A Tale Of Two Cities: How Chestermere is Spending $100K More Than Lacombe To Find a New CAO

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In a vacuum it is often difficult to see the value of one city’s processes over another.  There are always differences that outsiders do not understand.  However, there are unique situations in which very similar cities perform the same task at the same time but one costs radically more.  We found just such a circumstance and are comparing the search for a City Manager in Chestermere with that in Lacombe.

Let’s start by showing their similarities:

  • Both are similar size cities in Alberta
  • Both have very similar annual budgets
  • Both are located just outside major cities (Calgary & Edmonton)

WHAT IS A CAO?

manager-silver-computer-gray-hair-man

A Chief Administrative Officer (CAO) is the ONLY employee of your City Council.  Under the Alberta Municipal Government Act (MGA) those elected to Council are explicitly forbidden from giving direction to staff; only the CAO can hire, fire and direct staff.  The CAO is sometimes referred to as the City Manager and that is a good description.  CAO’s must be intimately familiar with the Alberta MGA and generally well connected in the municipal political sphere.

Put simply the CAO prevents elected officials from breaking the law and translates the will of City Council into action with city staff, so it is an important position to be sure.

The real question should be “how much is that position worth” but that is a discussion for another day.  Today, we are looking at what it costs to hire them and we think you will be startled by the numbers.  Specifically, what are the costs incurred between the time the old CAO left and the new CAO started.

chestermere-interim-cao-contractBACKGROUND

In Lacombe they are doing the common sense thing by posting the position with sites known to all municipalities (AUMA, Civic Jobs and Municipal World) and having staff gather the resumes they receive.  Lacombe, like every municipality needs someone at the helm, so they took an existing staffer and temporarily elevated them to the CAO position.  Staff pay (except for the CAO) is not made public so we don’t know how much of a pay bump Lacombe’s Interim CAO is receiving.   After a few off the record conversations with other towns (NOT including Lacombe) it appears that a $2500/month boost on top of that persons regular pay is about right so we used $3000 as a reasonable guess.

The new Chestermere City Council took a different approach.  They waited 3 months after the election to just to hire an executive search firm (who will then start formulating a process to start looking for a replacement) and claimed that they could not find anyone on current staff who was willing to take the CAO position for the interim.  That is odd.  Chestermere has a 100% new council and mayor.  Anyone involved in government will tell you they did not really know what they were doing for the first year and they heavily relied on the CAO.  This means that the one position you must have staffed from inside the organization, if all elected officials are new, is the CAO.  Having a outside interim CAO with a new Council is recipe for costly mistakes and delays.

In the end Chestermere Council decided that paying a interim person about $27,000 A MONTH including benefits (see page 34 and the snippet of the contract to the right) was a the best solution and he started in December.  We don’t blame him; who doesn’t want to start a new temp job just before an extended holiday paid break.

COST OF REPLACING THE CAO

Based on the publicly know facts and some common sense estimations, below are several scenario’s demonstrating the cost differences that might occur between the two different hiring processes.

The table below is a summary of the dollar amounts assuming both processes take 4 months, which is certainly possible we think unlikely.  This shows a difference of $142,500.

DESCRIPTION – 4 Month Scenario  CHESTERMERE  LACOMBE
All New Interim CAO ($27,000 x 4 months)  $                  108,000.00  $                                  –
Temp Pay Bump for Current Staff To Be Interim CAO ($3000 x 4 months)  $                                    –  $                   12,000.00
CAO Executive Assistant ($100,000/yr/12*4) est.  $                     33,000.00  $                                  –
Executive Search Firm Costs  $                     25,000.00  $                                  –
Internal Costs  $                           500.00  $                     2,000.00
 $                  156,500.00  $                   14,000.00

We know Lacombe is moving a bit slower than the private sector, but much faster than the typical government.  While we cannot be certain at this time, it is pretty clear that Lacombe will likely have their new CAO in about 3 months and Chestermere will take about 6 months.  That would make the likely scenario a  $226,000 difference.

DESCRIPTION – Likely Scenerio  CHESTERMERE  LACOMBE
All New Interim CAO ($27,000 x 6 months)  $                  162,000.00  $                                  –
Temp Pay Bump for Current Staff To Be Interim CAO ($3000 x 3 months)  $                                    –  $                     9,000.00
CAO Executive Assistant ($100,000/yr/12*6) est.  $                     50,000.00  $                                  –
Executive Search Firm Costs  $                     25,000.00  $                                  –
Internal Costs  $                           500.00  $                     2,000.00
 $                  237,500.00  $                   11,000.00

Under a Best Case scenario, we calculate the very smallest differential will be about $119,500 :

DESCRIPTION – Minimum Differencial Scenerio  CHESTERMERE  LACOMBE
All New Interim CAO ($27,000 x 4 months)  $                  108,000.00  $                                  –
Temp Pay Bump for Current Staff To Be Interim CAO ($3000 x 4 months)  $                                    –  $                   12,000.00
Executive Search Firm Costs  $                     25,000.00  $                                  –
Internal Costs  $                           500.00  $                     2,000.00
 $                  133,500.00  $                   14,000.00

BUT WAIT, ISN’T THERE REAL VALUE IN AN INTERIM CAO?

