalls of leadership, one filled with insecurity, the other with hard work, dedication, sacrifice, and adherence to certain moral values.

 As has always been the case, the leader given to act based on a strong sense of self confidence and grounded with solid moral values, will be able to take decisive action with relative ease. This is done in accordance with the knowledge that what is right must be acted upon. What must be acted upon should be acted upon without hesitation, and thus a perceived ability to take decisive action.

When your values are clear to you, making decisions becomes easier 
~ Roy Disney

Thursday, December 8, 2011

Fiscal Restraint and the Euro

Fiscal restraint and austerity measures are difficult to impose upon member nations with the credibility required for transparent and enforceable rules.  Enacting new policy relative to these rules, when left up to politicians, would have to be complex.  It is especially complex when national interests need to be balanced, and I underscore Britain. 

When Mr. Draghi appears to have closed the door to fiscal intervention as suddenly as it appeared he opened it, and the markets quickly concluded the ECB's intention is to focus on interbank cash flow instead of grand bailouts.  As the European economy sustains continued stagnant economic growth and probably some amount of recession, it would seem highly probably that government revenues will be reduced, thus exacerbating bond rates.  Should bond rates rise substantially for some countries (Italy and Spain come to mind), there will be a level where it becomes unfeasible to undertake debt refinancing.  This, in turn, is likely to increase pressure on the ECB to move aggressively into the bond markets.  The numbers, thus far, seem to be growing with rapidity.  Some 200 billion Euros of additional contribution to the IMF, plus a 500 billion European Stability Mechanism to supplement the 440 billion European Financial Stability Fund. 

The markets are jittery, but I remain optimistic for continued moderate growth in the Canadian economy in parallel with modest growth in the U.S. economy.  While I don't see North America enjoying a dramatic recovery, economic conditions are strengthening.  And even though there is still substantial risk of Euroean recession and the potential specter of Italian or Spanish bond rate difficulties that could serpve to blunt North American growth, it is my belief that Canada will remain one of the most secure, stable, and prosperous economies of the developed nations.  

Saturday, December 3, 2011

Devon 2012 - 2013 : The Growth Ahead

As Devon moves forward in the 2012-2013 time frame, we are moving from the preparation and planning stages to execution phase of municipal growth.  This is the "proof is in the pudding" phase, so to speak.  Where previously there was no growth, or extremely limited growth, the municipality is now embarking on a controlled growth phase that will bring new residential housing and a business park. 

Both of these developments will take place on the south side of town near highway 19.  Below are the general areas, and keep in mind these maps are not precise, I have just overlaid a box in the general area to give you an idea of where the residential development is planned and where a new business park is planned.  The actual size will vary somewhat from what I've drawn here, but it gives you a good idea of the area.

These projects are coming together in a municipality that is extraordinarily well placed to serve key strategic growth plans for the Edmonton International Airport and the Port Alberta initiatives.  Our proximity to transportation options via the QE2, highway 19, and highway 60 place Devon in a position to offer prime business park options that can feed Port Alberta growth while providing immediate access to Nisku, Leduc, and the greater Edmonton market.  In turn, this growth will act as a catalyst to accelerate economic development within the municipality while providing increased linear and non-linear assessment value.  In other words, our tax base will grow, facilitating our ability to contemplate and undertake new projects and infrastructure to service our citizens and the region while being fiscally prudent.

One of the items of discussion in recent council meeting involved completing plans for expansion west of highway 60.  Having these plans ready to go precipitates a short time fuse in the event we need to deliver completed engineering packages that are ready to tender when landholders west of 60 decide they wish to proceed with development west of 60.  Since the developers west of 60 are the same groups invested in the highway 19 land on the south side, we have asked them about their intentions.  They have said it is their intention to focus their investment activities in the south before proceeding across highway 60.  As a businessman, I find it logical to proceed with servicing lands that are going to be developed rather than invest into areas that are not.  I also anticipate the absorption rate of new residential and business park areas will exceed expectations which, in turn, will accelerate their desire to move across 60. 

Some council members expressed their desires to move services across 60 without the developers investment, and of course I understand their desires, especially since this was the mandate delivered by voters in the last election.  The fundamental circumstances, however, have changed since then.  The prospects for the southern development and the twinning of Highway 19 were not fully known at that time.  It is logical then, to proceed with the southern development because residents of Devon did not demand development must be west over south, instead, it was simply their mandate to grow and west of 60 was the only option on the table.  Things have changed.  Progress with fiscal responsibility is exactly what Devon is getting and I believe it fulfills the intention of the public mandate even though circumstances are somewhat different.

