The Dynamic Duo of Carrollton, Texas: Creating a Culture of Competition in City Government


The Dynamic Duo of Carrollton, Texas: Creating a Culture of Competition in City Government

Interview with Carrollton, Texas City Manager Leonard Martin and Director of Competition Tom Guilfoy

Ten years ago, city leaders in City of Carrollton, Texas charted a new direction for how the city would operate, directing administrators to transform the bureaucracy from a government culture to a competitive, business-like culture. Officials hired City Manager Leonard Martin to lead this change, and he created a new Director of Competition-the first both for the city and nation-whose sole purpose was to drive the city’s culture to become competitive, either using in-house or external service providers to provide services to residents “cheaper, faster, better, and friendlier.”

Martin and Director of Competition Tom Guilfoy developed a robust managed competition program-now a decade old-where all government service costs are fully burdened with overhead costs just like private businesses, and government compares their fully loaded cost of service delivery against private sector costs to seek the best provider. In some cases, this has led to re-engineering of city services, and in others, like solid waste collection and vehicle fleet maintenance, the city has turned to private service providers. Overall, the managed competition process is estimated to have saved the city $30 million over the last decade. Moreover, despite an increase of over 40,000 residents, the city still operates with approximately the same number of employees on the payroll in 1990, a testament to both the results of competition and the city’s fiscal stewardship.

In this April 2012 interview with Reason Foundation’s Leonard Gilroy, Carrollton’s City Manager Leonard Martin and Director of Competition Tom Guilfoy discuss the first decade of managed competition in Carrollton, the process used, and what it takes to create a culture of competition in city government.

Leonard Gilroy, Reason Foundation: Can you explain the situation that led the city of Carrollton to embrace managed competition-and really, a culture of competition-in the early 2000s?

Leonard Martin, City Manager, Carrollton, Texas: At the time, I was a city manager in Edmond, Oklahoma, a suburb of Oklahoma City, and heard Carrollton was looking for a city manager. And as I describe myself, I’m not your traditional manager; I’m a change agent, like a corporate turnaround guy.

This idea fit with the Carrollton City Council, who was looking for a better way to do business. They weren’t sure what kind of change they wanted, but they described it in terms like “we’re tired of no sense of urgency” or “we’re tired of studying things to death.” They were tired of traditional government.

Shortly after I came in 2001 we had a planning retreat with a facilitator, who helped the city council articulate what they were looking for. They said, “we want managed competition,” and though they weren’t entirely sure what that meant, they knew that I had done a lot of it over the years.

So they set out the goals and I began to work with staff. I began to recognize that what they wanted to do was change the culture. That’s the bottom line. They wanted us to change the organizational habits, which is what culture is. And I realized that as city manager, I could have the vision and I could push as hard as I want, but in order to change a culture, you’ve got to have a champion such that, in effect, when they speak, it’s the CEO speaking. This applies to any organization.

And that’s when I created the position in the city called the Director of Competition. Tom Guilfoy was hired for that position, and he came from the private sector, which is what I wanted. Tom’s job was to come in and get the organization competitive in one of two ways. A department would get a chance to compete for the business, and if they weren’t successful or were not competitive, then we would hire a competitor to do the job. If the department could get competitive, then we would develop a service contract-a written agreement-just like we would have with a private sector vendor.

Coming out of the private sector, Tom was shocked by the lack of a sense of urgency and lack of a sense of focus on being competitive, and he had to put up with “why do I have to be competitive, I’m government, we don’t have competitors” and that sort of thing. So Tom’s task was to create a process for assessing whether or not helping a department learn how to be competitive would work and then go through the process of competitive analysis. We began to do a lot of work on that and put through some significant changes.

To change a culture, you have to send a message. I have a firm belief that the reason a lot of businesses are not successful-and that governments are not successful-at being competitive is that we have a lot of people that hold positions but they don’t have jobs. I have a firm position that we want people with jobs, not positions filling a chair or driving a vehicle. They need to have a purpose. I think that people, by our nature, like contributing and we like producing. And those people with jobs go home happy. Those people who have positions are usually troublemakers in your organization because they don’t have anything else to do but stir up trouble!

