The Higher ED Blog: A tale of two local economic development delivery models
Michelle Madden / January 25, 2016
Economic development is a relatively new field compared to other municipal functions like planning and engineering. As a result, economic development is still evolving in certain ways. I’m sure many of you have dealt with changing governance structures, tweaked job descriptions, and explaining to outsiders what it is you do. As the profession continues to grow, it becomes more and more important to establish what economic development is, and how it is delivered.
With this context in mind, Stephen Thompson decided to explore the organizational structure of economic development for his Year 3 paper, while holding a joint role as General Manager/CEO of Port Colborne Economic Development Corporation and Director of Economic Development, Tourism and Marketing for the City of Port Colborne. Delivery models of local economic development is a comparative analysis of internal and external model types. He also surveyed economic developers, receiving 19 responses. His goal was to determine if one model was more effective than the other. This is an important question since the field is still organizing itself and determining the best way forward.
The most common internal model is a municipal department that reports to a council. The department may focus solely on economic development, or combine planning or tourism functions to increase efficiency and maintain a close link between the services. Small municipalities may only have one economic development officer or none at all. These municipalities might assign economic development responsibilities to the clerk, city manager/chief administrative officer, or a planner. Another variation on this model is a committee of council or advisory body. These entities are very close to the municipality and therefore still considered internal.
The advantages of the internal model stem from the integration with municipal services and resources. An economic development department can easily collaborate with related departments like communications and marketing, planning, and tourism, which all operate under complementary policy directions and protocols. There is minimal concern about conflicting policy directions set by different ‘masters’. A municipal department can also access many administrative and human resource functions from other departments, often at no cost to the economic development, resulting in a more specialized staff. Funding comes from one source and is therefore more predictable. Employees have access to the wages, benefits, and pensions that large organizations can offer.
The corporation model is external, often taking the form of a quasi-public agency, board, commission, or corporation, funded by a mix of public and private money. These organizations are led by a general manager or CEO, and report to a board of directors made up of members from the business community and municipal council.
While the key advantage of a municipal department is its closeness to the municipality, the distance of a corporation has its own advantages. First, an external organization is not subject to political whims and electoral cycles—giving it more autonomy—and it is not bogged down by the bureaucracy and scrutiny of government. By operating at arm’s length, a corporation can be more flexible, efficient, and even bold, allowing it to keep up with the pace of business. Further, the distance allows the corporation to be an aggressive advocate for investors when municipal functions are underperforming. Second, a corporation is not limited to the labour policies of government. It can tailor pay scales and hours of work to better meet the needs of the private sector. Third, finances are more flexible. The variability in funding sources can be challenging, but a corporation can apply for funding not available to municipalities and it can also carry forward surpluses or deficits (avoiding the ‘use it or lose it’ of government budget cycles).
Stephen’s research found other advantages as well. The structure allows business leaders to be directly involved, engaging them in economic development activities and bringing their expertise to the table. Municipalities rarely get this level of involvement from the business community. Client confidentiality may also be a strength of this model, though a board is as likely as a council to request involvement in confidential matters.
There is concern that the corporation model lacks accountability. However, this issue can be at least partially overcome by the involvement of municipal representatives in the board, and allowing the municipality some control over the budget.
There is no clear winner in this duel, as the weaknesses of one model align with the strengths of the other. If you are considering a change in organization structure, Stephen offers these two questions to ponder (p. 103):
Does the municipality wish to be directly involved in the operation of the economic development office (municipal model) or does it wish for members of the private and public sectors to come together as directors of the board for a not-for-profit corporation?
If the latter, how is the corporation made as accountable as possible to the municipality?
A very detailed comparative chart of the two model types is available in Stephen’s paper on pages 97 and 98. As is the case with all economic development activities, the best choice will depend on the unique characteristics and priorities of your community.
About the authors
Michelle Madden is the editor of Higher ED. She is also the Outreach Manager for the Economic Development Program and a graduate of the LED master’s program. She has authored a number of the articles in this series on behalf of the students, and has published several of her own blogs on economicdevelopment.org as well. Follow her on Twitter at @michelle_mad.
Stephen Thompson is a graduate of the University of Waterloo’s Local Economic Development Master’s program and has 20 years’ business and economic development experience at local, regional, and provincial levels of government. Following seven years with the City of Port Colborne, Stephen accepted an international trade and investment assignment as Ontario’s Senior Representative to the Western United States. Stephen serves on the board of the Economic Development Association of Canada and is one only forty in the profession to have earned Canada’s Ec.D.(F) Economic Development Fellowship designation. Away from work, Stephen is an accomplished nature and landscape photographer.
About the series
Higher ED: Insights for the Next Economy is a platform for students, guest speakers, staff and faculty of the University of Waterloo’s professional and graduate economic development programs to share knowledge with the field at large. The series takes works destined for an academic audience and reworks them into a fresh, easy-to-digest blog article.
Established in 1988, the Local Economic Development program is the only master’s program in Canada devoted solely to local economic development. It offers a balance between theory and practice by combining coursework, a major research paper, an internship, and weekly seminars featuring guest speakers. Students are prepared for careers in local, community, or regional economic development.
The Economic Development Program is a nationally-accredited provider of professional training. It delivers certification programs and seminars that offer a deep understanding of the Canadian context in a convenient block format. Peer learning is combined with informative lectures and practical case studies to provide dynamic instruction that is beneficial for junior and senior-level practitioners.