Implications of Amalgamating Fire Departments in Eastshire - Example

Running header: Financial_ management Student’s name: Instructor’s name: Subject code: Date of submission: Implications of amalgamating fire departments in Eastshire Introduction Owing to declining revenues and increasing demand for efficiency from the community, fire departments in counties, villages, towns and cities are looking for new ways of improving the quality of services delivered while cutting down the huge costs involved. The Eastshire fire rescue service as well as fire departments in the adjacent towns are no exception and have been in talks likely to lead to amalgamation of these departments. It is expected that through amalgamation, the departments will increase their effectiveness and efficiency as this will lead to better use of resources while providing greater capability and flexibility (Robert, 2005). It is also expected that through amalgamation, the departments will save a lot of costs due to increased efficiency and reducing duplication of effort by reorganization. The three departments have factored the following in their decision to amalgamate; The three departments are adjacent to each other and each has complete duplicated set of resources. There is increasing demand at all government levels for essential services funding leading to reduced funding and hence the need to reduce cost. The other two departments unlike Eastshire have had difficulties in recruiting and retaining staff. There has been increasing levels of disasters while the revenues have been reducing hence the need to increase efficiency while reducing costs. Although the above reasons for amalgamation are varied, amalgamation can prove to be a risky process as it may not always lead to the intended results. As such, the fire departments need to be very careful in implementing the proposed amalgamation to ensure it meets the intended objectives. As such, this paper looks at the potential benefits of amalgamating the fire departments as well as the risks that might be involved. It is hoped that the paper will be of great help in making informed decision on whether or not to amalgamate. Benefits of amalgamation There are many benefits that could be derived from amalgamating the fire departments. First, there will be improved service delivery due to financial economies of scale and avoiding duplication of services. Amalgamation will also lead to increased coordination through avoiding fragmentation as well as financial stability. The benefits are explained as follows; Economies of scale/cost reduction Economies of scale in this case refer to the benefits that come with large scale operations in terms of cost savings. This relates to costs associated with the day to day operating expenses which may be fixed such as rent or variable such as staff allowances which increase with the number of emergency calls. By amalgamating the three fire departments, this will result in one large department with increased/expanded operations. The increase in size will enable the department enjoy financial economies of scale/ cost savings that result from enlarged operations. This cost savings will result from resulting greater purchasing power which will always lead to discounts due to purchasing in large quantities. The discounts will lead to lowered costs of apparatus. In fact, the greatest aspect of cost saving is expected to result from bulk purchasing with data from related amalgamations in the united states indicating this direct cost savings could amount to up to fifteen million pounds every year. Some cost savings will also result from scrapping of some departments which is likely to increase profitability and hence financial stability. Some posts will also have to be scrapped (Robert, 2005). For instance, the three departments will only operate under one CEO as opposed to the current scenario where each department has its own CEO. This implies that amalgamation will also result in the number of staff being reduced implying reduced expenses on salaries. Another costs saving benefit will result from sharing of facilities. For instance, the three departments could decide to close all rented premises and only operate on the premises they own thereby eliminating rent expenses something that is not possible currently. Through amalgamation, all the equipment owned by the three departments will now be owned and controlled by the resulting department. This means the cost of replacing equipments will reduce owing to reduced duplication of effort which is likely to result in great saving thousands of pounds. In fact, the amount of savings expected to result from such efforts to increase efficiency is expected to be up to 25 million pounds every year based on similar amalgamation efforts in the USA. This implies that the fire departments could realize total cost savings of up to 40 million pounds per year (Barrack, 2006). If we are to assume that costs related to the amalgamation process such as research and employee retrenchment among others will amount to 70 million pounds, the managements of the three fire departments should find the amalgamation idea worthy since it will also give them a chance to offer superior quality services and greatly reduce their costs of operations. In other words, this will result in increased profitability and hence financial stability for the new department. Increased efficiency and emergency response time It is expected that amalgamating the three fire departments will result in increased effectiveness and efficiency. This is because the present