So we began to go through the competitive process and our first venture was solid waste. I don’t know why any city is in the solid waste business. This is not a core function, and that’s one of the things that Tom was looking at: what’s the city’s core business? So our employees competed and they came in fourth place.

Tom Guilfoy, Director of Competition, Carrollton, Texas: That’s right. They came in fourth place and it was hard for them to put together a proposal, as they only knew the “government way.” In fact, they were only working four days a week because they wanted to have three-day weekends; that was the main reason. But their competitors work five days a week, and it’s a capital-intensive business so the reason they do that it to get the utilization out of their equipment. So it was hard for them to shift from a four day a week operation to a five day a week operation.

Martin: So we went through that process. I had been watching a nearby city going through something similar, and the city council wanted the manager to put that service out to bid, and the city lost. But on the night the council was going to award the contract, out in the audience were employees from the city owned business, their grandma, their wives and their children. They had signs up, like “Don’t take our jobs away.” And when they convened the meeting and got to that agenda item, the council looked down in the audience and saw that, and they told the manager, “Whose stupid idea was this? We would never take these jobs away.” And I am amazed by the number of people on city councils, or in government in general, who own businesses and routinely lay people off but they come into government and do a no layoff policy. And that manager in that city was left holding the bag.

So I told my council that story. I told them that we were coming up on outsourcing solid waste, and if they decide to outsource it we will lay off about 50 employees. And I said, there is a chance that you’re going to be looking at their grandmas, children, babies and wives pleading with you not to take their jobs. And I said, you have an option: you can either say, “OK, we will not do that” and keep a noncompetitive business, or you could outsource them.

Well, our city council decided to outsource and lay off those employees on the consent agenda, with no discussion. Certainly they had a lot of background information and didn’t just blindly follow my recommendation. Once they analyzed it and saw that they were in fourth place, they outsourced trash and, in effect, by doing it laid off 45-50 people. And they did it on the consent agenda.

Well, you can imagine the next morning in City Hall. By and large, our employees had assumed that the council would never, ever authorize taking 50 jobs. So everyone had been pretty lackadaisical up to that point about this new city manager and this “renegade” director of competition. That next morning, knees were knocking and sweat was rolling down brows, because they said, “holy cow, this city council will do it. We’d better get busy.” From there on it got a lot easier to make the culture changes. But you’ve got to communicate a lot about the fact that there’s a new sheriff in town, and these are the new habits that we want to see out of people, and this is the way we’re going to operate.

I tell everyone it takes about three years to have enough impact on a culture or on organizational habits that you begin to see expressions of the new habits, the evidence of them occurring on their own without forcing that change. As I coach people-I do some seminars on leadership and how to change a culture-I tell them that when you get pushback from people, you have to shove back.

So about three years in that culture began to take hold. And ten years later, it is our culture now, it is the way our people think, and quite frankly they look down their nose with disdain at some of the stuff they see in traditionally run cities, and the waste they see in traditional cities.

Guilfoy: It’s interesting, the things you take for granted in any culture you’ve worked in for a long time. I worked in the private sector for 30 years, and I’ve worked at companies that went through deregulation and had to get competitive very quickly. The rules of the game were changing, and they had new competitors to deal with. And it was a shock to those organizations, just like it was a shock to the city people.

They’re not that really much different than anyone else. You want to know, what game are we playing today? What are the rules? How do we win? What does it take to be successful?

It’s also about things like how much equipment we buy and use every year. That all takes capital and maintenance, etc. And we can talk about what the operating units found when they talked to their competitors and found ways they could save without having to lay people off or reduce their staff. There are lots of opportunities for that.

It was just a very wide-open field when I got here, but there was a lot of resistance. People didn’t understand why they had to change because they’d been doing it that way their whole careers.

Gilroy: In terms of institutionalizing culture change, how did you structure the process by which employees would compete?

Martin: I think we looked at the low-hanging fruit. In any operation-public or private-you can see elements that are fairly competitive, and you can see others where the employees are practically waving their hands and saying, “please outsource us.”

