How Running a Government Is Different Than Running a Business

How Running a Government Is Different Than Running a Business November 29, 2018

In this era of political outsiders and disenchantment with government, many candidates from the business world with no governmental experience have been running for office promising to “run the government like a business.”  President Trump is the most noted example, but business outsiders are being elected at every level, including, most recently, the new governor here in Oklahoma, Kevin Stitt.

The Daily Oklahoman has published a piece by Scott Meacham, a successful businessman who was brought into government work when he joined the administration of former Oklahoma governor Brad Henry.  He is supportive of Governor-elect Stitt, but he reflects on his own experience on the challenges of going from the private sector to the public sector.

First of all, he says, businesses exist to turn a profit.  Governments have to provide services to people who are not directly paying for them.  (Yes, taxpayers pay, but the beneficiaries of roads, regulations, and social services are not buying them as consumers do in the private sector.)  Also, governments have pretty much a monopoly on what they do.  This means they aren’t subject to the competitive pressure that forces businesses to be efficient and to keep improving.

So governments are insulated from the free-market principles that businesses have to navigate in order to be successful.  And whereas the people in a business work together as a team, government has conflict built in.  From Scott Meacham, Running a Government Entity is Different from Running a Business [subscription required to read the whole article]:

I was dismayed at how partisanship affects decision-making at the governance levels of our state. In business, we don’t hire people, divide them into two teams and then task the two teams to wage a never-ending fight for control of our organization.

Unfortunately, with partisan politics, that is exactly how state government often works, at least at the elected official level.

The barriers to change are deep. The status quo has amazing momentum. One area of gain is perceived as another area of loss which leads to a perpetual zero-sum game, even when meaningful change is attempted.

But aren’t the political parties and their various factions competing against each other?  Yes, but this isn’t the same kind of competition we see in the private sector economics.  There multiple companies are producing a particular good or service and the customer decides which one to patronize.  But with government there is only one provider.  While the different factions compete in elections over who gets to lead it and to serve in the various offices, government at any one time is a monolith.  But it consists not of a single team united to do a particular job; rather, it consists of warring factions.  In other words, in business, the competition is external to the company.  In government, the competition is internal.

This is not a criticism of government.  It is how it has to be.  Internal checks and balances prevent government from becoming too powerful and taking over not just private sector businesses but individual liberties.  But this means governments will have difficulties in “getting things done” that businesses do not have.

Meacham does see one area in which governments would do well to emulate business:

What business does very well that government does not is understand how to manage costs. If shared services like human resources, IT, procurement and other administrative services could be implemented across government, the millions of dollars saved could be passed on to the consumers of education, health care, public safety, and other government services. Any successful business person understands this fundamental principal. The art comes in implementing it in state government.

Right!  And, of course, partisan politics gets in the way of cost containment as well.  But more could certainly be done to apply business principles to better manage taxpayer money.

Meacham is referring primarily to state government.  On the national level, note the irony.  President Trump is a businessman but he keeps stirring up conflicts (of the sort businesses dislike because they alienate potential customers) and he is running up massive deficits (as opposed to the fiscal discipline that businesses have to implement).

In this, he is acting more like a politician than a businessman!  Is this just inevitable?  Or should the president make more of an effort to run the government like a business?

 

Photo via Pixabay, CC0, Creative Commons

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