Let us consider a less rational prospect.  Suppose we decided to move utilities across highway 60 and the developers decide to wait until after their southern developments are completed.  This is a reasonable assumption because it is their publicly stated intention.  If that were the case, the taxpayers would have to carry a the tax bill to sustain a 2.2 million dollar loan or debenture (estimated) to run the servicing across highway 60.  Typically, with any debenture or loan, there are some closing costs factored in... call it the price of doing the deal.  This is not dissimilar to the closing costs associated with purchasing a home.  The rate of interest assumed, for a municipality, is typically much lower than would be the case for a private or public corporation or an individual.  But we would have interest payments to pay for services that run to an empty field.

To have some estimate of what the interest rates would be, I have prepared a spreadsheet that extrapolates an interest range from 3.00% - 9.00% interest; I assume the municipal rate would be closer to the low side of that estimate.  Given those assumptions, and given a 1% tax rate increase represents approximately 42,000 - the following table would be a rough scale that could be leveraged to make a reasonable estimate of carrying costs.  Finally, a mathematical extrapolation of expected cost increases that are typically passed through to ratepayers by way of a tax increase, assumes a range that runs from 3.5% to 7%.  The reason I selected that range was to reflect what we faced in this year's budget deliberations.  We started with a budget that required a 6.99% tax increase and wound up, after deliberations, with a tax increase of approximately 3.5%.  Given rather conservative estimates, none of which account for any extraordinary fiscal issues that could arise in the proximal year, we arrive at the following table.

As you can see, the cost of carrying 2.2 million dollars is rather substantial for an area with no ASP filed and developers who have openly stated that for the next two years, their business intentions are to develop the lands south of Devon.  We need to ask if it is a good business decision to invest in running services to a field with no plans for development.  Whereas if we run utilities to areas that are going to be developed, we recuperate these funds at an accelerated pace, preserve our municipal borrowing power, and alleviating the potential of having to pass along more substantial tax increases to service carrying the debt for an unspecified number of years.  Those increases, as you can see, could result in a modest net tax rate increase of 5 to 6% all the way up to the 9 to 10% range of net tax implication.  These are presented because, logically, they account for variation of economic activity, and as such, they could all be considered to fall within a range of expected economic circumstances even if the higher end is neither statistically nor historically probable.

I recognize that the carrying costs can be passed along to developers, but we must also consider the time value of money.  Some would argue that we could find ourselves in a bad position should the economy overheat, a position where we would be unable to contract the personnel and equipment to run services and, possibly, if we were able to secure such contracted services, they might come at an inflated price.  I understand that concern, but I do not think the concern warrants the carrying cost insomuch as the engineering plans will be complete and the amount of time from filed ASP or council decision, to the running of the services, all the way to completion is estimated to be three or four months in duration. 

In short, the planning work will be completed soon.  Once done, we submit this plan for RFP, select the winning proposal, and prosecute the work with likely outcome of delivering services to site in less than 4 months.  Four months, in a macroeconomic sense, is a tiny sliver of time.  And while a wildly fluctuating economy is possible, it is both historically and economically unlikely.  Moreover, having at our disposal a very short time window for our reaction because we have completed engineering studies, functionally negates any reasonably forecasted risk to a level that becomes immaterial to the financial considerations of the deal.  In other words, we're prepared for the worst even if it is unlikely to present.

I personally do not believe the economy is capable of overheating at such a rate so as to create a business case to undertake this work without knowing there will be development on the other end.  Why do I make that statement?  Because our length of time to vulnerability is estimated to be three months, or one fiscal quarter.  Historically, the Canadian quarterly GDP average is approximately .84% with a statistical high of 3.33% in 1963 and a low of -1.80 in March of 2009.  The most recent data we have is FQ3 of 2011, checking in at .9% GDP quarterly growth rate.  Given these economic realities, and even if we were extraordinarily conservative and said our vulnerability could exceed the fastest rate of GDP quarterly growth ever recorded in Canadian history (3.33%) we still do not arrive at a successful business case to undertake this work until we know there will be development.

Further, by planting 2.2 million borrowed dollars on the backs of our taxpayers (plus closing costs and accumulated carrying costs) and then putting those dollars into the ground, we will effectively compress our municipal ability to engage in financing other business arrangements as they present.  As such, I think it's wise to consider these very basic principles of economics before moving into substantial investment decisions as a municipality. 

Accordingly, I support our expansion and running services to the south, where we have development in the chute, including residential and business park development.  I do not support plowing cash into a hole in the ground just to say we've crossed 60 and no developers are there!  We will cross 60 when the developers are prepared to invest and in the interim, we will have successful development on Highway 19 and there is a good chance we will have further clarity on the redirection of Highway 60 at or about the time our southern developments reach critical mass.

The other highlight of financial deliberations during the council meeting surrounded the discussions of the Summer Special Olympics.  Some were reluctant to believe we could "handle" the event or properly staff such an event.  There were also concerns surrounding accessibility.  My viewpoints on this are simple.  First, the accessibility issues are real, but it's also equally true that this represents a great opportunity for us to address accessibility issues here in Devon.  I think we should take that challenge head on... not because it's easy but because it is hard and because it's worthwhile to do it.  Second, I have complete confidence in our ability to secure volunteers to support a successful event.  Finally, I made the point that it would be quite difficult to explain to the local and regional business community how it is we decided to back away from an event that could inject tremendous economic impact to the municipality and the region.

