Thursday, December 13, 2012

A 'Public Entity Who Has Gotten Sideways' Has Righted Its Ship

When a smoldering crisis bursts into flames, some organizations make like a turtle. Good managers, however, assess the crisis and take steps that will return it to business as usual. The type of organization is irrelevant -- everything from luxurious shopping malls to sewage companies.

It's the latter this post will focus on. Metropolitan Sewer District in Louisville, Kentucky, was thrown into crisis mode following a highly critical state audit. The audit found poor management, lax business practices, conflicts of interest, and wasteful spending. The audit spelled out 27 findings and 150 recommendations in a 115-page report. (See my posts about MSD at and

"But now a new state auditor, who has been reviewing MSD’s monthly progress reports, is praising the response by (Mayor Greg) Fischer, a new MSD board and new executive leadership as 'a textbook example of how you would want a public entity who has gotten sideways to right their ship.'” (

Teena Halbig, a longtime leader of Floyds Fork Environmental Association, believes MSD “still has a long way to go to restore public trust.” But, she said, “with regards to the entirely new MSD board and interim director, so far, so good.”

That interim director, Louisville Water Co. President Greg Heitzman, was appointed permanent director this week, setting up a planned merger of the water company and MSD. Heitzman replaced Bud Schardein, whose retirement was announced by the mayor on the day the audit was made public.

Heitzman said the board and management changes were “an intervention in the context of a wake-up call. There was recognition by the mayor, the board, management, and now the employees that we have no choice” but to change.

Among those changes have been:
  • One person, an administrative services manager, was fired for awarding $530,000 in work to eight businesses owned by friends.
  • Another  employee received a warning to refrain from using MSD personnel for personal matters.
  • Adoption of a tighter ethics policy, after top leadership was found to be personally benefiting from their positions.
  • The hiring of a communications manager where none existed before.
  • New policies, including the tightening of spending controls, procurement procedures, and  retention and disposal of public records.
  • Revamped legal services to take on much more work in-house instead of contracting largely with one law firm led by attorney Larry Zielke, who MSD
  • The longtime financial adviser who, according to the audit, had persuaded the board to make risky investments and had a conflict of interest, was let go.
The audit got the attention of Mayor Fischer who got the attention of everyone in the quasi-government MSD. I've written in this blog about other such nonprofit organizations who, when confronted with an audit recommending sweeping changes and fewer perqs for those at the top, chose to complain and explain rather than contain and refrain. Your stakeholders don't want excuses; they want results. A well-thought-out crisis communications plan can help you explain and give them the action they expect.

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