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Backstory to Rotorua’s Aquatic Centre management crisis

The crisis in the management of the Aquatic Centre dates from 2014 when, after 12 years of successful leadership, Louis Sylvester resigned to take up leadership of 21 aquatic centres in Auckland. He left an organisational culture of community service, a flat and cooperative management structure, an integrated strategic and business plan, and high performing staff with clear key performance indicators (KPIs).

Although a relatively small organisation with a permanent staff of 21.75 equivalent full-time staff (i.e. 38 part-time and full-time permanent staff and 28 swim instructors and lifeguards), the Centre received international recognition for its application of Kaizen-LEAN management principles.

Sylvester reportedly left a surplus of $357,000 and highly-tuned management systems that delivered on a community service kaupapa to the general satisfaction of stakeholders. Sylvester reported to the then Manager, Sports and Recreation, the then Group Manager, and the then Chief Executive (CE).

In 2013 the incoming Mayor invited an Australian company to propose a new business model, supported by the Acting Group Manager. Following a tour, the leader of the Australian delegation commented that they needed to speak to the Mayor because what they had observed on the tour was not representative of the briefing they had received prior to visiting the Aquatic Centre. It was the first indication to centre staff that the new Mayor and relatively new CE were considering changes in centre work practices which were likely to involve substantial changes. The model cut across the centre’s community service kaupapa and was set aside when found to be financially unsustainable.

An Interim Centre Manager co-managed the Aquatic Centre with the Service Manager for three months while the new CE searched for a leader to achieve efficiency gains, having made it clear that LEAN would be abandoned. In September 2014 the Aquatic Centre won the New Zealand Recreation Association in Innovation in Aquatics Award.

From 2014 to 2017, a new Centre Manager attempted to redirect the Aquatic Centre towards becoming a corporate commercial entity that made contributions from surpluses. He was line managed by the current Manager, Sports and Recreation and Environment, a Group Manager that has since left, and the current CE. Fresh marketing by the private Swim School proved successful, and although management of the progamme was brought back in-house in 2017, it became an in-house competitor to other Centre programmes and the tensions remained unresolved. Operational management of the centre gradually devolved to the Service Manager.

The CE then established an “Aquatic Centre Board” comprising the three line managers noted above and a Swim Rotorua representative, to supervise the Centre Manager. It failed to generate effective leadership, mobilise appropriate corporate service support or achieve expected returns. The Centre Manager resigned in August 2017. The CE appointed an Acting Centre Manager while he looked externally for a new solution. On 26 June, the Manager, Sports and Recreation and Environment commissioned four reports from Wā Consultancy;

• a Section 17A review to report the cost effectiveness of current arrangements for meeting the needs of the community

• an Operations Report to review operations and service delivery options

• a Management Report to review the “best” governance and management model for the Centre, and

• a Redevelopment Report to identify the “best redevelopment option”.

The Wā Section 17A Report dated 1 August recommended that five governance and management options be investigated to identify if the current governance, funding and delivery model is the most cost effective, compliant with the Act. The methodology reportedly included a few interviews of “key staff” in the Centre and “key personnel” in the RDC, stakeholder surveys, desktop research and national benchmarking.

The Report did not include a critical review of the history of centre leadership in its corporate and community contexts. There was considerable potential for ‘top-down’ bias in the data collected.

The Wā Operations Review Report, also dated 1 August, used the same methodology and data to conclude that fresh centre management was needed to:

• develop and implement an annual business plan with goals and objectives expressed in KPIs;

• report monthly to the Manager of Sports and Recreation against KPIs and on centre performance;

• document and embed processes;

• establish best practice in staffing and operations;

• implement planned maintenance;

• advise on redevelopment investment;

• train staff to meet KPIs; and

• manage service delivery to maximise both usage and revenue.

The Wā Operations Report read like a standard management check list without reference to current practices in the Centre. It inaccurately attributed the average overspend of 16 per cent per annum in the previous two years mainly to expenditure on staffing and maintenance when there was a significantly greater surge on capex and maintenance in the ageing facility. It failed to clarify the unique context and purpose(s) of the Aquatic Centre’s operations or appropriate corporate support services. Above all, the Wā Operations Report failed to identify that a major reason for the centre management crisis was a failure of corporate leadership and support.

The Wā Management Report, dated 17 August, considered the five governance and management options mandated for the Section 17A Report. It recommended the external management option for six reasons:

• minimum cost savings of 20-25 per cent savings in staffing costs and overheads, bulk purchasing power, rationalization, etc.;

• minimal impact on existing operations;

• immediate improvements through implementation of QMS system;

• access to specialist staff services i.e. programmes, aquatics, asset management, etc.;

• Council to receive profit share over and above budget; and,

• possible future investment partner in development of the Centre.

It recommended that Council “inform staff of the decision to seek external management via a Request for Proposal (RFP)” (p. 12).