The formula for economic impact was discussed, at length, in my previous post about BikeTown.  The formula is quite simple, so I whipped one up during the Council meeting and briefed the Council on the potential outcome of such and event vis-a-vis economic impact while we were debating the matter.  The economic multiplier (range 1.6 - 3.5) x number of participants (650 est) x number of days (3) x average daily spend (range local to regional i.e. 65 to 150) is a simple formula to enter into a spreadsheet.  Then, one can adjust assumptions and have an quick and fairly accurate estimate of the range of economic impacts one might expect.

 Let's look at the potential economic impact of a three day event using 650 participants and support personnel.  The participant number is exceptionally conservative as it does not account for spectators, this was done intentionally to provide a very conservative estimate.  The multiplier uses 1.6, the most conservative number in the range.  It is arguable that the range should probably be from 2.5 to 4.5, but such a range could be argued to be "blue sky" estimating.  As such, taking 1.6 as a multiplier leaves that number totally unchallenged as a conservative estimate.  The number of days is carried as 3, although we know there will be residual days added in before and after the event.  Finally, the average spend is examined from two levels, the first is a conservative estimate of 65 dollars a day for local spend and 150 dollars a day for regional impact estimating... the higher side accounts for hotel rooms that would likely be taken up in Leduc.

I must note that having laptops in Chambers allows me to whip up these formulas during a discussion at a Council meeting and this facilitates my ability to analyze discussions with financial calculations.  Having quantitative data to supplement the qualitative information presented creates a more robust decision matrix!  Oh happy days!  But I digress...

Expected local economic impact would be (using very conservative estimates) about 202,000 for local impact - the high side for that could be about a half million dollars if the multiplier were 3.6 and, of course, the regional economic impact could be about a half a million dollars to a little over a million dollars with a larger multiplier used.  In short, I had to ask the question (and I did ask the question), "how are we going to explain to our local and regional business community and residents that we've walked away from the potential of a million dollars in regional economic impact because we were worried it would be hard to host the Special Olympics?"  I know that we've hosted far more than 650 people at an event, we did it just last week for Christmas in the Park.  We have staff, equipment, administration, and volunteerism sufficient to handle this with confidence.  Such an event also brings us the chance to add to our event resume, something that will be considered as we bid for other events.  Here are the quick calculations;

Even using the most conservative estimates, you can see this is a tremendous economic windfall for our local merchants and our regional business partners.  It seems logical to examine these sorts of events through the practical lens common sense.  And I would ask, why not scribble up a bit of math to help clarify things just a wee bit?

Finally, to underscore my beliefs and my business outlook on these decision sets, I would point out that it is my belief our administration would not bring these things forward if they did not have the confidence in their ability to undertake them successfully.  They also expressed a similar sentiment during the meeting. 

All in all, I'm quite confident that we are delivering business and residential growth that speaks to a more prosperous Devon.  I believe that in the proximal two years, our growth and prosperity will be admired by many throughout the province and, in fact, across the country.  We have accomplished a great deal in the last year, we have planned to succeed and we have built the infrastructure required to execute our plans.  We have crossed into the phase where we now start rolling up the accomplishments, one after the other. 

Personal notes: I did have two notice of motions prepared for council deliberation, both were voted on, one was passed and one was defeated.  

The motion entitled "Public Board Documents" was passed by unanimous vote of council with the text relating to the placement of these documents on the web stricken so as to accommodate web changes in the future.  This motion was designed to make it easier for the public to find strategy documents created by public boards and to insure their accessibility in a timely manner.  The text of that passed motion can be seen at this link.

The failed motion was for a public facing dashboard, an instrument to quickly communicate our service levels and other assorted information of interest to the community at a quick glance.  This is common practice in business and is becoming widely adopted by municipal governments.  The motion was defeated by a vote count of 6-1.  The administration is working on a dashboard that may come forward for council consideration, possibly at a committee of the whole meeting at a later date.  The text of the failed dashboard motion can be see at this link.

As residents you can, and in my opinion, you should be proud of your organization; of the new structure of the municipality; and of the people who will be tasked to marshal our growth phase.  I have every expectation that our accomplishments will most assuredly accelerate in the year ahead.  I also believe that as residents, we all enjoy a fiscally responsible municipality that is well governed, well managed, and well run.  Not many municipalities of our size have accomplished what we have accomplished in the last year, and fewer still will be able to measure up after we start putting shovels in the ground in 2012.  The residents of Devon delivered a strong mandate through their vote, your council and administration are carrying the freight, and now you're starting to see the delivered goods! 

