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  • Writer's pictureMark Matijevic

What if councils had to account for Goodwill?

Updated: Jan 9

Goodwill is the difference between the price an organisation is acquired for and the net value of the assets. Specifically, a goodwill definition is the portion of the purchase price higher than the sum of the net fair value of all the assets purchased in the acquisition and the liabilities assumed in the process.

 

The value of a company’s name, brand reputation, loyal customer base, solid customer service, good employee relations, and proprietary technology represent aspects of goodwill. This value is why one company may pay a premium for another. Companies that are either looking to sell or are trying to understand their value will calculate their enterprise value based on these factors, and it is often a component of executive pay structure. A vital component of enterprise value is goodwill.

 

As public organisations, councils do not calculate goodwill as they are not going to be sold, and they are mostly service-based organisations. This blog is not advocating that they should account for goodwill, but looking at how government and, particularly local government could calculate.

 

The first difference that should be noted is that most organisations have customers, and councils have stakeholders and, importantly, voters. Most people paying councils do not have a choice as to whether to use council services, so in my crude judgement, they should not be considered ‘customers’ - so terms such as customer experience do not really hit the mark, I think it should be called ‘government experience.’


Most people paying councils do not have a choice as to whether to use council services, so in my crude judgement, they should not be considered ‘customers’

 

So, what are the factors for calculating the goodwill a council would have? And how would we calculate it? It should be based on customer satisfaction, which will be judged at council elections, but how do we value the change in goodwill?

 

Stakeholder satisfaction is one of the most important components. This could be measured with surveys, this would be arbitrary and often based on point in time considerations, so what components would increase satisfaction? The goodwill factor could be calculated by looking at areas such as:

 

Transparency and Trust

Open and honest decision making and openness about the operations of council. Letting the public understand the considerations of council, and their relationship with council, including what happens at council meetings, the financial situation the council is operating within, and the strategic objectives.

 

Levels of Service 

How quickly are problems resolved when reported to council, and how good is the communication back to the community on the status of the resolution, including if that is unwelcome news? Giving information on the approvals of regulatory functions such as development approvals, including timing, and ensuring the public understands that the process is fair. The ability to engage using different channels would be a strong factor in any rating, as many people like to engage using their preferred methods and a time that is convenient for them.

 

Financial Management

How well does the council manage the finances of the council? And how do they ensure they provide services and maintenance without raising rates to a level that the community will accept? This can often be based on engagement with the community on budget priorities. It will also be important to understand the considerations and transparency of the long-term strategy and budgets, including the stewardship of assets. A key consideration will be the perception of value for money.


How well does the council manage the finances of the council? And how do they ensure they provide services and maintenance without raising rates to a level that the community will accept?

Community Engagement

How well does the council engage with the community? This may include understanding the priorities of the council, which may include budget but could also include priorities on many issues, including economic growth, infrastructure, environmental, or social. It could also include the ability to get information in a timely way, submit issues, and track areas such as personal water usage.

 


What has council achieved over a meaningful period? Have they improved the lives of their community, built playgrounds, built roads etc?


Outcomes

What has council achieved over a meaningful period? Have they improved the lives of their community. Have they built playgrounds, built roads, reduced congestion, improved library services, improved economy, etc

 

There may be many other factors that would need to be considered in the calculation of the goodwill between a council and their community, but the government experience will be an essential component.


This blog has been entirely hypothetical, but these factors and others are essential in assessing the mood of the community towards the council. They are factors in the re-election of councillors, harmony in the community, and community relations with council staff. I would love to be able to do a calculation on the value, but that will be a consideration for the future.




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