Effectiveness vs. efficiency

lected and appointed officials have historically lauded the efficiency of businesses and urged government agencies to be more like them. These officials never seem to learn, however, that the private sector and public sector are fundamentally different. Public organizations don't necessarily operate less efficiently than their private sector counterparts, they simply serve different purposes.

The private sector performance model drives businesses to make profits in a competitive market. Competition sharpens company executives. Industry demands this efficiency; otherwise, the economy would fail.

In contrast, the performance model in the public sector is based on effectiveness. Public sector organizations are usually monopolies. The Defense Department, for example, is charged with defending the country, and no alternative organization performs that function. Efficiency should be a concern for officials who use public funds, but effectiveness is paramount. Trying to cut costs in a war, for example, is useless if the outcome means losing the battle.

When the government shifts gears and tries to become more businesslike, as it frequently does, it starts contracting out every function in sight. The result is publicly visible failure, from which the government learns nothing. The latest example is NASA's Mars landing debacle. With the best intentions, NASA Administrator Daniel Goldin launched a push to get things done "faster, better, cheaper" by moving work to private industry and minimizing government oversight. He reduced NASA's infrastructure to the point that the agency's role shifted from mainly technical support to contract administration. Since only one NASA exists, it should focus on effectiveness rather than cost savings. But following business's efficiency model for the Mars landing program resulted in failure, albeit at a reduced price. More testing and technical oversight, which would have made the program less efficient, may have made it successful.

A NASA study of the "faster, better, cheaper" policy from July 1999 to February 2000 said the agency is too focused on cost. "We need to slow down some, not rush too quickly into important programs and projects, plan and implement them more carefully, and move away from fixations on cost and near-term gain," the report said.

In sharp contrast to NASA's approach, the Defense Department used the effectiveness model in the Gulf War. Before executing their strategy, Defense Secretary Dick Cheney and Colin Powell, chairman of the Joint Chiefs of Staff, made sure overwhelming forces were in place. This led to a decisive outcome. Could they have done it more efficiently by massing fewer forces and moving sooner? Perhaps, but while they tried to minimize costs, they were chiefly concerned with winning the war.

Despite lessons such as these, federal agencies insist on using the efficiency model as the touchstone of public management. The Defense Department is focused on becoming more businesslike, slashing its infrastructure as quickly as the process will allow. But NASA's study addressed the perils of shrinking the size and competence of in-house workforces. "NASA mission centers must retain the expertise to do in-house projects. This 'corporate history' represents a sustaining expertise that is the foundation for space exploration," the report said. The study suggests one way to retain expertise would be to stabilize funding for the mission centers. Defense officials should consider this recommendation as they try to define and sustain core competencies.

Saving taxpayer dollars is always desirable, but agencies must remember that performing the mission is mandatory.

James Colvard, deputy director of the Office of Personnel Management under President Reagan, later was associate director of the Johns Hopkins University Applied Physics Laboratory. He teaches at Indiana University.

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