Finally, I have some sadness to share with you.  One of our neighboring communities, Beaumont, suffered a tragic week with the loss of several youth in a most unfortunate car accident.  In addition, Beaumont also lost Chantal Berube, who passed away suddenly.  On Friday, my life and all things in it, came to a halt as I sat there watching the services streaming over the internet to a packed overflow in the school gymnasium.  The last time I was in that gym, the Prime Minister was there.  

I suppose it is poignant that all I have ever known of Beaumont is the wonderful and classy people who live there, and that whenever I am in Beaumont, the importance of the moment is always of the most dignified and honored level.  Friday was a day of great sadness, compassion, and heartfelt pain for the great people of Beaumont.  My heart goes out to them and to all the people of Beaumont and our region who knew and loved Chantal.  

When you say a prayer on Sunday, please remember all the people of Beaumont who were taken from us, and pray for those who go on living, for their pain will never be totally healed, but with love and care, it can be eased over time.  

Sunday, November 13, 2011

Remembrance Day 2011

"The willingness with which our young people are likely to serve in any war, no matter how justified, shall be directly proportional to how they perceive the Veterans of earlier wars were treated and appreciated by their nation."

James Rajotte MP
Placing the wreath for the Government of Canada

Remembrance Day is always special, it brings back memories of great sacrifice, heroism, joy, and heart wrenching pain.  Those who have served know that there are no unwounded Veterans, that each one pays a price in some way.  For this reason, we pay our respect to all who have served on Remembrance Day. 

It's important to remember the epic battles of faraway places, and it is important to remember those who walk with us today.  I have witnessed, in my life, a dramatic change in how society views our Veterans.  When I served and for many years thereafter, it was not popular to be a Veteran.  For the most part, Veterans quietly folded up their uniforms and put them in a box.  I gave my field jackets and uniforms (after taking the unit markings off them) to the goodwill so that someone less fortunate, perhaps even a homeless Veteran, might acquire them.  They were well made, designed to withstand the jungle and the wear and tear of military use.... I figured they'd keep somebody warm and last a long time.

Over the years I've seen the crowds swell at Veteran's Day and Remembrance Day ceremonies, and this fills me with great joy.  I am pleased to see this honor and respect paid to our Veterans.  To see young soldiers home from Afghanistan coming out to join the remaining WWII Veterans on Remembrance Day is heartwarming.  Their steps still seem a bit cautious and some remain at the back of the room.  Some probably wonder if the WWII Veterans might think their contribution doesn't merit standing alongside the WWII Veterans.  But every year, as more come to the front, the WWII Veterans are there to greet them with open arms.  For their contributions are equally appreciated and perhaps for the WWII Veterans, they now look into the eyes of our younger Veterans with a profound sense of pride, knowing they pass their torch into capable hands. 

Canadian Forces at the Cenotaph in Devon

We pay our respects to our first responders and our fire department.  I recall a time when the Coast Guard or the Merchant Marines would have been omitted from the ceremonies, as if to suggest that somehow their service did not rise up to the level of nobility of those who served in the regular forces.  Now we include all of them, we embrace our Merchant Marines and Coast Guard, the Fire Department, the EMT's and Paramedics.  For we recognize that all of these people are noble in their service to others. 

Our ability to survive as a nation and recognition of our vulnerabilities inspire us to offer honors and appreciation to those who would protect us.  The fire department that rises up on a cold February night, or the police officer who patrols the dark street surrounded by shadows of uncertainty... these people are the definition of courage.  They provide the needed stage upon which peaceful society may prosper, a place where families may raise children without the fear of unprecedented evil.

A young Army private sat down at the table, we had two Army corporals with us.  He said the great highlight of his day was a little boy who came up to him and asked him if he could give him a hug.  The young private said it was the neatest thing that he'd ever experienced at an event like this.  I smiled and asked the soldier if the boy was about this tall, as I held my hand about 3 feet off the floor.  He and I shared the same experience.  The little boy said thank you for protecting us.  It was the highlight of my day too.

We send a message to all those who are serving and to those who will serve in the future with our actions.  Sometimes a quote from history applies;

"The willingness with which our young people are likely to serve in any war, no matter how justified, shall be directly proportional to how they perceive the Veterans of earlier wars were treated and appreciated by their nation."

Saturday, October 29, 2011

Q&A : More About Bike Town

Statement of Independent Opinion
I wish to point out that this article is of my own creation.  I am merely exercising my right to freedom of speech such as would be the right of any Canadian Citizen.  While it is true I am a Councillor, the viewpoints, thoughts, and information provided herein are of my own creation with no intention of representing the thoughts, wishes, feelings, or policies of either the Council or Administration; nor should it be construed to be provided under the approbation of the aforementioned entities.

