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Private sector business principles to adopt & avoid Anna Robak Opus International Consultants
It is an article of faith…that government is bad or at least inept and business is good and efficient.
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Paul R Pillar, ex-CIA analyst
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An organization is effective if it meet the outcomes it intends to produce
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Myths we shall test Compared to private sector, public sector: 1. Less productive 2. Disorganized 3. Less innovative 4. Immobilized by red tape 5. Less motivated staff 6. Pay structure does not incentivize performance 7. Less efficient staff 8. Less cost effective
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THE PRIVATE SECTOR IS MORE PRODUCTIVE
Myth #1
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Test: Are goals being met?
Effectiveness
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Target (objective)
Resources
Alignment
Feedback
Effectiveness
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Target (objective)
Resources
Alignment
Feedback
THE PRIVATE SECTOR IS MORE PRODUCTIVE
Myth #1
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Test: Are goals being met?
THE PUBLIC SECTOR IS DISORGANIZED
Myth #2
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Test: Are decisions based on rational processes?
Strategic Decision Making
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Source: Dean, J. W. and M. P. Sharfman (1996). "Does Decision Process Matter? A Study of Strategic Decision-Making Effectiveness." Academy of Management Journal 39(2): 368-396.
Political Behaviour
Favourable Environment
Effectiveness of Strategic Decision
Unstable environment
Implementation Quality
Rational Procedure +
-
+
+
* Dotted lines indicate control variables
Decision Making
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Source: S. Dillon, J. Buchanan and J. Corner, “Comparing Public and Private Sector Decision Making: Problem Structuring and Information Quality Issues ” in Proceedings of the 45th Annual Conference of the ORSNZ 2010
Decision Making
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THE PUBLIC SECTOR IS DISORGANIZED
Myth #2
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Test: Are decisions based on rational processes?
THE PRIVATE SECTOR IS MORE INNOVATIVE
Myth #3
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Test: Does the structure foster innovation?
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Adapted from Adams, K. “Sources of innovation and creativity: A summary of the research.”
THE PRIVATE SECTOR IS MORE INNOVATIVE
Myth #3
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Test: Does the structure foster innovation?
THE PUBLIC SECTOR IS IMMOBILIZED BY RED TAPE
Myth #4
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Test: Is there a high degree of formalization?
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THE PUBLIC SECTOR IS IMMOBILIZED BY RED TAPE
Myth #4
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Test: Is there a high degree of formalization?
PRIVATE SECTOR EMPLOYEES ARE MORE MOTIVATED
Myth #5
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Test: Is reported commitment to the organization greater?
PRIVATE SECTOR EMPLOYEES ARE MORE MOTIVATED
Myth #5
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Test: Is reported commitment to the organization greater?
PRIVATE SECTOR EMPLOYEES ARE MORE MOTIVATED
Myth #5
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Test: Is reported commitment to the organization greater?
PUBLIC SECTOR PAY STRUCTURE DOES NOT INCENTIVIZE PERFORMANCE
Myth #6
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Test: Does public sector pay scheme incentivize performance?
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PUBLIC SECTOR PAY STRUCTURE DOES NOT INCENTIVIZE PERFORMANCE
Myth #6
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Test: Does public sector pay scheme incentivize performance?
But kind of irrelevant
PRIVATE SECTOR EMPLOYEES ARE MORE EFFICIENT
Myth #7
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Test: Who works faster and more vigilantly?
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When faster, more accurate, and more vigilant work is required, government is superior to private service provision.
PRIVATE SECTOR EMPLOYEES ARE MORE EFFICIENT
Myth #7
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Test: Who works faster and more vigilantly?
PRIVATE SECTOR SERVICES ARE MORE COST EFFECTIVE
Myth #8
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Test: Are overall costs lower for same service by private sector?
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Public sector Private sector
?
?
?
?
? ?
? ?
PRIVATE SECTOR SERVICES ARE MORE COST EFFECTIVE
Myth #8
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Test: Are overall costs lower for same service by private sector?
Myth test results 1. Private sector more organized 2. Private sector more cost effective 3. Private sector staff more motivated 4. Private sector staff more efficient 5. Private sector more productive 6. Public sector immobilized by red tape 7. Public sector pay structure does not
incentivize performance 8. Private sector more innovative
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X X X X ~√ √ √* √
Effectiveness scoreboard Effectiveness component
Element Private Public
Objectives Clarity of objectives Alignment Decision making - -
Information for decision making Staff motivation and performance Risk tolerance
Resources Innovation Cost effectiveness Service quality - - Procurement
Feedback Connection b/w actions & results Performance management
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What to keep doing?
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• Motivation ‘for good’ • Being cost effective • Delivering high quality services • Using rational decision processes • Good data and analysis • Engaging with stakeholders
What are the challenges?
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Effectiveness challenge
Problem Improvement Option
Objectives Multiple, ambiguous, shift Clear, measurable Information Patchy? Data & analysis strategy More stakeholders Resources for consultation Engage early, show
progress Red tape / constraints More costly services Evaluate costs &
benefits Transparency Less innovation Special Purpose Vehicles Performance incentives
Less innovation Business processes to monitor, evaluate, implement innovations
Perceptions “Public sector inept” Communicate the facts
Now what?
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1. Set clear objectives 2. Establish performance management
program with built-in improvement process
3. Assign staff to missions that align with their objectives
4. Capture cost of service provision well 5. Establish good supplier relationships
OBSERVATIONS, QUESTIONS, MUSINGS
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[email protected] Private sector principles to adopt & avoid