What Model Should I Use For My Plan?
An economic development model is a basic structure or foundation of rules and responsibilities that an economic development plan works within.
The economic development model helps determine:
- Who an organization is accountable to
- How they are funded
- The kind of economic development activities they can do
Economic Development Models
There are three main models for economic development organizations:
Below is a description of each of these economic development models and the general advantages and disadvantages associated with each.
Public model organizations are part of a local, regional, or First Nations government. These organizations can be:
- A government department
- A cluster of government departments
- An arm’s-length public entity including:
- They are a part of local government, which may give them more access to or influence over government decisions that impact economic development
- Many public model organizations have governance powers delegated to them by local governments
- They usually have stable funding as a part of government budget
- As a part of the public sector, the organization’s history, knowledge, and experience from the organization’s work are preserved over time by government staff
- They have access to local government resources including:
- Legal services
- Human resources
- Public works
- Their influence is limited to the jurisdiction of the local government they are part of
- Municipal spending may restrict the types of economic development financing they can get
- They are unable to lending funds directly to the private sector
- They often cannot generate direct profits, further limiting funding
- They are impacted by political activities like electoral cycles
- They have broad accountability to entire local government; this can (not always) lead to less-focused activities, slower responsiveness and avoiding risk
Private model organizations are not a part of or directly linked to local government. They are often set up as societies or corporations. They are flexible organizations and are usually designed to address specific local economic development needs.
- They can serve as a neutral link between people, governments, investors, and business
- They serve a focused group of stakeholders, clients, or specific work, allowing for targeted action and may create more tolerance for risks
- They can do things that can’t be done in the public model, such as taking on different level of debt or providing business financing
- They can often act quickly because they are responsible to fewer decision makers
- They often need to focus on getting funding since they aren’t funded through local government budgets
- They may be seen as less neutral for work involving the organizations that fund them
- They have less access to or influence over local government decisions impacting economic development
- They may have a harder time building connections and having the ear of local government than public model organizations
- Small, private organizations can struggle to preserve history, knowledge and experience because they have no broader organization to support them
Private Model BC Ideas Exchange Success Stories
In a public-private partner model, the costs, governance, and operations for the organization are shared between a local, regional, or First Nations government and the private sector. In this model, the organization is not part of the government and has some degree of independence but is still linked to local government.
This model can reduce some of the disadvantages found in the private and public models by sharing strengths from each. For this to work, all partners must have a clear, agreed-upon understanding of the organization’s purpose and how it will operate.
Public-private partner organizations require:
- A clear, shared mission that all partners agree upon
- Defined governance and funding streams
- Freedom to organize their internal structure and operations independently from their partners
- Agreed-upon accountability structures, performance measures and ways to evaluate success for the organization
- Their mission can provide explicit focus for their activities
- They have greater access to public resources than in a private model and more financial and activity freedom than in a public model
- A mix of funding sources can be very stable and sustainable
- They can require a lot of up-front work and resources to establish
- A poorly defined mission, governance or funding agreement may require a lot of work to fix
- Poorly defined accountability structures, performance measures, or evaluation policies can create a lack of overall accountability to partners
- If there is a lack of overall accountability, other issues like a lack of transparency or responsiveness can occur; these issues can lead to disengagement or distrust toward the organization in their service area
Once you decide on a model for the foundation of your economic development organization, you can choose a structure to help set the shape, powers, and functions of the organization. Structures have different legal and operational considerations. Common structures include:
When making the decision on what model and structure to choose you should ask the following questions:
- What model and structure should I choose?
- What are our goals?
- What resources do we have to develop and run an organization?
- Who do we need to involve for the organization to be able to do its work?
- What has been done in the past and did it work?
- What is going to work long-term for the organization and those it serves?
For More Information:
- Learn about economic development organizations in your region or community
- Contact a regional economic operations manager in your area