Statement of  Bias
I'll attempt to answer the common body of questions to the best of my ability.  Since I am a member of Council and have participated in developing the policy guidance for Administration regarding Bike Town, the reader should be advised of this influence upon objectivity.  I am also not a professional brand development expert, and while I will attempt to explain the academic underpinnings of brand development, I necessarily draw upon the expertise of others to frame some of the responses.

What is the process used to arrive at the Bike Town brand?
A business case was developed by municipal staff in coordination with marketing leaders of regional organizations with international reach.  The decision matrix was supported with quantitative and qualitative data from multiple sources and supplemented with longitudinal data from the Board of Economic Development and Tourism.

One of the commonly used theories centers on a the concept of a brand value chain, you can find a primer here.  A brand value chain offers a holistic, integrated approach to understanding the value created by brands. According to the model, brand value creation begins with the town's marketing activities and capacity. Marketing reach then influences customers who, in turn, affect how the brand performs in the marketplace and is ultimately valued by the consumer. Three important multipliers moderate the extent of transfer between these value stages: the program quality multiplier, the marketplace conditions multiplier, and the consumer sentiment multiplier.  This concept is leveraged from financial brand theory and is obviously adjusted for tourism.

There is a large literature base surrounding brands.  Some practices have an anatomy consisting of general procedural understandings and rules that speak to explicit or discursive knowledge.  The skills, abilities, and culturally appropriate consumption projects (tacit, embedded knowledge or how-to) also form a pillar of the knowledge base.  There are emotional commitments expressed through actions and representations relative to the brand, and there are usually common practices across brand communities that may be compiled into thematic aggregates to track how consumers realize extended value beyond the value the brand is designed to create. 

Research also illuminates practices that seem to have a physiology that interact with one another and function like apprenticeships by endowing brand participants with cultural capital.  This is a catalyst to produce a repertoire for insider sharing and it generates consumption opportunities.  Theoretical and managerial implications may offer avenues for building and nurturing brand community and enhancing collaborative value creation between and among consumers and the organizational brand.  Ultimately, these concepts in modified forms combine in a brand matrix that is leveraged by the brand leadership team and the municipal staff who work with the Bike Town brand.

There is no lack of science involved, although it is rarely presented in such terms.  The vast majority of theory generated by branding research may be accessed from peer reviewed resources openly accessible via various academic online resource search engines such as EBSCO.  These resources are available to the public at the Devon Public Library.  While the study of branding is worthy of a dissertation or a thesis for graduate business students, such levels of academe are not typically central to municipal decision making.  This is especially true in smaller municipalities where fiscal constraints compress the ability to maintain staff with these particular skill sets as full time employees.  

Instead, experts such as Roger Brooks of Destination Development International, who have already accumulated the academic knowledge and practical experience are consulted.  This is done to maximize municipal benefit with minimal cost.  Essentially, it may be thought of as a form of outsourcing the overhead required to establish advanced academic knowledge and experience relative to the science of branding.  The municipality is able to advance the brand cause, wrap decisions in advanced theory, and shine it up with practical branding experience.  In Devon's case, that experience, notably, was with other municipalities such as St. Albert, and numerous cities throughout North America.  You can review the Destination Development International Case Histories by clicking here.

Who was involved?  
Municipal staff, members of the public, and key stakeholder group representatives were involved.  More details and a presentation about Bike Town are available online at the Town of Devon website.

Did the Council issue an invitation to the public to participate in the branding exercise?
Council provides policy decisions and authorizes specific actions for the Administration to undertake.  Issuing invitations, coordinating meetings, and handling specific event planning activities, such as coordinating an exercise, would fall under the purview of Corporate Services.  Operational activities such as these constitute prohibited activities for Council under the provisions of the Municipal Government Act (MGA).  Parts 5, 6, and 7 of the MGA are most relevant to understanding the roles of Council and Administration and may be consulted online via the Queen's Printer.  Nevertheless, Council may direct administration to carry out policy, which may obviously include the nature of communication between the municipality and the residents.

What other options were considered as a brand?
Over twenty options were considered.  Bike Town was selected based on a scientifically constructed brand decision matrix.  After rising to the top in the brand decision matrix, supplemental information was considered.  Some of the supplemental data includes information from the Government of Canada, for example, tourism.  Tourism is an activity that generated over $74.7 billion (2008 data), some 2% of Canada's GDP as reported by Industry Canada.  Tourism employed over 660,000 Canadians and supports restaurants, hotels, cultural events, sporting events, and a variety of small businesses.  Sports tourism is the fastest growing segment in the tourism category.  Bicycling is the fastest growing channel in the sports tourism segment. 

How is branding funded without taxpayer dollars?
Corporate sponsors typically fund various events that lead to increased brand awareness, as was the case with Kraft and TSN.  People may voluntarily contribute time, which may be considered "in kind" contributions.  Brand awareness is accelerated via media interest and can be captured through activity in various outlets such as traditional print media, radio, TV, the internet, and strong results in the social media space.   The Cyber-Journal of Sports Marketing has a primer that explains why corporations engage in sports marketing and provides peer reviewed sources that may be consulted by the reader, including Canadian studies.

