Is it realistic to think governments can run like businesses? There are many opinions – some say yes, many say no way! But is there a common ground somewhere in the middle?
1) The Ability to Scale
This is perhaps the first thing to debate: how governments and businesses differ in their ability to scale. If a manufacturing company sees demand for their product drop, they can almost immediately cut production capacity by slowing down the supply of incoming material, cut manufacturing hours or shifts, and even shutter plants. Government, on the other hand, is a services provider to their customers (the taxpayers), that must continue to provide a fixed level of services to a fixed geographic area with a fixed number of people no matter what the revenue stream. Obviously there are some ways to adjust, but lower revenue does not change the demand for services. Governments cannot make linear decisions on direct labor cost reductions like a manufacturing company can. Inherently, government will be slower to respond (or scale) to revenue reductions, but respond they must! In either case, raising prices (or taxes) is not a popular option for either sector.
2) SomeBusiness Models Are Not Optimal
Famous thought leader Jim Collins in his monogram, Good to Great for the Social Sector, points out that there are many poorly run businesses that should never be emulated. Even the best companies – IBM, Apple or Hewlett Packard – that have all endured the test of time, had periods when they looked like the Costa Concordia beached on an Italian Shore.
3) Application of Best Practices
Each sector has its own distinct purpose: one, to make money, the other to serve. Can governments take the best attributes of well-run businesses and incorporate them into a fabric that complements their services and operations? Absolutely! Ineffect, they can use common private sector practices to make sure their services are delivered in the best possible manner with the highest levels of efficiency. The key ingredient is to identify what is important and measure it, always with an eye on continuous improvement. It was Peter Drucker, who coined the phrase, “If you can’t measure it, you can’t manage it. ”Notice how profoundly this simple statement addresses our discussion issue.
4) UsingPerformance Metrics
Both sectors must establish consensus for what are “must haves”, “nice to haves” and “potentially expendable.” Performance metrics should be established for each – not to measure them for measurement’s sake, but to truly understand the important attributes (cost drivers) of performing the function. The level and quality of service should be included in any metric. If something costs $1,000 to provide at an “A” level of service, but “B” would be acceptable at a lower cost, dollars would be saved by adopting this logic and adjusting the delivery to coincide with the lower ranking. Or should we just continue to assume that everything should be an “A”?
What is your opinion? We’d like to hear from you.