January 22, 1998

To: Special Committee to Review the Transition Team's Final Report

From: Chief Administrative Officer

Subject: City of Toronto Administrative Structure

This report discusses options for an administrative structure for the City of Toronto. The report recommends a transitional organizational design that has the capacity to undertake the integration of seven independent and separate administrative organizations into one and to streamline the management of the organization.

Financial Impact Statement:

Work must begin immediately to implement an administrative structure that provides effective management controls, clear lines of accountability and efficient service delivery. It is also essential to the morale and productivity of the workforce of the seven organizations that stabilization initiatives begin right away, particularly initiatives for managing the exit and retention of staff and their skills. The financial impact will be reported to the Strategic Policies and Priorities Committee together with the related human resource policies required to support implementation of the approved structure.

Recommendations:

It is recommended that:

(1) Council approve an administrative structure comprising the Chief Administrative Officer and six Commissioners reporting to the Chief Administrative Officer for the following service groups: Social and Health Services, Community and Economic Development Services, Urban Planning and Development Services, Works and Emergency Services, Corporate Services, and Finance;

(2) this report be forwarded for information to a special meeting of the Strategic Policies and Priorities Committee to be held prior to the February 4, 1997 Council meeting;

(3) the Chief Administrative Officer report on a regular basis to the Strategic Policies and Priorities Committee on the progress of implementation of the administrative structure; and

(4) the appropriate officials be authorized to undertake the necessary action to give effect thereto.

Council Reference:

On January 8, 1998 Council established a Special Committee to Review the Transition Team's Final Report. The Special Committee has a mandate to review the recommendations of the Transition Team within a four-month time frame, and is to report back on certain matters such as the administrative structure on a priority basis. The Transition Team has made recommendations regarding the senior administrative structure of the new City of Toronto and has communicated to Council recommendations resulting from their recruitment activities for Executive Commissioners and other Acting appointments. A number of motions were also referred to the Special Committee for its consideration, including the following motions which this report responds to:

Background:

Description of Current Situation

At its first meeting of January 2, 6 and 8, 1998, Council confirmed the appointments of the Chief Administrative Officer, the Clerk, the Chief Financial Officer, the Commissioner of Human Resources, the Fire Chief and the Acting Medical Officer of Health. Council also received a communication from the Transition Team advising that it was recommending four candidates for the positions of Executive Commissioner, an Acting Solicitor and an Acting Auditor, for consideration by Council. A separate report to the Strategic Policies & Priorities Committee will address this matter.

On December 30, 1997, the Chief Administrative Officer (CAO) advised the Mayor and Members of Council that an Implementation Task Force was established to ensure that City services continue without disruption and to facilitate the administration of the City. The Implementation Task Force consists of the four candidates recommended as Executive Commissioners by the Transition Team, along with the Chief Financial Officer. Each member of the Implementation Task Force is responsible for coordinating a group of functions. A "lead" person has been assigned for each functional area to assist the respective Implementation Task Force member by facilitating resolution of program issues, coordination of reports to committee and response to Council inquiries. The Implementation Task Force is establishing the administrative approval mechanisms required to ensure that business continues and that checks and balances are in place.

In summary, there are three categories of senior executives in place in the City of Toronto: those who have been through a competitive process and who have been hired by the Transition Team and subsequently confirmed by Council; those who have been through a competitive process and recommended by the Transition Team to Council and who are acting in their positions pending Council approval; and those who have been designated functional leads but have not been through a competitive process.

This interim arrangement provides some stability in these early days, but is far from ideal and cannot continue for long. Clear lines of responsibility and accountability are difficult to establish and maintain in such a patchwork configuration. The role and authority of the designated functional leads require greater certainty if they are to effectively exercise management responsibilities and integrate service delivery programs.

It is important to proceed as soon as possible with a planned organizational restructuring process. As the first phase, an appropriate administrative structure must be put in place. This will allow phase two of restructuring to begin within the service groups at the next level of management.

Establishing the Administrative Organization

The design of an ideal administrative structure for the City of Toronto will be an evolutionary process. It must begin with some early decisions to put in place senior staff who have the responsibility and authority to drive organizational transition. The initial administrative structure must by necessity be a transition structure. The structure must streamline management, consolidate corporate functions, give priority to integration of non-amalgamated functions, and ensure that functions affected by Who Does What program delivery changes can efficiently reorganize to accommodate these changes. Concurrently, the structure must provide the means to provide strategic management direction, identify opportunities for service delivery integration at the frontline, and provide a client focus in redesigning the core businesses of the government.

