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One More Time: Can Government Be Run Like a Business?

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We may finally get an answer to the question. It surfaced again in a recent Sirius radio show, Knowledge@Wharton, “Can Government Be Run Like a Business?” when it was discussed by the University of Maryland’s Philip Joyce and Wharton’s Peter Conti-Brown.   

Their discussion was at the 10,000-foot level, at times philosophical, and focused on the role government plays and the differences in the dynamics of the public and private sectors. As Dr. Joyce stated, “I think people conflate how well government operates with the question of whether they think government should do something or not.”  

He’s correct, of course; they are separate and very different questions. It’s unlikely there will ever be complete agreement on the role of government but it’s clear the Trump administration is not going to wait for a consensus. At a different level, new agency leaders will have to deal with an operating environment unlike what they are accustomed to in any other sector. In Professor Joyce’s words, “The system we have is a system where there’s all this fragmentation of power, where it’s not a hierarchy, where you don’t have control over your budgetary resources or even knowledge of what your budgetary resources are.”  

The Joyce/Conti-Brown discussion was silent on another basic difference—the constraints on talent management imposed by civil service laws and regulations. Even in states that have initiated reform, work management practices and openness to new ideas are not what one would expect in a successful company. It’s been argued that government has a culture of compliance and risk avoidance. That is incompatible with efforts to improve performance.  

There are reports the new administration will need to deal with an added workforce issue. As The Washington Post put it in a recent headline: “Resistance from within: Federal workers push back against Trump.” According to the story, “The resistance is so early, so widespread and so deeply felt that it has officials worrying about paralysis and overt refusals by workers to do their jobs.” The hiring freeze, emerging plans to reduce the workforce along with employee benefits, and proposals to make it easier to fire employees have exacerbated the situation.

At its core the purpose of management is the achievement of goals through the efforts of subordinate employees. That is true in every organization. No organization can succeed if the workforce is not on board and committed to achieving goals.  

In government, of course, appointed leaders work most closely with members of the Senior Executive Service. The answer to the “how well government works” question starts at that level. In other sectors, executives are accustomed to meeting regularly with subordinates, often monthly, to review performance data, identify impediments to achieving business goals, and develop action plans to overcome obstacles.  Everyone leaves those sessions empowered and expected to initiate those plans. In government, an agency’s Chief Operating Officer would lead those meetings.

The reports about what prior administrations have done to improve performance extend back more than two decades. The issues have evolved over time—under Obama it was Chief Operating Officers, cross-agency priority goals and goal leaders—but each administration has introduced practices intended to manage “more like a business.”

Two points are notably never discussed: specific agency performance problems and the break from universal practice in other sectors—the use of individual performance goals. In business, goal setting is standard for executives and managers. That’s been true for decades. At each level, personal goals define how an individual’s performance is expected to contribute to their employer’s success. It’s the basis for planning and evaluating their performance.

It’s striking that the recommendations have been silent on executive accountability, the evaluation of executive performance, and the basis for rewarding performance. The role of managers is never mentioned although research shows they have more impact on performance than any other factor.

In business, financial rewards are integral to the management of performance. Linking incentives to goal achievement makes the goals an ongoing concern and a frequent topic of discussion among co-workers. It reinforces management’s priorities. The basic model for management incentives has been used for years.

Significantly, the Canadian government has established an explicit policy governing the use of goals—they use the word “commitment”—and the linkage of executive pay to performance. Here they use the phrase “pay at risk”. Their policy is very similar to the model found in business (and most hospitals). A portion of each executive’s award depends on “corporate” performance and the balance on achieving personal goals.

The SES bonus model is different. An analogy might be the donkey that cannot be certain he will be fed the carrot.  

Management textbooks as far back as the 1960s have recommended a limit of five or six “stretch” goals.  That originated with the father of modern management: Peter Drucker. There may be no more widely accepted management practice. Executives and managers in every organization should be able to state what they expect to accomplish in specific, verifiable terms. Experts in government management agree with that statement.  

As the year unfolds, executives remain cognizant of how results will affect their compensation. They are expected to initiate adjustments as needed. It reinforces their responsibility for expected results.

The subject is central to discussions of accountability. In business publications, accountability is linked to consequences, including financial rewards. That is reflected in the model for cash incentives.  

Research confirms the value of goal setting and rewarding good performance. That’s accepted in all walks of life. Its why the Boy Scouts award merit badges and the Girl Scouts have their “Cookie Program Rewards.” As their website states, “Hard work should be rewarded. Incentives do need to be carefully planned—they can trigger unanticipated consequences—but there is no better strategy to reinforce a shared focus on accomplishing goals.

Government has been encumbered far too long by a civil service system that makes managing poor performers more important than recognizing and rewarding those who score the touchdowns.  Improved performance has to start with leaders. Reform initiatives would be more likely to succeed if executives and managers are rewarded for leading the transformation.

Howard Risher is a consultant focusing on pay and performance. In 1990, he managed the project that led to the passage of the Federal Employees Pay Comparability Act and the transition to locality pay. Howard has worked with a variety of federal and state agencies, the United Nations and OECD. He earned his bachelor’s degree from Penn State and an MBA and Ph.D. in business from the Wharton School, University of Pennsylvania. He is the co-author of the new book It's Time for High-Performance Government: Winning Strategies to Engage and Energize the Public Sector Workforce (2016), with Bill Wilder.

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