The Wā Management Report failed to critically evaluate centre management and related corporate management services since 2014. It confirmed the absence of investment since 2003, noting that the Centre is “nearing the end of its lifecycle and due for an upgrade or replacement” (p. 8). The promised $700,000 return to Council in Year 1, to be achieved through cost compression, especially via staff and maintenance savings, without capital investment, appeared both draconian and implausible.

While it did identify a list of remedial actions for centre and team leaders, it did not clarify the Centre’s unique services to be provided to the Rotorua community with an appropriate culture, structures and programmes. It did not provide a sophisticated rationale for out-sourcing centre management per se compared to an in-house capacity-building management model to avoid the culturally alienating stresses of imposing external management with a commercial kaupapa.

The Wā Redevelopment Report dated 24 August reiterated the methodology noted above and added a degree of speculative futurism. It further clarified the Management Report recommendation for external management, and added mainly rhetorical justifications by reference to the Council’s Long Term Plan, the Sports and Recreation Strategy and the Bay of Plenty Spaces and Places Strategy principles.

Mindful of the current condition of the Centre, the report provided preliminary costings for three capex options; minor upgrades for $7M, a recommended refurbishment of $15M (with a partner or by taking on additional debt), or a total rebuild for $25M (with the same financing strategies).

The CE and his senior staff set the timetable for implementing out-sourced centre management. On 12 September 2017 the Acting Centre Manager notified Centre staff that the RDC’s advertisement of a Request for Expressions of Interest from companies had closed on 1 September and that some or all respondents would be invited to return an RFP by the end of October, with Council to “be asked for a decision on the way forward in November.”

On 2 November, Council’s Operations and Monitoring (O&M) Committee receive a proposal from Manager, Sports Recreation and Environment, and the Acting Group Manager Operations, for a new management model for the Aquatic Centre. It was light on detail. The Wā Reports were not shared. The O&M Committee accepted their assurance that the recommended tender would run the centre “at a higher level of service for considerably reduced cost” and their recommendation that Community Leisure Management (CLM) be awarded the contract, with the CE empowered to negotiate the contract.

The proposal claimed inaccurately the “staff have been kept advised throughout the process”. There had been routine meetings with AWUNZ (union) over coffee since June without any of the four Wā Reports being shared or the Rotorua Lakes Council (RLC) declaring its intentions to consider out-sourcing centre management.

This breached Section 37d(i) of the Collective Agreement between the RLC and AWUNZ which requires that “The employer shall consult with the Consultation Committee when considering changes in traditional work practices which are likely to involve substantial changes in the nature or degree of workforce skills or which are likely to substantially alter the hours of work or reduce the number of people employed. The Chief Executive shall convene and meeting of the Committee no later than four weeks prior to the introduction of such changes.”

On 23 November, full Council endorsed the recommendation of the O&M Committee to contract CLM to manage the Aquatic Centre. Again, the Wā Reports were not shared. Council was apparently convinced by CLM’s promise to deliver more efficient, effective and expanded services and programmes, and to save about $700,000 of the annual cost to ratepayers of $2.2M. The CE did not convene the Consultation Committee.

The same afternoon, the lead Wā consultant reported the Council’s decision to Aquatic Centre staff, and added that a new Centre Manager from CLM would start on 27 November. The Wā consultant was later confirmed as Sports Development Manager at over $100K pa, apparently to supervise the new Centre Manager, thereby adding another level to the corporate hierarchy who are all paid over $100K pa.

The following day the Manager, Sports Recreation and Environment, thanked Aquatic Centre Staff and AWUNZ by memo for attending the meeting on the previous day and acknowledged that industrial issues had been raised by them and Rob Popata, AWUNZ. He reported that a working group of three AWUNZ and three RLC HR staff had been formed to “commence working through the transition process”. The CE did not convene a meeting of the Consultation Committee.

On 29 Nov, the new Centre Manager explained CLM’s structures at two meetings with Aquatic Centre staff, especially their options for moving from RLC employment to CLM employment. Permanent pool attendants and swim tutors were offered matching job titles and pay, subject to new rosters, with some changes to employment contracts foreshadowed around sick leave provisions, long service leave, and redundancy. The 11 duty managers, receptionists, service manager and the swim school management, administration coordinators and programme lead staff were offered an opportunity to apply for new CLM positions, with other options. Casual pool attendants and swim tutors were asked to declare their availability. And on 1 December, the RLC formally asked all Aquatic Centre staff by letter to declare their intentions by 8 December. The CE did not convene a meeting of the Consultation Committee.

On 5 December that AWUNZ’s barrister asked the RLC’s Manager of HR to halt the transition process because it was breach of clause 37 of the Collective Agreement and section 4 of the Employment Relations Act 2002 which applies to any proposal to contract out. She indicated that she was seeking interim and substantive relief at the Employment Relations Authority (ERA) and immediate mediation.

The HR Manager claimed in response the following day that staff had been “engaged, consulted and informed staff at different stages of this process since June, and leading up to the Council decision.” Further, he noted, the CE had just delegated responsibility for convening the Consultative Committee, its first meeting to be held 11 December. He added that the deadline for staff responses had been extended one week to 15 December but that “we see little merit in mediation at this time.” Another email the same day to some Centre staff made it clear that the HR Director expected the transition process to proceed.