We also focused on where there was the largest return on investment. Outsourcing solid waste saved us $5.2 million over the life of the first contract we did. That’s a big chunk of change versus going in to a small operation, where you work hard for six months or a year and you only save $50,000.

The view was that the new city manager and the director of competition were simply here because they hate government employees so they want to lay all of us off. There were some really interesting stories about me floating around the Metroplex among the younger government professionals-“does he really go down the hall screaming, ranting, raving and firing employees?”

And so a point that we tried to communicate as soon as we started the process is that this is not about laying people off or outsourcing or anything. What it is about is becoming competitive and offering services cheaper, better, faster and friendlier. And in 2001, those words became our slogan at the city: cheaper, better, faster and friendlier.

We made the point that as a government unit you should not have anything to fear about being the provider of choice for services because you have a built-in competitive advantage. One is that you don’t have to make a profit. When your competitors do their costs, they’ve got to make a profit, so that’s a cost advantage. You also don’t have to pay taxes. Private business has to pay taxes.

We walked them through some of these advantages and told them to focus, try hard, and learn from their competitors. Tom would tell them they need to identify their competitors, but they viewed their competitors as other cities. They didn’t understand that it’s private businesses that provide the same services we do. So we communicated that.

Tom created a four or five step process that we would use, and we would flex the process depending on the business unit that bid it, because some were unique. And I think it was our parks maintenance operation, where the head of parks-rather than resist it, he saw this as an opportunity and communicated that to his employees. And they won their competition fair and square.

Gilroy: Given some of the public sector’s competitive advantages you mentioned and the fundamental differences between public and private sector accounting, how did you create a level playing field for private businesses?

Martin: The thing that you’ve got to do-that government does not do-is that in the private sector you fully allocate your overhead costs to your business units. When a potato chip company makes a bag of potato chips, the pricing of that bag is not just based on the potatoes, the oil you fry them in, and the cost of the cook. In every bag there’s some part of a CEO’s salary, the corporate overhead, the corporate buildings, the insurance, the utilities, the legal staff, the HR staff-all of that goes in to that price.

In government, if we were going to price our potato chips, we would typically price out the costs of the potatoes, the oil we fry them in, the cook, and maybe the kettle we fry it in. And some governments go way out and add in some of the electricity it takes to run the fryer.

Well, we went in and set up a cost allocation system so that all of our services and business units are fully burdened in their costs. So if you look and try to compare the costs of us providing, say, police services, it looks like we might be wasteful and spend more. But it’s because we capture all of the costs of providing that-both the direct and indirect costs-whereas government traditionally only focuses on the direct costs.

If you’re going to compare the costs of government services against private sector costs, it’s only valid if you level the playing field and put into the government costs all of the overhead that the private sector must bring to the table.

There are a lot of cities that do this kind of stuff, but they just use this to beat up and scare their employees, with no intention of doing it. Or, they argue that they’re cheaper than the private sector because they’re only factoring in the direct costs, or just throw a little money in and say it’s fully burdened.

We developed that cost allocation system, and, boy, you talk about “deer in the headlights” in the organization. I remember when human resources (HR) figured out that when they lost solid waste, they lost a part of their customer base, and therefore I needed fewer people in HR. When vehicle maintenance lost some trucks, we needed fewer mechanics. The overhead in the organization figured out real quick that they had to make sure to keep their costs down so that the people they serve-their customers in the organization-could be competitive, or else they both go out the door.

Guilfoy: That’s a really key point. I can remember in the beginning the operating units, the people out there dealing directly with customers, were asking, “Why don’t the staff or the ‘city hall people’ have to go through this?” There was a feeling this didn’t apply to finance, HR and others. But by recognizing all of these overhead costs from the central units, they became part of the process too. This kind of process can work in any organization.

Gilroy: How did you evaluate what services you would compete?

Guilfoy: The question we always get from cities that come visit us is, “how do you decide who to pick to start with this process?” Some cities we’ve talked to are really concerned about that, whether it’s going to be worthwhile, number one-picking a unit where they’re going to have some significant savings. Number two is that there are private sector competitors out there, so there are alternatives to providing the service. Third is a concern whether elected officials will support whatever they recommend.

