Public managers are enthralled by private sector management ideas but must not lose sight of their social purpose. This article first appeared in The Guardian on the 12th December 2012.
Public leaders are in crisis. I know we all know this. But sometimes when you live in the hopeful bubble of social innovation or change management, it is worth saying again.
Budget cuts and financial crisis are the main villains that got us where we are. But following closely behind is the way the public and social sectors are apparently enthralled by private sector management gurus.
These people wow us with their hip attire, stories of incredible success and slick presentations. We love their simple five-point plans, matrix diagrams and key performance indicators.
But when we get back to our desks their steps for success don’t seem to fit so well with our team meetings and advisory boards.
The problem is that private sector management gurus are from Mars, while we work on Venus. We live in worlds governed by different norms and values. Our bottom line is not the same as their bottom line. Our principal objective is to make the world a better place; theirs is usually to make a profit.
These differences affect everything. It means we have different organisational cultures: we tend to be less hierarchical, slower at making decisions but more democratic. We have different decision-making systems. They prioritise efficiency, while we prioritise outcome. We have different ‘clients’, and serve our communities and members, while they have to serve their shareholders. We have more ‘feminine’ qualities in a sense – sensitive and better at listening; while they are more ‘masculine’ – decisive and risk taking.
Obviously, this is a gross caricature but there is a point to it – the limitations of our addiction to private sector leadership models is most obvious when the two sides try and work together and the strained relationship is well-illustrated by the many fiascos over public-private partnership and crises over government outsourcing.
The systems we use to manage these public-private relationships are almost always lifted, with a few tweaks, directly from classic MBA courses. These include cost benefit analysis, Swot (strengths, weaknesses, opportunities and threats) analysis, key performance indicators (KPIs), and many, many more.
These tools have been designed for the simpler private sector world where cash is king, and talent, it is said, rises to the top. This world, for better or worse, is not our world. Our organisations have been founded for social purpose, not prioritising cost over value.
But prioritising cost rather than value is now endemic in government, and is nowhere better illustrated than in the deeply saddening outsourcing crisis across our communities, as centralised contractors replace local organisations. Classic management tools are incapable of effectively valuing vital elements such as commitment, local knowledge and local networks. Using a cost benefit analysis to make a decision about a public sector outsourcing contract is like using a fork to eat soup; many of the best bits just pass through.
Many public managers may retort that they need to live in the real world, and that charities and government can learn about impact and efficiency from the private sector. I agree. But – and it’s a big but – if we lose sight of our social purpose, then we have nothing.
Even more important is the self-deception that the private sector always delivers better value. This is patently not true. The famously privatised US medical system is two and a half times more expensive per head of population than the NHS, and leaves 15.7% of the country’s population with no health insurance. This is a good illustration of market failure.
And we should not forget the goodwill and enthusiasm of our community-based organisations. That may not appear in any cost benefit analysis, but are vital for delivering sustained value for money.
Larger outsourcing organisations are simply culturally and structurally incapable of this. As one director of a famous outsourcing giant once said to me: “We specialise in saving government money, not serving community interest. If the two overlap great, but we do the former not the latter.”
Public leaders, however, work the other way round. This is not just a battle of management theories; it’s a battle for our communities’ lives and our own souls. We must not devolve our authority to a narrow decision tool. Use those tools by all means, but make the decisions we believe to be right and put the public back at the heart of our leadership.