The administrative organization and the restructuring associated with it must demonstrate fairness and equity, reinforce the professionalism and integrity of the public service, establish an organizational culture and values which support Council’s vision and citizens’ expectations, and must be financially sustainable.

The administrative organization established early in 1998 will be modified and adjusted over time and with experience. The City of Toronto is in totally new territory in Canadian municipal experience and will be establishing unique precedents as it evolves and matures. Several other jurisdictions were examined over the past year, and useful insights were obtained. Yet, it is quite clear that there is no other municipality of comparable size and complexity, and certainly no other municipal amalgamation of this scale, to guide us on the way. First steps are required on this journey. A "made in Toronto" model will emerge along the way.

A single administrative structure must provide support concurrently to Council and its functional standing committees and to Council's geographically decentralized committees _ the Community Councils. The administration will require a centralized management structure for consistency in management direction and policy formulation, while at the same time continuing the strong traditions of decentralized service delivery of the former upper and lower tier municipalities. The review of service delivery models and the integration of individual services and functions are separate issues that will be addressed in phase three of the restructuring process.

Administrative Structure in Relation to the Political Structure

The administrative structure must be able to provide advice, receive political direction and maintain accountability to Council and its committees. However, this does not necessitate a mirroring of the political and administrative structures. The respective structures are influenced by different factors, and flexibility is essential within the overall governance structure. For example, Council's strategic agenda may require the establishment of other committees for various periods of time, or alteration of the Council-committee structure mid-term or in a new term of Council. In contrast, management and operational considerations are the primary determinants of administrative structure, and the administrative organization will not undergo major restructuring on as frequent a basis.

Political and administrative structures are shaped by different factors _ one structure does not and should not dictate the other. It is easier and quicker to realign the political structure than it is to realign the administrative structure.

Organizational Hierarchy and Nomenclature

Organizational structures bring coherence to complex organizations and facilitate their effective management. This applies to the public and private sectors alike. In theory, an organization's various products, services, functions and activities are organized by program groups or business units, and are nested or stratified (e.g., from strategic to operational), forming both a horizontal and vertical stratification.

The context of private sector organizations, and hence their approach to structure and management, is dramatically different to that of public sector organizations. Multi-product private sector companies tend to organize around product divisions and regional business units, often on a global scale. While their approach to organizing provides valuable insights, direct applicability in the public sector is limited due to a number of factors. For example, private sector organizations have flexibility in product lines and geographic service areas, and enjoy a relatively private decision-making and management environment. In contrast, public sector organizations in the first instance are democratic institutions, not private businesses. They provide mandatory and essential services, operate in defined geographic areas, face multiple and at times competing objectives, have decisions made in public forums, and are expected to facilitate citizen participation in their operations. Lessons from the private sector are most applicable to the methods of service delivery rather than the senior level administrative structure.

Other public sector jurisdictions provide more appropriate insights. At the municipal level of government, administrative structures take many forms, yet follow some key patterns. The CAO or City Manager model continues to serve as the most common administrative structure among Canadian municipalities. Departments are the highest order of organization immediately below that of the CAO. Departments house a group of related program responsibilities in a single organizational entity for management purposes (e.g., Community Services Department). Departments at the municipal level are traditionally led by commissioners, and Council involvement in the hiring process traditionally extends to the commissioner level.

Most municipal departments are comprised of a further organization and management level. In many medium and large departments, this level is usually defined as a division (e.g., Social Services Division). This level in the organization may be defined according to common purpose or function, or geographic district, and is often further organized into units. In terms of management, directors or general managers are common titles of divisional managers. Councils traditionally are not involved in the hiring process at the divisional level or below.

Organizational structures at the provincial and federal levels are influenced by the parliamentary system of government. Below the level of the Minister, there are several points of consistency. At the federal level, government program responsibilities are assigned to program envelopes. Each envelope comprises several departments. Similar to the municipal experience, federal departments house a number of related program responsibilities in a single organizational entity for management purposes. These are commonly referred to as groups or branches. The next level in the federal structure, depending on how the structure is nested, is generally a directorate, region, or section.

In the Province of Ontario, government program responsibilities are organized into ministries. Provincial ministries correspond to departments at the federal and municipal levels. Consistent with municipal and federal structures, provincial ministries nest a number of related program responsibilities in organizational entities commonly referred to as groups or divisions. The next level in the provincial organization structure is referred to as a branch. Depending on how the program structure is nested, ministry structures then group functions according to units, sections or regions.

Regardless of the level of government, the largest organizational entity will take the form of a department or equivalent service group. Departments will be further stratified in smaller organizational components, reflecting functions or geographic districts, and will be designed to best accomplish organizational objectives.