Industrial action followed. On 6 December an AWUNZ hikoi attempted to deliver a petition signed by more than 4,000 people to the last Council meeting of 2017. The Mayor and the CE used fearism to justify the reportedly illegal ‘lock down’ of the Council building, refused to accept the petition, discouraged any councillors from meeting with the petitioners despite a number expressing disquiet, and then convened a press conference to explain the out-sourcing of the Aquatic Centre management to CLM.

The following day the AWUNZ’s barrister notified the HR Manager that she had met with Centre staff and would be seeking interim relief and a substantive investigation, and lodged a request for all information related to contracting out. She raised issues to do with employment responsibilities, mandatory consultation, being a good employer, and the CE’s obligations to rectify breaches, starting with the retraction of the 1 December notice. The substantive concerns about contracting out included reduced staff conditions to achieve cost savings, the absence of references to honouring the Treaty of Waitangi in the RFP, the lack of an opportunity for Centre staff to put an alternative proposal, pressure to transfer to CLM, and concerning statements made to individual workers.

The HR Manager replied to the AWUNZ’s barrister on 8 December. He reiterated the Council’s decision to delegate authority to the CE to negotiate the contact with CLM, clarified the different functions of the working group managing transition and the Consultation Committee, insisted that all information had been provided to AWUNZ, and that Centre staff had had every opportunity to submit a proposal. AWUNZ did not attend the Consultation Committee meetings scheduled by the RLC for 11 and 15 December.

The ERA offered mediation to the RLC and AWUNZ on 18 December without positive outcome. It then convened an investigation hearing the following day. Having identified two breaches by the RLC, not negotiating in good faith and not convening the Consultation Committee, the ERA issued seven consent orders:

1. RLC to provide all documents to AWUNZ about outsourcing centre management to CLM, including the four Wā Reports, by 22 December.

2. The CE to convene the Consultation Committee on 10 January to address the staff’s alternative management model and requests for information.

3. The CE to convene the Consultation Committee on 17 January to discuss staff’s alternative management model.

4. The CE to convene the Consultation Committee on 19 January to discuss the CE’s draft response.

5. AWUNZ’s response to the CE’s draft response is to be with the CE by 26 January. Both AWUNZ and the CE are to submit proposals and responses to the Operations and Monitoring (O&M) Committee.

6. O&M Committee to decide on 1 February if the staff’s alternative proposal is to go to a full Council meeting on 28 February.

7. RLC officials to pause the implementation of out-sourcing to CLM, other than provide information to staff, until after O&M and the Council have made their decisions.

The first meeting of the Consultation Committee on 10 January was devoted to interpreting the determinations of the ERA with AWUNZ seeking information on model costings.

At the 17 January meeting, the AWUNZ team tabled a proposal on behalf of Centre staff, and answered questions, but solely in Te Reo. It called for a kaupapa Maori internal management model (Te Puna) and provided a preliminary financial comparison with current and CLM’s external management model. A translator found in haste admitted that many of the concepts were beyond her translation capacities. The Acting CE indicated that Te Puna would be translated and appraised using the criteria set out in the RFP.

The Acting CE tabled a draft response to the Te Puna model at that 19 January Consultation Committee meeting. He acknowledged that both parties had worked under intense time constraints and that the Te Puna proposal advanced “mahi kotahi”; when the Council, Community and Staff would work together on developing an alternative to external management.

The draft response included a comparative assessment of the CLM and Te Puna proposals against the RFP criteria. It found that the CLM proposal was superior across the criteria, and additionally out-sourced risk, which is a doubtful claim because officials would continue be expected to supervise the contract, internal or external. Similarly, it was argued that the Te Puna proposal located all risk with the RLC, which ignored the interconnected responsibilities and accountabilities of officials, councillors and the community. Risk was conceived solely in financial terms.

Perhaps the most important acknowledgement by the Acting CE was that the Te Puna proposal aspired to achieve bi-cultural and community values, and offered an opportunity for Council to create a process for councillors, officials, staff and community to translate this philosophy into an effective governance and operations model.

In consultation with AWUNZ officials on 23 January, RDRR Committee members evaluated the extent to which the Te Puna proposal is likely to serve the interests of residents and ratepayers. They were appalled by the unethical nature of corporate leadership provided by officials, the extent to which the crisis in the management of the Aquatic Centre was caused by incompetent human resource management, the ineffectual governance of the CE and his senior officials by the Mayor and councillors, and the contrived information deficit around O&M’s and Council’s decisions. They support the Te Puna proposal in principle, and are committed to continuing collaboration with centre staff through AWUNZ in the interests of our community.

The focus is now on O&M Committee’s decision on 1 February, and the time now needed for the Te Puna proposal to be more fully developed. In consultation with AWUNZ, the RDRR is mounting a public information campaign to inform decision making by elected representatives at O&M, and hopefully, at full Council. AWUNZ will organise a public meeting for the evening of 31 January.

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