largely inefficient management teams of the three departments will be replaced with one highly effective and efficient team to be chosen from the three departments. In other words, there will be a greater pull of management talent which is likely to lead in increased efficiency and effectiveness (Janet, 2005). Reduction of redundancy and duplication of equipment as well as employees is also expected to lead to increased effectiveness and efficiency. As such, there will be a more efficient application of the now greater pool of resources which will enable the resulting fire department to close down some offices while ensuring that all duplication is eliminated in all levels of service delivery. Facilities that will be found to have been duplicated before could be disposed off hence resulting in more funds for the resulting department. Efficiency will also result in reduction in time required to respond to emergencies, better utilization of the available resources and better communication between the internal stakeholders as well as between the department and the community hence resulting in increased community confidence which could mean more revenue. Amalgamation will also make future planning for replacement of facilities, staff planning and expansion easier as this will be done from a single point of control and with increased resources. The resulting fire department will also be able to modernize its systems and hence be more effective and efficient. In addition, the political boundaries hindering our emergency response currently will be eliminated and emergency will be responded to from the closest point without regard to its political position. Amalgamation will also result in more motivated personnel who are able to offer better services and respond to emergencies promptly. The fact that some staff members will be laid off implies that the departments will have a smaller number of employees who they can reward more competitively while offering more opportunities for training and advancement. This implies that they will be more efficient and effective as they are more motivated. Ease of acquisition of funds and reduced cost of funding At times, the fire departments are hardly able to meet their day today operational expenses. This becomes even more complicated when undertaking capital projects such as purchase of equipment. In this case, they usually find themselves going for credit or loans from financial institutions. It should be noted that the biggest percentage of our funding comes from well wishers since the community is only charged minimum charges for services offered and considering that fire departments mostly deal with emergencies, charging the community for services is found inappropriate most of the time. The other source of funding comes from the municipality but given the increasing competing needs for the council; the financial advancements have been reducing over the year. It is for this reason that the departments find it justified to secure credit or loans from financial institutions to cater for the increasing financial needs. However, it is worth noting that financier and creditors are not just interested in advancing credit or money in a bid to make profit but they also need to assess the credit worthiness of the borrower so as to be assured that the borrower will meet the resulting obligations without difficulties. Amalgamating the fire departments will hence mean that the resulting department will have better credit rating due to increased asset and client base (Janet, 2005). As such, the departments are more likely to access better financial and credit facilities that they currently do due to increased confidence. Amalgamation is also likely to result in tax savings benefits by providing a larger tax base and a better planning process that will help identify areas for possible tax savings not presently anticipated. In fact, it is anticipated that tax savings could be as much as 2 percent annually. In addition, amalgamation will result in more efficiency and better emergency response times. This will mean improved ratings by insurance companies which could result in reduction of insurance premiums. As such, amalgamation is likely to result in overall lowering of financing costs. Risks associated with amalgamating the fire departments As stated above, the intended amalgamation of the fire services department is expected to result in cost savings from such areas as equipment, personnel and elimination of duplication. In addition, this would result in increased efficiency and better emergency response times. However, amalgamation may at times prove risky if not well coordinated where there may be resistance from various stakeholders hence making the fire department not to achieve the intended purpose of consolidation. As such, the departments must identify the needs of various stakeholders and ensure there is consensus before embarking on the process in order to ensure its success. The following are some of the risks that need to be carefully considered before the actual consolidation can start. Intended cost saving might not be realized after all The fact that it is expected that combining the three fire service departments is estimated to cost 70 million dollars is a clear indication of how costly amalgamation can be as a method of achieving cost savings and efficiency. In addition, costs can also increase as a result of amalgamation due to increases in salaries and training expenses. Increase in salaries will of course lead to increase in related costs such as pension contribution payable by