What measurement tools and/or methodologies are being utilized to determine the financial benefits of each event?
Software for economic modeling, such as IMPLAN, is available at a significant cost.  Devon does not currently own this software.  Accordingly, we reached out to regional partners and the City of Leduc provided Devon with access to their economic modeling hardware and software.  Interviews were conducted by members of Devon's Economic Development and Tourism Board during Nationals.  The report is available to the public and was part of the supporting quantitative data set used in the Bike Town decision matrix.  I will point out that this report is not easily accessible online... I threw a few queries into the Town of Devon website search box and couldn't find the document.  To address this, I will be introducing a notice of motion called 'Public Board Documents' to be filed as notice of motion 11-14-11.3 at the proximal Council meeting.  The Public Board Documents motion may be viewed by clicking here.  The Public Board Documents motion, if passed by Council, will direct administration to add links to these documents in order to enhance transparency and, frankly, to make it easier to find these important documents on the Town of Devon website.

Determining the economic impact of events is a function of an Economic Impact Assessment (EIA) study.  While I noted that economic modeling software can be used to generate very granular assessments of the economic impact of events and/or activities, I recognize that citizens want to know more information about the financial benefits derived from events like bike races.  To that end, I have conducted my own research in order to determine what that entails.  I have learned that there is a standard formula commonly used in EIA's.  The formula is comprised of four data points, two of which are subjective and require further investigation, two of which are empirical and require data collection without special resources outside of manpower.  The formula is as follows;

EIA Multiplier x Number of Tourists x Number of Event Days x Average Spend = Benefit

There is substantial literature regarding this and I will forward some key documents and resources to our staff so they can begin the process of determining the best number for the two subjective data points, namely, the EIA multiplier and the average spend.  Average spend is lower for Devon because we don't have a suitable quantity of hotel rooms to capture stays, a situation we hope to rectify soon.  Our multiplier will necessarily be lower than Leduc or Edmonton due to limited ability to capture room nights and certain limitations regarding non event consumption activities like dining or movies.  Our task is to find the best number possible to use in our calculations.  As you can see, using this formula, an event such as the Provincial Bike Races probably had about 100 tourists (this includes entrants).  Using a conservative number for the EIA multiplier (1.5) and assuming 100 tourists, a 2 day stay, and estimating an average spend of 50 dollars per day, the economic impact would then be as follows: 1.5 x 100 x 2 x 50 = 15,000 of direct economic impact to the community.  

I suspect the numbers are much higher, but I used these as an attempt to offer a very conservative estimate.  For example, the average spend for a municipality like Leduc or Edmonton would probably fall into the 175-225 range due to their ability to capture the totality of room nights.  As such, assuming a mid point of 200, my estimation of 50 slices off 150 per day to adjust for zero room capture within the daily spend estimate.   That said, we do know some people stay in our hotels.  Accordingly, the estimate of 50 can easily be argued as falling on the conservative side of the estimating range.  

Looking at the same formula using the input of 200 as an average spend would result in a substantially larger economic benefit.  That formula would be... 1.5 x 100 x 2 x 200 = 60,000  Suffice it to say, the room night value on the average spend is tremendously important.  On the other subjective side of the equation, the economic multiplier of 1.5, was once again, taken at the low range of estimates.  This multiplier, for many municipalities, is set in a range much higher... from 1.7 to 3.0 and, again, I have used a low estimation as an attempt to overcompensate on the side of fiscal conservatism.  That said, it's interesting to note that if we use an estimate of 2.25 and examine the calculation, the economic benefit jumps from 60,000 to 90,000 - for one event.  Arguably, an overcompensated formula (to the downside) places the case for cost recovery for the total sum of investment to date... at one event.  This is why it's important to measure these economic benefits, with consistency and accuracy, so they may be articulated in a logical, open, and transparent manner, to the residents of Devon.  

In order to understand, with greater precision, the economic benefit of our events in Devon, I have crafted a notice of motion as part of our ongoing process improvement strategy entitled 'Economic Impact Assessment Metrics' to be filed as number 11-21-11.5 and am planning to introduce it at the next meeting of Council for debate at the subsequent Council meeting.  You can read the EIA motion by clicking here.

Data used to arrive at this formula were taken from numerous resources, but the key resources are: 

The United States Sports Academy: A Review of Economic Impact Studies on Sporting Events

Economic Impacts of Tourism: A Handbook for Tourism Professionals
Illinois Bureau of Tourism


Once the appropriate formula inputs are determined, it would be logical to place a simple interface on the municipal website under the Economic Development and Tourism heading so that groups or organizations planning events may use the tool to determine the potential economic impact of their events upon the community and to increase transparency into the value of the events this municipality works so hard to deliver.  I believe the numbers will be both realistic and valuable to our community.