But the question was how to select a candidate to go through managed competition. We were in a hurry. Back in 2001-2002 when Leonard got here we had a $2.5 million budget deficit that we had to close. Managed competition was a strategy for how we were going to balance our budget. So we went after the big, low-hanging fruit first (i.e., solid waste).

After selecting a candidate, our second step is that we do an in-depth operational and competitive assessment. What that includes, for a given operation, is defining their services and functions, and we group services together into lines of business just like any kind of business would. The next step is to identify the fully allocated costs (i.e., including overhead). Once we understand that, we are ready to go out and benchmark against other providers. We look at the private sector, we look at other cities, and other operations in our own city. We look at their staffing models, we look at their operating costs, overhead, equipment utilization, we look at their prices, etc. By that point we usually can see some differences between our operation and others. That gives us some clues as to where we want to investigate further.

The next step is to identify industry best practices and trends. That was one of the hardest things I think for the city government people to embrace. You can learn a tremendous amount by studying your competitors, because most of the industries we operate in are mature. There have developed best practices and trends you can look at, and there are ways of doing things and improving over the years and being successful. That gives you an opportunity to compare your organization and the way you do things with the industry standards.

After that, I usually write up these operational and competitive assessments and identify where the opportunities are for us to provide services cheaper, better, faster and friendlier, and I take it to Leonard for a review. There are several options he’s got. We can give the unit time to reengineer, restructure and get competitive. We can compete them, developing an RFP and letting them bid against their private sector counterpart. We can retain the business just like it is if we’re satisfied with the way it’s operating. Or we can outsource it or partner with someone else to provide services.

The next step is that once he decides, whatever option he picks, we go down the path of either developing the RFP or giving them time to reengineer and get competitive. And at this point, I usually change hats. Prior to that step I’m in this role of objective management consultant, and then if we decide we want to help the unit get competitive I switch hats and start working with them, helping them reengineer and restructure. And if they’re successful, at the end of the process we sign a multiyear service agreement, which is an agreement between the operating unit and the city manager’s office to provide services. That in a nutshell, is our process.

Gilroy: What sorts of benefits have you seen from managed competition over the last ten years?

Guilfoy: Well, we haven’t had an elaborate way to track every dollar we save because as more of the organization gets this philosophy and way of doing things, we’ve stopped doing things that cost us a lot of money in the past. For example, in our parks maintenance operation, they had a tremendous amount of equipment needed every year-weedeaters, mowers and that sort of thing. As they went through the process, they realized that maybe they didn’t need all of this equipment and maybe it’s a good idea to, for example, standardize on certain types of equipment so we would have duplicates of things so that everyone would know how to operate it, maintain it, get parts for it, etc. And they stopped buying a lot of equipment. How do you capture that, when they stop doing something?

So instead we did a rough estimate of what we think our savings were, and it’s about $30 million over ten years. I suspect that’s a very conservative number though because we didn’t track every single dollar of savings.

But we can give examples of units that had significant savings. Our water & wastewater operation saved us about $605,000 annually-this is recurring money-so every year we save that amount. Add that up over ten years and that’s $6 million right there.

That’s one of the powerful aspects of this. When you reengineer to try and optimize your business processes, it’s the best way to drive waste and inefficiencies out of the operation.

Martin: The other measure we now track is salaries. Government’s biggest expenditure is usually salaries, people. Government, by its very nature, is a people business. We’ve gone back far enough to know that we have about the same number of employees on the payroll today in 2012 that we had in 1985. And the city population in 1985 was probably somewhere around 70,000. Today we’re over 120,000 in population.

You find so much overstaffing in government because government rewards failure. We do it without realizing it. The example I use is, crime goes up, and what do we do? Well, then we need more police officers. Test scores are low in schools, and what’s the solution? Well, we need to pay teachers more and have more teachers to solve the problem. I’ve got a lot of potholes in town, what’s the solution? Well, hire another pothole patching crew.