In a word, little.  Is a CAO that will be in place for about 6 months going to do anything innovative or with long term vision?  An interim CAO is going to show up, have a lot of meetings with a lot of ‘important’ people and basically slow down the system. Remember the last time a new manager was brought in at your company?  They take a few months just to figure out which end is up.  That does not mean they are bad people or useless.  In fact, most of the better quality executives intentionally take the first few months to settle in, get to know WHY things run they way they do and then make changes.  It just means that interim managers nearly always slow everyone down around them and keep the boat going in the same direction it was already moving.

The exception here would be if you elevated an existing staffer to Interim CAO, then, as we outline below in the STAFF MORALE section there is some real value.  Projects do not get held up; lets get acquainted meetings do not occur, and real projects with vision get advanced.

EXECUTIVE ASSISTANT FOR THE CAO?

In the ‘best case scenario’ above we have taken out the cost of  Chestermere’s new Executive Assistant for the CAO position in the hopes that the CAO’s EA is a useful productive individual, although Lacombe seems to operate just fine without one.  For 30 years, Chestermere CAO’s and Council also seemed to manage just fine with using a small group of SHARED ‘assistants’ that often double as receptionists rather than paying exorbitant rates to a dedicated EA for the CAO.  Chestermere’s CAO will be paid about $200K but with the addition of a dedicated EA, that position will almost certainly cost more than $300K/year.

WHY USE AN EXECUTIVE SEARCH FIRM?

were-hiringNext, lets look at the value of Executive Search firms.  Such firms are commonly used in the private sector to poach high ranking people currently working at in other firms.  There are tens of thousands of those people even in a small Province like Alberta and Executive Search firms in the private sector makes lots of sense.  In stark contrast, there are only 17 Cities and 108 Towns in Alberta so the CAO community is small and connected.  Further, we did not find a CAO that did not find his current employment through one of the following two systems:

  1. a direct call from someone at the ‘other’ city – perhaps then a friendly lunch that that lead to an application that lead to a job
  2. Reviewing one of AUMA, Civic Jobs and Municipal World sites that cover every municipal position in the country.

It is clear that Executive Search firms have and will periodically find candidates for CAO positions but the question should be did the CAO that ended up being hired know about the position from the public sites and would they then have applied anyway… we think yes.

25k-contract-for-caoAnother argument Executive search firms will claim is that they need their $20K to $100K fee (see page 128) to find a CAO that is currently outside of the Province.  After discussing the matter with several current and former CAO’s we believe it is safe to say that there for cities with populations of less than 100,000, the new CAO is hired from within the same province MORE than 9 times out of 10.  This means that searching outside of your Province is likely a costly exercise with little to no return.

It is worth noting that Chestermere council thought that they could hire the EA through those websites.  That is odd, because using a search firm for an EA makes one heck of a lot more sense than hiring a CAO through a search firm.

STAFF MORALE?

One of the most nagging issues in small towns and cities is their inability to offer advancement.  There often isn’t and really can’t be a career path provided for staff that does not involve them moving to a different city.  Imagine you work in an environment of about 100 people (several of which are long term, highly skilled, educated, and experienced managers) and being told that none of them can run the operation for 4 or 5 months.  In fact, those staff are so bad that your company has decided to plow an entire annual salary into getting a replacement… and you get none of it.

Now imagine working in the same organization and finding out that there is a temporary position available allowing you could steer the ship for a few months until a full time replacement is found.  You will get a substantial bump in pay, peers will gain respect, you will build your resume, you will feel great and work even harder.  Better yet, when the new manager comes in you will likely be there to provide guidance as part of the team.

WHICH IS BETTER, LACOMBE or CHESTERMERE?

Here we will summarize the facts and you can decide which has the competent solution:

  • Cost difference – a  likely minimum of $120K – win for Lacombe
  • Speed difference – likely 3 months slower in Chestermere – win for Lacombe
  • Staff Morale – empowered and involved Lacombe staff – win for lacombe
  • Ease – much easier to spend $120K of taxpayer money thinking no one will notice – win for Chestermere Council (not citizens)

You do the math.

POST SCRIPT:

Note that we did provide the City of Chestermere advance access to this article for a full business day to allow for them to respond with corrections or comments.  By  5:30pm when the story was released, Chestermere had only responded (at 5:10pm) with a “thank you for the heads up” type message.  We did not want to ‘ambush’ anyone, we simply felt that is was important to explore the differences between two similar cities practices.

Article by Ian Matthews & John Roberts

Comments

  1. Injit Pang January 25, 2018 at 2:34 pm

    Thanks for righting up the numbers. This is staggering amount of money to waste in a small place like Chesteremere. We deserve better.

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