How is Bike Town encouraging residents and tourists to shop locally?
Event participants, support staff, family, and spectators purchase goods and services in close proximity to their events; bike races are no exception.  The prestige of the event directly correlates to non-participant visitors.  Larger events like Canadian Nationals or Provincials typically involve more teams, numerous support personnel, additional organizers, more volunteers, as well as family and fans.  The local economic activity is supplemented by regional economic impact such as hotel room nights captured by regional partners in Leduc and the greater Edmonton region.  Since many Devon residents work in the region, an acceleration in regional economic activity benefits the Devon workforce, in turn, creating more economic resources for Devon residents to use locally, thereby creating additional economic capacity to support shop local initiatives.

Shop Local     

An interesting study relative to the economic impact of bicycle races can be found at the League of American Bicyclists.  This study has a substantive bibliography consisting of a an extensive list of resources that speak to everything from municipal benefits to health benefits and environmental benefits of bicycling.  A Google search of the 'economic impact of bicycle races' returns about 116 million hits, so it's safe to say this is a topic that has widespread global interest.

How many tourists have attended the bike races?
Since bike races are not ticketed events and do not have points of entry to provide gate metrics, exact numbers are difficult to quantify.  This is a great question, and I will ask the Council representative and the Chairman of the Economic Development and Tourism Board to raise this at their proximal meeting to explore options to quantify this.  This information is also a critical data point for conducting an economic impact assessment.  This is another great question and it requires a solid answer if we are going to have reliable data sets to calculate the economic impact of these or any events.

What is the total revenue the Town of Devon has generated from entry fees, sale of promotional material, corporate sponsorship not including the $25,000 from Kraft that is dedicated to the Mountain Bike Skills Park, or anything else I may have missed?
Entry fees are typically part of the revenue stream of the organizations that host the event; they are typically used to offset their organizational costs.  Promotional materials are usually entered in the chart of accounts as marketing, advertising, or promotional expenses.  Corporate sponsorship investments are typically directed to event sponsorships or teams.

Total Costs (this was a very lengthy question, but I'll address it as a question that is essentially a total cost of ownership (TCO) question.
Resources used for TCO were drawn from within the existing departments and budgets without creating remarkable budget variance.  Onetime extraordinary charges were associated with intellectual property management.  Remarkable a.k.a. 'material' impact on the Town of Devon's amalgamated fiscal budget is roughly considered to be approximately $50,000 dollars.  In this case, the overall expenses were substantially less even when considering all associated expenses including labor, promotional material, multi-use event equipment, and so forth.  Many of the items that people may associate with the Bike Town brand are deployed for many other events and serve multiple-use roles in keeping with widely accepted tenets of fiscal responsibility and organizational efficiency.

Whenever items of a material level arise in the day to day operations of any corporation or organization, the top level leadership is informed of these impacts.  When various actions of an administration fall within the operating budgets of various departments and do not impact approved budgets negatively, they are deemed to be within the purview of day to day operations of those departments.  Such is the case with smaller items such as the purchase of a couple dozen t-shirts or similar items used for promotional purposes.  In the case of the Bike Town brand, virtually all the expenses fall into this category and would not be of substantial impact such as to warrant the direct consideration of Council, the same would apply in any corporate structure or organization.  

To increase the transparency of budget versus actual expenses, I have introduced a motion to increase visibility by formalizing a quarterly budget vs. actual report that indicates variances in the municipal financial budgets.  The motion is designed to generate quarterly reports that will be formally submitted to Council.  The intention is to provide Council and the public with a better sense of the fiscal condition of the municipality on a quarterly basis.  Since the budget of the municipality is a matter of public record, these reports along with the annual report belong online so as to be easily accessible to the public.  This motion is known as the 'Quarterly Reporting Motion' 11-7-11.1 submitted at the most recent Council under Notice of Motions for consideration at the proximal Council meeting.  You can review that motion here.

Finally, since items purchased in support of Bike Town have been captured as expense entries in our accounting software, these ledger entries may be reported.  I do not know if all the expenses can be captured with a single report, that would be a function of how it was entered.  In other words, if somebody bought a dozen t-shirts for Bike Town, and on the same bill, they purchased promotional items for, say, the hockey arena or the swimming pool, it is likely that would have been entered as one item and posted to promotion expenses.  It would be difficult to report these out of the software with accuracy.  Once we have to send people back into cardboard boxes to audit individual paper receipts, track all the minutiae, and then create a report for it, we have to call into question the concept of activity based costing.  In other words, are we going to spend 2,000 dollars in manpower hours to report on 500 dollars of expenses.  In the oil patch we call that a hundred dollars waiting on a dime.  It just doesn't make sense to do it, but the point is well taken.

