Government from the View of Business


here is a perennial debate about whether government can be run like a business. As a veteran businessman who just spent nine months working in government, I'm in a position to weigh in on the question.

The answer is: mostly no, partly yes. If that sounds like I'm equivocating, you're right. I learned that in government.

I am a businessman by career choice. I spent my first 10 years at Eastman Kodak followed by 20 years as a management consultant. Recently I shifted gears and served a nine-month fellowship at a federal agency. Obviously a few months doesn't make me an expert on government. On the other hand, as a management consultant, my job is to analyze problems and propose solutions in a lot less time than that.

Different Strokes

During my fellowship I identified five ways that business and government differ: purpose, people, time, money and hierarchy. I also saw a few ways government can learn from business.

Purpose. Business has many goals, but one is foremost: Make money. Government likewise has many goals but one is paramount: Spend money to ensure the well-being of its citizens. Given these cross-purposes, there's no way government can operate like a business. Spending money takes the hawk eye of an auditor; making money takes the instincts of an entrepreneur. Government serves many masters, operates at a deliberate pace and tries to minimize risk. Business serves one master, the customer, and acts with dispatch. Government actions are open. Business activities, except for delivery of the product or service, are generally closed to the public.

Government and business have one similarity-both are builders. But business does it through what economist Joseph Schumpeter called "creative destruction"-the weakest get weeded out. Government serves the weakest and tries to make them stronger.

People. In business, managing people means hire, fire and inspire. Workers are a resource; they perform functions and add value. In government and business, I've heard workers described as FTEs (full-time equivalents). But in government, FTEs seemed to mean functionaries, not value-adders. Regrettably, many workers acted that way, as caretakers rather than contributors. I once heard a manager say, "Don't think, just do your job." That same line is used in business, but not by many, nor for long.

The biggest discrepancy I observed between business and government is in firing people. Some workers, in either sphere, need to be fired. In business they are, in government they're not, at least not where I worked. One example: I routinely saw a support person playing solitaire on her desktop PC; in fact, I never once saw her word-processing. When I asked about her, eyes rolled but nothing was said or done. It's not easy to fire in the private sector, but it's done every day. Keeping deadwood on board creates three problems-nonperformers don't work; their work must be picked up by performers; morale drops among the performers.

So what do you do if you can't fire someone? In business, we try to find a better fit elsewhere, or we unload them on someone else (which can backfire) or we isolate them. "Isolate" means take away their perks, take away their resources, exclude them from key meetings. It's not fun, it's not easy, but deadwood exists everywhere and it should be dealt with or the organization suffers. From what I observed, government carries more deadwood than business, and that impedes productivity.

Time. For government, time is long, elastic and glacial. Bombers and social programs are not made overnight. Projects and budgets are viewed in years or decades. Business, by law, must make timely reports to investors. "Timely" for publicly held companies means quarterly. In some industries, like Hollywood and Las Vegas, market share data are announced weekly for all competitors to see and react to. I developed a rule of thumb during my government service: If I thought something would take a day, that really meant it would take a week; a week meant a month, etc. You get the picture.

In government, eons of time were consumed in meetings. Business has meetings too, but it's customary to start a meeting with the objectives, outcomes and the duration of the meeting. Once, when I tried sticking to the clock, someone said: "What's your hurry?" Her comment really referred to two dimensions of time-the immediate time spent in the meeting and the total time to be invested in the project.

Money. There's never enough money in business or in government. In business, that can be a motivator. Some management gurus say projects should be starved for cash just to see how resourceful people can be. Business executives are hardly paragons of thrift. They function within budgets because they have to; if they overspend and don't produce, they're dead. Sure, there are exceptions, but budgets are rigid. The role of money in business is clear-start the year with $1 and end the year with $1.20. It's called ROI (return on investment). You don't increase ROI by overspending budgets.

In government, I saw four types of budgets: operating, capital, overspent and underspent. The first two are self-explanatory. The third-overspending-is often found in defense spending. But I also saw overspending where too much money was thrown at projects. Or at least too much to be spent wisely, so it was wasted. The fourth-underspending-takes place when Congress creates a program but doesn't fund it. People spend a lot of time creating elaborate plans knowing they will never be implemented.

Hierarchy. Business and government are structured as a pyramidal hierarchy. But in government, regardless of the chain of command, you serve many masters. There are many ad hoc bosses: the congressional representative or staffer requesting information, the senior agency executive outside your chain of command, or the leader of a virtual team you've just been appointed to.

Where I worked, the agency made good use of virtual teams. People were detailed to projects where they could contribute their expertise or where they could learn. I saw the interaction of teams with cross-functional skills create better programs. But I also saw teams that were leaderless. I sat through meetings where minutes turned into hours and no one had command or took command. Lacking a boss, plans and projects flounder.

Tips From the Outside

Can government be run like business? Probably not, but there's a lot government can learn from business.

  • Purpose. Vision and mission statements are common in business today. Every government office should have one posted so its customers can see what the office is doing or should be doing. Missions should be audited. A mission without an audit is a dream.
  • People. This is critical: People matter more than programs. I saw very little counseling in my arena and most was on content, not behavior or career planning. I became a de facto mentor to many presidential management interns (PMIs) where I worked. Why me? From my business experience, I know that if you develop people, they develop programs.
  • Time. Excluding capital budgets, business executives are wary of ongoing, multi-year projects. They soon become black holes that devour money and morale. Government managers would better serve their constituents if they injected some urgency into programs and operations.
  • Money. In business, budgets are precious and tight. Many government programs, at least federally, seem to receive annual appropriations regardless of whether they are needed or not. Budgets and results should be analyzed annually. This requires taking the 1993 Government Performance and Results Act seriously.
  • Hierarchy. Government means politics. Politics means there will always be many bosses. There's nothing you can do about it, other than to be nice to everyone. You never know whom you may be working for tomorrow.

Paul Kuzniar is a management consultant who has worked in the public and private sectors for 20 years. He recently completed a nine-month fellowship at a federal agency.