Key Considerations

In assessing the options for administrative structures, a number of considerations have been used to determine the relative merits of each model.

The administrative structure is headed by the Chief Administrative Officer who will have a number of direct senior management reports. The CAO in this context is comparable to a Chief Operating Officer, since the Mayor is the Chief Executive Officer. The CAO is the first level of the administrative organization.

A CAO or City Manager as the first level of the administrative organization was the practice in six of the municipalities being amalgamated. The popularity of this model in municipal administrative structures is directly related to the clear leadership and accountability that this model provides. The Transition Team recognized the significance of a clear line of accountability from the administrative leadership to Council and its committees as an essential feature of the City's administrative organization.

Much has been said about clusters of functions and how to organize the second level of the administration using the cluster concept. The concept of clustering is not new in any of the seven organizations merging into the City of Toronto. Corporate Services clusters are common throughout, as are Works clusters; at the upper tier, Community Services is an example of a very large clustering of related functions. A number of criteria are used to determine appropriate functional clusters. One set of criteria relates to functional fit: policy integration across a number of functions; operational synergy and efficiency; functions which support governance and internal processes; regulatory functions affecting common clients; and high levels of interaction in operational relationships affecting services or delivery systems.

Management considerations form another set of criteria. In assessing the practicality of managing any set of functions, the span of control and scale of operations described by budget and staff size are particularly important considerations in designing organizational structures. Generally, it is assumed that a span of control ranging from five to seven direct reports of diverse functions is reasonable. However, the literature and experience in other jurisdictions suggest that context is critical. The scale of operations determined by staff, budget and location must be further analyzed according to the nature of each function. For example, is the staff complement generally delivering a single service or many diverse services? Are expenditures controllable or are the drivers of cost externally imposed? Are revenues a critical component of the budget?

A broader span of control is possible when some reporting functions are the same or similar, when variability and uncertainty are limited, and when functions are geographically compact. A narrower span of control is advisable when reporting functions and disciplines are unique, when issues are not routine or predictable, and when services are geographically dispersed. Depending on the circumstances, decentralized and geographically dispersed functions may necessitate an additional layer of management. Similarly, spans of control that are too narrow will likely necessitate additional management layers if senior management is expected to effectively hold front-line supervisors accountable for their performance.

Greater and more direct senior management attention, and hence a reduced span of control and/or a flatter management structure, are required by the degree of corporate risk and the consequences of decision-making associated with some functions. Corporate risk may also be minimized by appropriately spreading across clusters those functions that exhibit relatively greater risk potential. The structure must allow senior management to attend to important policy direction and "steering" functions.

Another set of criteria relates to operational and political complexity. Some rather large operations are straightforward and are reasonably predictable because of routine procedures and policies, and the relative absence of change in technology or service delivery methods. Others are affected by continuing shifts in policies, demand for service change, or rapidly changing technology. The legislative and regulatory environment for many services also impacts the degree of complexity. At the political level certain functions have a high profile for a variety of reasons including the level of constituent interest in certain functions. Some functions are critical to Council’s strategic agenda and have a priority status in terms of time devoted to debate of issues related to these functions at Council and Committees.

Discussion:

Administrative Structure Options

Options were developed through an iterative process, using the Transition Team model as the starting point. All were considered in the context of the key considerations discussed above, and were discussed with the Implementation Task Force. While several variations were discussed along the way, three main options are presented in this report. A description of each of the three options is provided below, with administrative structure charts for each option appended. A summary of the assessment of the options follows.

The charts describe the first and second levels of the senior management structure (the CAO and the senior managers reporting directly to the CAO). Specific functions are shown for each service group. Though not exhaustive, they represent the main areas of responsibility within each group. The list of functions and services does not represent any specific structural arrangement or predetermine service delivery models. These are separate issues to be determined through subsequent service integration and redesign reviews. In fact, the service integration reviews may identify the need for shifts in the alignment of functions.

The charts also provide quantitative features of the administrative structure options, in each case reflecting the position prior to restructuring and excluding special purpose bodies:

(a) Option One: Toronto Transition Team Model

The Transition Team in its December 1997 report, "New City, New Opportunities", proposed an administrative structure which features a CAO directly accountable for the entire corporation and a strong senior management team of four Executive Commissioners. After considering other models, the Transition Team opted for a CAO model based on its two-fold advantage of direct accountability and central leadership, considered critical for any corporation, and certainly one the size of the new City. The Transition Team further proposed that operational or departmental commissioners report to the Executive Commissioners. Key features of the model include:

The four functional clusters in this model are Urban Development Services, Community and Neighbourhood Services, Emergency and Protective Services, and Finance and Corporate Services. Refer to the appended administrative structure chart for Option One (Appendix 1).