That said, I'll inquire to see if we might be able to generate an accurate report that contains the hard costs expended for the Bike Town initiative.  Soft costs, like labor hours, would probably be more difficult to ascertain as I am fairly confident the accounting methods used, while in compliance with generally accepted accounting practices, are probably not set up with a "job costing" feature.  I don't work in the accounting department for the Town of Devon, but I do know accounting software inside and out.  In other words, it is unlikely that the finance department tracks employee hours in this manner.  To do that, employees would need to either make a hard copy record of time they allocated to each task or element of work, which would then have to be entered and a ledger entry created to post these expenses against specific jobs.  They could also employ a bar code scanner and "swipe" in to each job with a portable IR bar code scanner and a notepad.  I am familiar with this because it is quite common in the manufacturing industry and I am deploying this technology in my factory.  This kind of accounting practice, however, would be extraordinarily uncommon in a service related industry like municipal government.

A Few Personal Thoughts on Democratic Values
I have read words that imply or create what seems like innuendo that Council has acted in an undemocratic manner where Bike Town is concerned.  Like any Veteran, I am deeply committed to the virtues of democracy, and like any Veteran, I swore to fight for democratic principles and to pay any price for it, up to and including my life if necessary.  I'm not going to back down from that core value because it defines who I am as a person.  I can assure you that I have no intentions of ever engaging in undemocratic actions or undertaking any work or project for purposes that would undermine the foundations of our democratic form of government.  

On this Remembrance Day, we will dedicate the new Veterans Way, a project I helped facilitate.  I'm very proud of this new honor for our Veterans and I want to salute all our Veterans and their families.  Borrowing words from history, I am able to convey my sentiments by telling you that in war there are no unwounded soldiers.  And as we express our gratitude, we must never forget that the highest appreciation is not to utter words, but to live by them.  

Some of our citizens have set down the challenge to answer the questions they have.  I believe it's a matter of honor and respect that I should pay, in full, my diligent and honest effort to reply to their questions and craft it with respect and care for the great people of Devon, all of whom I am enormously proud to represent.  

I have thought a great deal about these questions since I read them in the paper.  I'm happy these questions were asked because I have now gained a substantially greater appreciation for the tremendous amount of work it takes to answer what might seem like a short question. These questions were not short, they were substantive.  And once I started peeling the layers of the onion back and became introspective... I considered the questions with the utmost care.  

I have a great deal of respect for people who are willing to challenge things, to ask the tough questions, and to demand answers.  I believe they are the very backbone of our democracy and they cause all of us to continually seek to raise the bar.  

Bravo!  Thank you to everybody who asks the questions and challenges the policy.  This is the very foundation of what makes democratic government great.  Out of these questions, I have so far crafted two notices of motion for Council consideration to improve the way we do business.  

Everybody has the right to be heard... and they should be listened to.  


Gord Groat

Monday, October 10, 2011

Hitting the Mark

Offshore Wind Generation

According to data from the UK National Grid, production of electricity from wind reached the marker of 10%  during September of 2011, largely from the largess of Hurricane Irene and thanks to Scottish Wind generators.  The UK Department of Energy and Climate Change reported a change in quarter 2 (Q2) that was 120% more than Q2 a year ago.  That substantial year over year renewable gain in Q2 translated to over a 3% gain in national energy provision.  That's a significant gain and one worth noting especially when we see 10% of the UK's entire energy requirement being met with renewable energy.  That's a huge accomplishment and worthy of emulation.

Dr. Gordon Edge, RenewableUK's director of policy, notes that producing nearly 10% of the national energy needs is a clear demonstration that renewable energy can play a huge role in supplying national energy needs, but also, in building jobs and contributing to a low carbon economy.  In fact, the UK Department of Energy and Climate Change (DECC) has created a roadmap (downloadable .pdf), a laudable document that outlines precisely how the UK will make the shift to clean renewable energy, laying out specific technologies and targets along the way.

Scottish Undersea Turbine

But it's not all peaches and cream, as Dr. Edge points out, as the renewable energy sector approaches around 13% of the UK's national power the bottleneck will become difficulties tying into the aging grid infrastructure in the country.  This is a problem that exists in every developed nation and inevitably, it will become an issue for Alberta. 

When the UK hit the 10% mark in September of 2011... at the peak time, 1860MW was being generated - largely from Scotland - and accounted for 4.7% of total generation at the time.  That's impressive by any standard of measure.  If, according to the National Gird, wind power directly feeding into the low voltage local electricity networks by smaller wind farms is taken into account wind generated about 10% of Britain's power during the 24 hour period. 

Solar Capacity added to a Bridge in London

We can accomplish that right here in Alberta.  But it takes courageous leadership, intellectual vision, and solid planning.  In fact, the biggest challenge we face in Alberta is not how to acquire energy nor how to increase renewable production, the challenge is how to rethink our transmission infrastructure.  A viable strategy to shift to renewable energy should be incorporated or associated with every new energy infrastructure plan.  Are we up for the challenge?