What we should be focusing on are the true causes, and maybe part of the problem is that we are trying to solve old problems with old methods. And if we have crime going up, maybe we need to restructure how we offer police services. If public schools aren’t performing, what we perhaps need to focus on is how we are offering education to our young people, and what is the structure. If potholes are out of control, how are we building our streets and are we patching the same potholes over and over? Maybe I need to change my method of repairing things.

Government is very tradition-bound, and we still like to do things the way we’ve always done it. So this culture change is getting people out of that mindset. It’s looking at how to solve the problem with fewer resources. Anyone can do more with more. It takes a leader and manager to do more with less. And that’s where our people are, and we have not had to do wholesale personnel changes. People just needed to be educated and motivated to a new way of doing things, and they’ve bought in. Some of the people who didn’t have a clue of what we wanted early on are today our biggest advocates.

Gilroy: What is a “director of competition?” Is that a procurement director under a different name?

Guilfoy: Let me use a football analogy. I think it’s like Bill Parcells’ style of coaching. I want to win, I want our units to win, and I care about the people that work here. But I also realize that we live in a world of limited resources, and we’ve got to make the best use of those resources and put our best team on the field. And sometimes that means giving employees some support and encouragement. Other times it means confronting them and telling that they’re just not operating very efficiently or utilizing their capabilities the way they need to. I suppose that the bottom line is that I’m a coach, but I’m also an accountability partner in the sense that I have to hold people accountable for what they’ve committed to. So my role is being the contract manager for these agreements with the city manager’s office and the other units. If I didn’t care, no one would care because no one else is really watching out for how they’re performing according to their agreements.

Leonard has given me some additional responsibilities over the years. I cover organizational development, trying to help the organization learn new skill sets and new attitudes and ways of doing things. I’ve also got strategic planning responsibilities. That’s one of the strengths of the private sector that cities can emulate. Every business I worked for in my career had a long-range plan. When I got here the only long-range plan we really had was a capital improvement plan. Now we have multi-year business plans for each of our operating units and they’re updated every year. By asking them to do that, it forces managers to look out into the future and anticipate the kind of operating environment they are going to be faced with in three or four years, and how do they get ready for that.

It’s changed them from being reactive, crisis-oriented managers to being proactive, strategic managers. I don’t know any business of any size that is sustainable being in crisis mode all the time. I think a lot of departments can get stuck in that reactive mode really easily in government.

Martin: I view Tom like a referee in a football game. Those referees know all of the players, they’re friendly, but when you do a crack-back block they throw the flag. That’s what Tom does. He knows the people, and he wants to see them do what’s right. When they do what’s wrong, he calls the foul. Sometimes he calls the foul to the point that he takes them out of the game, which means they’re being outsourced.

Tom is our chief culture change person. John F. Kennedy made a statement that change is a law of life. Those that live only for the past or present are sure to miss the future. And Jack Welch was quoted as saying that, when the rate of change outside your organization is moving faster than the rate of change inside your organization, the end is in sight.

What we try to instill in our employees is a value system that assumes the world is changing. There is no end to change, until you die. Every morning in Africa a gazelle wakes up and knows that it has to run faster than the lion to survive. And every morning a lion wakes up and knows it has to outrun the slowest gazelle or it will starve to death. Whether you’re a lion or gazelle, you’d better wake up and start running.

Government runs on morale. They might see something that would improve government and would save taxpayers money, but they don’t do it because it would offend the employees. I openly tell our employees, “I don’t care about your morale because I can’t make you happy. You make yourself happy. All I do is provide an environment where if you choose to be happy, you can be happy.” But that’s a personal choice, not an externally imposed choice. We don’t worry about the morale, and Tom’s job is to continue to ask them that probing question.

When he first came they hated his guts because they saw him as the Grim Reaper. Now, the people that know Tom and work with him, well, he’s their go-to guy and they come and bounce things off of him. He’s viewed as our internal management consultant.

Gilroy: Can you describe some of the things you learned about driving competitive change as you got underway?