In the Transition Team proposal, the Economic Development function is to report directly to the CAO. The model also calls for the establishment of a Strategic Directions Secretariat to provide corporate strategic and policy support and report directly to the CAO. The Secretariat would include functions to provide corporate policy support, organizational transition support, and environmental planning and management, as well as a function based on the Healthy City model.

A Clerk's department provides a range of services and functions. For those direct services in support of the governance function, the Transition Team proposed that the Clerk report directly to Council despite being located within a cluster (as noted in the chart for Option One).

The Transition Team report included several proposals with respect to key corporate officers and functions, although these were not formalized as part of the chart on the administrative structure. The Transition Team proposed that the annual attest audit be conducted by an external auditor commissioned by and reporting to Council (via an audit committee). The Team proposed that the Chief Financial Officer and, during the transition period, the Commissioner of Human Resources report to the CAO as part of the core senior management team despite their location within a cluster. The Team noted that legal services are required by two clients _ Council and the administration _ and that the location of the legal services function in a cluster would not preclude the Solicitor from having a solicitor-client relationship with Council.

The Transition Team also proposed that access and equity responsibilities be located within the human resources function. This arrangement would ensure that access and equity principles become an integral part of the organizational culture, a responsibility of all managers. A task force was also recommended to further review access and equity mechanisms and strategies.

(b) Option Two: Modified Transition Team Model

Option Two is a variation on the Transition Team model. This option realigns functions among the clusters under the four Executive Commissioners. The modifications to the Transition Team model are based on the aforementioned criteria, particularly operational and political complexity.

Option Two has the Chief Financial Officer reporting directly to the CAO as part of the senior management team. This model places the annual attest audit under the direct auspices of Council. Dual reporting relationships of the Clerk and the Solicitor are also noted in the administrative structure chart for Option Two. The access, equity and human rights function in this model has a reporting relationship to the CAO on issues which have significant corporate policy and community impact. The Economic Development function is re-located to a cluster.

The realignment of functions and services retains four clusters with a modified focus. The functional clusters in this model are Urban Development Services, Community and Health Services, Works and Emergency Services, and Corporate Services. Refer to the appended administrative structure chart for Option Two (Appendix 2).

(c) Option Three: A Transitional Organizational Design

Option Three entails additional modifications based on the previously discussed considerations, particularly those relating to span of control and reduction of layers of senior management. The further realignment of functions and services in this model results in more service groups than featured in either of the previous options. The key features of Option Three include:

The service groups in this model are Social and Health Services, Community and Economic Development Services, Urban Planning and Development Services, Works and Emergency Services, Corporate Services, and Finance.. Refer to the appended administrative structure chart for Option Three (Appendix 3).

Option Three also places the annual attest audit under the direct auspices of Council, and identifies the dual reporting relationships of the Clerk and Solicitor, and the human resources and access, equity and human rights functions, in the administrative structure chart.

Assessment of Options

(a) Option One: Toronto Transition Team Model

The strengths of the Transition Team model reside in its validation of the concept of service clusters, and its recognition of the need for clear lines of accountability between the Council and the administration as reflected in the CAO model recommended. The model also highlights the importance of economic development as a program function and the lead role of the CAO in strategic policy development.

However, one of the major weaknesses of Option One is the lack of balance in workload and responsibility across the clusters. Emergency and Protective Services is the simplest in terms of program complexity, having significantly fewer organizational and program components and less political complexity compared to the other clusters. In comparison, workload and responsibility are excessive in the Community and Neighbourhood Services cluster which has by far the largest budget and a high degree of political complexity including absorbing service transfers and costs and ongoing provincial cost sharing arrangements.

A second major weakness of Option One is the insertion of another layer of senior management on top of the operational commissioners. The two-tier commissioner system is inevitable in this model given the wide span of control associated with such a small number of executive commissioners reporting directly to the CAO. This approach does not achieve a streamlined senior management structure with clear lines of accountability and the capacity to provide effective leadership, and would stall efforts to drive organizational transformation.

With respect to internal corporate services, the organizational and program components are considerably smaller in terms of budget and staff, and will also be subject to extensive integration. Therefore, more functions can be reasonably located within the Finance and Corporate Services cluster as compared to the other service clusters. However, the number of components brought together in the Finance and Corporate Services cluster from the seven former municipalities is excessive in Option One if the functions are to receive appropriate senior management attention.

