Start Planning To Privatize Now

The worst time to begin evaluating your organization for privatization is after you've been tapped for the job. If you think the responsibility will fall to you eventually, start planning now. The most important thing is to know your operation, who does what, why they do it and how they do it.

Hal Steinberg, a former Office of Management and Budget official who has also been a partner at KPMG Peat-Marwick, suggests you ask the following questions before you start:

  • Is there agreement among Members of Congress, the agency and its customers that privatization is a viable option?
  • Are there legislative or regulatory barriers to privatization?
  • What aspects of your organization would be enhanced by privatization? Efficiency? Quality? Service delivery?
  • Is the private sector capable of doing the job you want it to do?
  • Will potential operators see sufficient economic return?
  • What will be the impact on unions and other governmental operations?
  • Can the requirements of your organization be defined with enough specificity to attract bidders?
  • Can the operation be adequately monitored if turned over to the private sector?
  • What is the cost of resuming responsibility for the operation if the private sector fails?

Once you feel comfortable with the answers to these questions, you'll need to develop a business plan. This is probably the most important step in the privatization process, Steinberg said. This is your sales pitch for potential funding sources and the blueprint for how the operation will be managed. It must define your priorities for operational and financial decisions as well.

In your business plan, you must address the following issues, as specifically as possible:

  • Who will be served and how, what services will be provided at what cost, how long before the operation is expected to break even, and how much revenue will be produced.
  • The participants involved. What will be the role of senior management, fiscal specialists, personnel specialists, technical experts and others?
  • The time period for all aspects of privatization, including raising capital, property acquisition, personnel transitions, service delivery and pilot program duration.

One of the most difficult aspects of privatization is dealing with people's reluctance to change the way they do business, says Theodora Watts. Watts spent a dozen years in senior positions at the Internal Revenue Service before she moved to the private sector last September.

"I think [some managers] can go a lot further with privatization than they're going. There's just such an entrenched way of doing business it is difficult to get people to change," Watts says. "If you look at what people have on their bookshelves you'll see volume after volume of nitty-gritty procedures. There's no emphasis on serving the customer. That's the culture."

Managers who have good ideas but are afraid they won't be heard by those with the power to implement them need to find someone to champion those ideas for them, says Watts, now a senior systems specialist with InfoPro Inc., a consulting firm based in Silver Spring, Md.

"You really need somebody who's going to carry the flag for you," she says.

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