Guilfoy: Here’s a good example. Water and wastewater is an example of an essential city service-providing safe drinking water-and our unit was doing a good job of trying to produce that result, but they had not really looked at what it was costing them to produce that result. And they had made some assumptions that weren’t valid any longer. One of the things that every city that provides water has to do is man their pump stations 24/7. When I got here, we had two people on duty 24/7 at every pump station, basically. We started looking into why we had two people and heard that if there’s a call-out or a sewer overflow, we have to have someone to go check that out and figure out how we can solve the problem immediately. And they said that it was what the council expects, for us to have two people on duty all the time to take care of these things. We discovered that our Council never dictated how to staff our pump stations.

So, we started to look into it a little further and realized that with a combination of voicemail, cell phones, etc.-and also the monitoring systems we have in our pump stations and water towers-that we were monitoring the system just fine electronically. We didn’t really need two people sitting at the pump station just waiting for calls, so we were able to eliminate that one duplicate position. If we get an after-hours call, that person can go out and inspect the problem. They’ve still got access to voicemail if any other calls come in. That’s a simple example of where the employees assumed that they were directed by city council to operate this way, and they really hadn’t looked at a creative way to still provide the level of service and security that we need, but do it more efficiently.

Another thing we learned is the importance of leadership in driving change in an operation. At the beginning of the process the senior team was suspicious about what our motives were in managed competition. They thought that our goal really was outsourcing, not getting best value services. So they were very resistant, and it was very hard for me to gain their trust and cooperation. Eventually they started to turn around and trust the process, but it took a long time for their employees to buy in to what we were trying to do because of this suspicion in the organization.

That’s an important point to think about whenever you’re in a change process: everybody needs to be pulling in the same direction. It’s not about who’s right or wrong; it’s about what we need to do to be competitive. Everybody is at risk in a case like that, from the top director down to the street maintenance worker. What I learned is the importance of getting the leadership team on board at the beginning, and making the process transparent. I want to make sure people understand that our evaluation process is fair and predictable; there are no surprises, no hidden agenda. I’m not trying to give one department an advantage over another. The strategic goal is to provide best value and save the citizens money.

You also have to give people time to understand the key drivers in their business unit and what’s affecting their competitive position. For many people this is new stuff that they never studied in school. One of the aspects of our program is that in almost every case, if the unit is trying to get competitive, we want to give them time and support them in doing that. So we flex our process to fit the circumstances of each operating unit.

However, on the reverse, if someone is resistant and have their heels dug in-hoping that it will just die under its own weight or that we’ll lose interest-we don’t have as much patience with those folks.

Martin: And in fact, in the case of vehicle fleet maintenance, we worked with them for a reasonable period of time, but they just kept resisting and dragging their feet. So, they did not get a chance to compete. I went out one morning and told them, “we’re outsourcing you people, we’re done.” And we hired a private company that now maintains our fleet. That’s an example of where normally they would have gotten a chance to submit a bid, but they were so resistant it would have been a waste of everybody’s time.

I don’t know why anyone would want to do fleet maintenance in-house. It’s not a core business of government. I think our contract is going very well. We are talking with other cities about helping them do some of their maintenance now, so they’re looking at possibly getting out of the business themselves and contracting with Carrollton and its private company. And we don’t think that we’re necessarily the best at everything either, so we can look around to other cities and see where they might have some excess capacity to sell to us.

Gilroy: How did you build trust among your public officials?

Martin: Communication is at the core of any relationship. Whether you’re married or you’re business partners, it’s communication. We communicate very, very frequently about what we’re doing to be competitive. We share success stories, and we share frustrations. What elected officials want is results. In government one of the sayings is, “it all pays the same, whether we’re working hard or not.” Now, by and large it’s been my experience that there are really good people in government. It’s processes that drive bad outcomes.

So because government is in that sunshine, when we’re making a decision the public is involved, and if we screw up we’re in the lead of the six-o-clock news, where they say, “let’s look at what the boneheads at City Hall screwed up now.” While I’m certainly not opposed to that transparency, if you think it through, it can make anyone realize why government is so risk averse. No one wants to be portrayed as an idiot just for trying something new and taking a risk. The easy thing to do then, for me as a city manager, is to go to my city council and ask them what they want me to do and how they want me to do it. But on that council I’ve got a contractor, an attorney, an architect, two small business people, a person in finance-they don’t really know anything about how government works day-to-day.