In Option One, the number and nature of functions that are to report directly to the CAO are a concern. Although there are only four executive commissioners reporting directly to the CAO in this model, it is proposed that other corporate staff report to the CAO as part of the senior management team and that several other functions report to and be managed by the CAO. This model has too many functions, if not too many direct reports, under the CAO.

While the Transition Team model provides an interesting approach, a post-amalgamation organization would first need to be in place to test out the validity of some of these approaches. The temptation to use the opportunity of restructuring to test innovative approaches may be counter-productive to the restructuring process itself.

(b) Option Two: Modified Transition Team Model

The approach taken in Option Two is based on the Transition Team's model with modifications introduced to address some of the concerns identified with that model. Option Two remedies the imbalance among cluster responsibility and workload to some extent by realigning functions from the Emergency and Protective Services cluster and reducing the range of services in the Community and Neighbourhood Services cluster.

While Option Two achieves a better balance in workload, the issue of the level of workload and complexity (exceeding 30 organizational and program components in two of the service clusters) is not addressed. These clusters are too large and complex to guide the restructuring process and provide effective senior management direction to all of the constituent components.

Option Two does formalize the reporting relationship of key corporate officers and functions which were not explicitly included in the administrative structure chart for Option One. This model sets out modified reporting relationships for the external attest audit function, the human resources function, the access, equity and human rights function, the Solicitor and the Chief Financial Officer.

However, Option Two does not correct the other major weakness of Option One, namely the creation of a two-tier commissioner system. As with Option One, an additional layer of senior management and some sub-clustering is required due to the very large span of control, most pronounced in two of the service clusters in Option Two. A key result would be the leveling-up of positions currently below the level of Commissioner that would now have responsibilities commensurate with those positions described as Commissioners.

Span of control issues remain in Option Two. The confusion of accountabilities and management responsibilities created by this two-tier approach would stall efforts to drive organizational transformation and do not adequately meet the Transition Team's objective of achieving clear accountabilities and effective leadership.

(c) Option Three: A Transitional Organizational Design

Option Three encompasses the strengths of the model presented in Option One, including service clusters and clear lines of accountability, and the strengths of the model in Option Two, including workload balance and explicit recognition of dual reporting relationships. Option Three also incorporates further improvements to effect a more efficient administrative structure and respond to some of the other concerns in Option One and Two.

Option Three redresses the issue of excessive workload and complexity in some of the service groups and establishes a more reasonable span of control. This is achieved by introducing a new service group. Related modifications include the realignment of functions and services reporting through each service group to ensure both balanced and manageable workloads.

A key feature of Option Three is the provision of clear accountabilities and a single tier of senior management reporting to the CAO. Option Three avoids the two-tier commissioner structure, and the resulting confusion in lines of accountability. By moving to six service groups with manageable spans of control, the need for an extra layer of commissioners is not necessary.

Finance, which contains several distinct functions in its own right, is split-out to report directly to the CAO. This arrangement not only provides a more manageable workload for Corporate Services, but in a $6.5 billion corporation has the benefit of having the Chief Financial Officer reporting and providing financial advice directly to the CAO.

While it may not be the perfect model for the City in the long run, it does break down traditional barriers and builds capacity to undertake the primary challenge of the next three years _ restructuring. It will permit streamlining, consolidation and innovation within each of the service groups as transformation occurs. It provides clear accountability to the elected representatives by streamlining the senior management tier. Finally, this model can be implemented immediately, will rationalize current senior management resources, and will allow service integration initiatives to commence with appropriate senior management leadership. Building on the Transition Team proposals, modifications which better recognize the complexity of the pending restructuring, and yield clearer lines of management accountability, combine to make Option 3 _ A Transitional Organizational Design, the preferred model for the initial administrative structure of the City of Toronto.

Conclusions:

This is the beginning of the restructuring process, not the end. Key senior staff catalysts must be in place to lead the restructuring of the administration and to establish a climate of stabilization. The clustering of functions may shift over time as the most appropriate forms of service integration become evident and further experience with the structure is gained. The Senior Management Team will be the size required to undertake the twin goals of restructuring and strategic direction setting.

This report does not address a number of other elements related to the total restructuring process. These items will be dealt with in other reports coming before the Strategic Policies and Priorities Committee. This report seeks Council’s approval for the administrative structure comprising six Commissioners reporting to the CAO and having responsibility for the following six service groups: Social and Health Services, Community and Economic Development Services, Urban Planning and Development Services, Works and Emergency Services, Corporate Services, and Finance. This structure is based on a Transitional Organizational Design as described in Option Three of this report.

Michael Garrett

Chief Administrative Officer