the department (Janet, 2005). This might in fact cause the departments not to achieve their intended intention of amalgamation and even leave them at a worse position. In addition, it may not be obvious that the employees will gladly accept the amalgamation proposal given the uncertainty that would result in terms of job security since amalgamation may imply that some workers positions become redundant and hence they will be laid off. As such, the management might be forced to use large amount of money to compensate those laid off while increasing salaries for others as an incentive for them to accept the proposal. In the worst case scenario, failure by staff to accept the proposal might lead to massive turnover which might force the new department to use a lot of money in hiring and training of new officers. These are huge cost implications that may make the departments not to realize their cost cutting objectives. Increased staff turnover/sabotage Incase the whole amalgamation process is not carefully handled; the current workers from the three departments will become greatly demotivated. Most will opt to leave the department for other departments where stability is guaranteed (Bart& Bill, 2008). In fact, a survey conducted in amalgamated fire departments in the united states indicate that a great percentage of fire departments’ staff blamed their morale loss on merging while one in every three staff members actually left their fire departments for other departments mainly due to uncertainties on the future. This may result in increased inefficiency as well as delays in responding to emergencies hence leading to great losses and deaths as well as loss of confidence by community members and financiers. There will also be costs associated with hiring and training new staff members as explained above. Increased inefficiency The major aim of the proposed amalgamation is reduction in costs as well as increasing efficiency. As stated above, some of the cost cutting measures would involve merging of some positions and laying off some members of staff whose positions are found redundant. However, all this should be done with at most care to ensure it is acceptable by all and that those affected are adequately compensated. Otherwise, the workers will work against the newly created department which will lead to inefficiency and increased disaster response times. The top management officers who suspect that their positions will be scrapped are also likely to sabotage the whole process since they would fear losing power and autonomy they currently posses. As such, all those opposed to the process may work against it resulting to ineffectiveness and inefficiency which leads to loss of lives and property in emergencies. This calls for the process to be undertaken carefully so that everyone appreciates the need for amalgamation while those willing to leave be adequately compensated. In addition, the new department though formed from the existing departments may not have enough geographical knowledge of the entire region which might lead to confusion in responding to emergencies hence resulting in increased inefficiency instead of dealing with it. The new way of doing things may cause conflict Amalgamation of the three fire departments will not just imply that the departments have come together and are now working together. It is more complicated than it appears since it will imply combining of minds from different cultures and who are used to doing things in a particular way. Incase the ways of doing things differ significantly among the three departments, this will most likely result in conflicts among the workers in the new department. Adapting to a completely new system of working for a large number of employees will most likely lead to conflicts and inefficiencies as well as increased disaster response times (Bennet, 2007). Team work which is essential for firefighting departments will be absent hence resulting to poor emergency response and poor judgment hence resulting in massive loss of lives and property in emergency situations. Conclusion In the contemporary world, clients whether for private businesses or public services such as the fire service are increasingly demanding for superior quality services hence the need for the fire departments to ensure increased efficiency and service quality. This is bearing in mind that competition for funding has greatly increased while revenues continue to decrease (Barrack, 2006). As such, this calls for cost cutting measures. One cost cutting strategy that will also increase efficiency is that of amalgamating the three departments. Such a process will also ensure easy availability of funds hence ensuring the departments of financial stability. However, adequate consultations have to take place in order to effectively fight the organizational politics by forces opposed to such a process that may make the departments not realize their objectives of amalgamation. Otherwise, the departments risk to being left worse of by the process than they are currently as explained above. References: Robert, W 2005, One plus one equal three, Fire Service management Journal, vol.10, no.5, pp5-10. Barrack, D2006, Public safety management, London, Rutledge. Janet, T2005, Emerging trends in fire service departments’ management, Sydney, Light House Publishing Company. Bart, S& Bill, S2008, Regional consolidation in the fire service: Issues and perspectives, National fire academy fire officer program. Bennet, J2007, Professional management of the public sector, Oxford, Oxford university press. Read More