Here what we’ve done is tried to make their job easy. We ask them if they want to row the boat or steer the boat. We have been successful with the council being like the board of directors of a corporation. They steer the boat, and therefore we’re free to row the boat. If the boat is being rowed in the direction that the helmsman steers the boat, then the helmsman is really happy.

That’s how it is with the city council. If they provide the direction and we’re able to deliver for them cost effectively and competitively, they are going to be willing to let us continue doing that. That’s how we’ve maintained our ability to continue course.

We don’t take jobs. However, we have taken out positions where people did not have a job. Or, people had jobs but they didn’t perform competitively, and they were basically asking me to help them find a new career path, which we did. This is foreign talk for government.

Our current mayor, when he was a councilman a few years ago, made a statement one night. In the depths of the recession, even when we were tightening up and furloughing some people for a few days, we didn’t do any layoffs nor did we curtail services. He said that we-the city council, staff, etc.-made the hard decisions when we were not forced to make the hard decisions. We made the hard decisions for the right reasons, which in effect was because we are the guardians of the taxpayers’ money. And we’re spending their money like it’s our money.

Government has been taught that there are only two options: raise taxes or cut services. You hear it in Washington. You hear it in the states and cities. No, there’s another option: run it like a business and make it efficient. We don’t try to be everything to all people. Early on we made two lists: one list had the essential services that we had to provide, either legally or to make the city work.

You need water to make a city work, for example, but you really don’t need to loan first-run movies at the library. We had a library that was across the street from a Blockbuster Video, and I found out that we were loaning out first-run movies. You could come borrow “Die Hard” from our library free of charge, and we even had a drive up window. You could call ahead and reserve “Die Hard” and have them meet you at the window. Across the street was poor old Blockbuster, who’s trying to convince me to go pay $3.50 to rent “Die Hard,” and then they’d charge me a sales tax that will go over to the library to buy more copies of “Die Hard” so the library could put them out of business. The council decided that we don’t need to be in the business of loaning out first-run movies. We’re in the educational business, so therefore we divested ourselves of our inventory of first run movies and got out of that stupid racket, and closed the drive through window service. That was obscene.

It’s these philosophies that elected officials have bought into.

In government the dull roar of the silent majority has been drowned out by the shrill cry of the special interest groups. I’ve witnessed it, like when five people come and scream loud enough we’ll crank up a whole bureaucracy and a whole service unit. That’s just foreign to Carrollton and our city council. We only want to provide services that cover a wide customer base, unless it’s a public safety issue. It’s the focus on cutting costs and not trying to be all things to all people, trying to develop sustainability in everything we do. If we start a new program today, how does that contribute to Carrollton being a quality city five, 10, 20 years from now? And how are we going to finance that program? If we can’t really say it’s financeable for the foreseeable future or would truly contribute to us being a better city 20 years out, then we’re not going to get into it…end of discussion.

In government there may be times that you need to raise taxes for some reason or another, just like a business sometimes has to raise prices. But you’ve got to do it with a backdrop that the only time a business wants to raise prices is when there’s no other option to offer that product but to raise prices. You don’t raise prices just to give employees a raise; if you do, that’s not a sustainable model and you’ll go out of business.

Our exercise wasn’t really fancy. We took legal pads, put a line down the middle, and on the left side put essential services and on the right, non-essential. We listed out every service we did. The things we learned that we were doing were things we didn’t previously have a clue on, like the movies. We don’t need to go out and undercut businesses, so we just stopped doing some things. Another example is karate, where you can’t drive down the street and not see a school on every other corner. Yet city government was offering karate classes. And you’re out there with your black belt, paying your lease, paying taxes on your business that I get to keep to undercut you at the rec center.

I had an employee that defended it to me once, saying that there were people that couldn’t afford to go take karate. So I told him that was an excellent point that I hadn’t thought of. At the time George Bush was president, and I said, “I’m quite sure that President Bush had to know karate under the Constitution in order to run for president.” Because obviously if you’re going to be President then you have to know karate. I wanted to be an astronaut, and my town didn’t provide me astronaut training. It’s amazing I was able to become a city manager since my town let me down on astronaut training.

