Janie Finlay at the City Prom and Chamber of Commerce Forum at the Grand Chancellor last Monday defended operations such as York Park, the Aquatic Centre and QVMAG as “Social Enterprises”. I took note because I’ve been advocating that the QVMAG be re-imagined as Social cum Cultural Enterprise. But, and isn’t there always a but, such an operations I submit cannot in any real sense operate the same time as a ‘Cost Centre’.
In the corporate world a Cost Centre is understood to be a ‘department’ within an organisation that does not directly add to profit, but which still costs an organisation money to operate. Cost Centres only contribute to a company's profitability indirectly, unlike a Profit Centre which contributes to profitability directly through its actions. This type of department is likely to be one of the first targets Economic Rationalist – a contradiction in terms albeit – look to for downsizing because, on the surface, it has a negative impact on profits. The key factors here being that costs can be traced to the centre and the manager can be held accountable for those costs.
In a Council context a Cost Centre within the operation does not directly contribute to the primary service delivery – a Council’s purpose for being – is a non-core aspect of the operation. Whereas a Cost Centre operates outside the scope a Council's primary purpose – its core business – it still costs the operation money to function. Like in the corporate sector, Cost Centres contribute to a Council’s service delivery indirectly and/or peripherally.
In the context of Local Government such Cost Centres may be adding intangible value to community life. Like in the corporate sector such operations are likely to be one of the first targets for downsizing and cost cutting because, on the surface, it has a negative impact o n 'the budget' and by extension on service delivery.
All that being so, Cost Centres are not intended to deliver fiscal dividends, social or cultural dividends possibly/ideally, but at the very best, and by design they can only survive by not straying from their budget.
They cannot succeed if you measure success by the operation by growing and adding value, fiscal and other, via the centre’s entrepreneurship as that would involve intolerable risk taking. The operators of cost centres are risk adverse and are antithetic, given their raison d'être, to risk taking at any level.
Nonetheless, many of these Cost Centres could indeed be reconfigured as social enterprises just so long as they were not competing directly, and unfairly, with like local commercial enterprises. In a contemporary context there is considerable scope, and unrealised opportunities, for that. In doing so in a not-for-profit context they might well be providing employment and income opportunities in the community.
Entrepreneurship, is a totally different mindset to that of Cost Centre management. Entrepreneurship is about seeking out opportunities to create and generate value whereas Cost Centre management is about containing costs at all cost. Cost Centre management is about counting beans and making sure they all there whereas entrepreneurship is about planting beans – albeit prudently in fertile soil.
The mind shift from ‘Cost Centre Management’ to ‘Entrepreneurship’ in the context of Local Govt. might well be a paradigm shift. However, the sustainability of non-core service provision in Launceston is reaching the point where the question of equity across the community needs to be considered given the level of expenditures involved.
Interestingly, these non-core Cost Centres at LCC have arguably grown into ‘bureaucratic empires’ of a kind and so much so that Council management arguably has a conflict of interest and consequently it appears that management wish to maintain the status quo due to the benefits flowing to personnel – salaries superannuation etc.
The sustainability and viability of these non-core Cost Centres is a conversation that Council needs to have with its constituency in order to find outcomes that are both equitable and sustainable.
Ray Norman
Trevallyn
LINKS:
LINKS:
- http://tourismandculture7250.blogspot.com.au/ ... A paper on Cultural Tourism & Launceston
- http://networkedmusers.blogspot.com.au/ ... A series of discussion points to do with re-imaging musingplaces in a 21st C context
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