So that guy quit. I respect that person because they lived up to their principles. And I assure you that there were lots of places in government he could go that had that same philosophy: that anyone who wants something gets it. Not here. The council has stayed firm to our policies. We’ve known other places where the staff want to do managed competition, but the council doesn’t want to push on employees because the employees are viewed as a strong voting base. You see that especially at the state levels, where politicians cater to that state bureaucracy.

Our councils have not gotten into that, and they’ve stayed on firm ground and done what’s right for the taxpayer. You got people on the council that have been there for years and understand the culture and are proud of it. All of that takes some courage.

Gilroy: How have citizens responded? Do they like the way things are going?

Martin: For example, when we first started this, our employees told us that our residents expect for their trash to be picked up by city employees. And I said, “they couldn’t care less about who picks up their trash, they just want their trash picked up.” When you flush your toilet in the morning, you don’t yell for it to come back because some private company is treating it when it gets out there. Residents just want their trash picked up, they want a cop to show up when they call, and they want their potholes fixed. And they don’t want me picking their pockets to do it.

I think our citizens are happy. If you survey our residents about managed competition, they’ll probably say, “huh?” People don’t really care about the agenda-they want service and value. All the taxpayer cares about is the highest quality at the lowest cost. They don’t care whether it’s a city, a business, a county, or Martians coming down to Earth to deliver the service. Residents are pleased with what’s happening because there’s no political turmoil. That’s the best barometer for when residents are unhappy.

Gilroy: When you’re talking with other cities looking for lessons on fostering change, what advice do you give them?

Guilfoy: One of the most valuable things we’ve done is to show the younger generations in city management a different way of managing cities. That will reap tremendous dividends over the years. I just wish that we could get this philosophy instilled in leadership development programs throughout the country because that’s really the long term hope-get this approach adopted by the younger managers who will be in leadership positions in a few years.

Martin: The downfall of many want-to-be leaders in the public or private sector is an overpowering need to be liked. That’s what’s wrong with parenting very often, where parents that want to be liked by their children will not take the steps that are in the best interest of their child. And managers do not take the appropriate actions that are in the best interest of the sustainability of the business. So if you want to do what we’ve done, you have to understand that anytime you start forcing change-and initially you have to force this change-you’re going to upset people. They’re going to be angry and they’re not going to like you. But the longer it goes, the more the employees respect me and what I’ve done with these philosophies. And they respect Tom and what he has done.

We had some people early on that left the organization and said, “you’re changing the rules of the game and I want to go somewhere traditional.” But our turnover rates today are down around two percent or less a year. And that’s what’s shocking to people.

But it’s hard work that first three years, which is usually what it takes for change to lock in. For those first few years, you just have to be real bastard.

Leonard Martin has served as City Manager for the City of Carrollton, Texas since 2001. With a career in city management that spans nearly four decades, Martin has developed a well-earned reputation for transforming organizational cultures and providing citizens with the highest quality services at the best value. He holds B.A. and M.A. degrees in Political Science from Midwestern State University, and began his career as a management analyst in his hometown of Wichita Falls, Texas. Martin was recognized as City Manager of the Year in both Missouri and Oklahoma and received the American Society of Public Administration Administrator of the Year Award for the State of Oklahoma.

Thomas P. (Tom) Guilfoy was appointed to the position of Director of Managed Competition and Strategic Planning in May 2002. Prior to joining the City of Carrollton, Tom spent 30 years in various marketing, sales, finance and strategic planning positions with several Fortune 500 companies. Mr. Guilfoy holds a Masters degree in Telecommunications Management, and Bachelors and Masters degrees in Business Administration. To help Carrollton city staff continue to transform the organizational culture into a competitive “service business” model, Tom is serving as an in-house management consultant. Tom also provides leadership for a comprehensive organizational development program, including employee and organizational learning opportunities, performance improvement strategies, culture change strategies and training initiatives that promote professional excellence. He enjoys working with other cities and counties who want to achieve permanent cost savings and efficiency improvements through the application of Lean Government principles and practices.

Other articles in Reason Foundation’s Innovators in Action 2012 series are available here.