Monday, June 4, 2012

Why doesn't government behave more like business?

I am frequently asked about my views and experiences regarding the differences between business leadership and government leadership.  It is a great question and I am in a very unique position to answer it. I spent 32 years in business.  Twenty six of these years were spent owning and operating a mid-sized industrial distribution company. I left the management of this Company on December 31, 2010 and walked into the mayor’s office 24 hours later.

The differences are many, yet the five of the clearest differences I have observed:

business  leadership- more autocratic- I speak,others listen
1.       Ownership:  In government, the owners and customers are the same. Every citizen is an owner and customer, and has a rightful seat at the table. Business has a clear distinction between owners and customers. This is a very important distinction. In business, owners choose their customers by their strategies. Government cannot make this choice. Government must serve all of its customers. The strategic options available to government to manage costs are therefore fewer.

2.       Power and authority: Business is more autocratic. Government in the United States is everything but autocratic, as it should be. This defining characteristic dramatically changes the speed and process of decision making and implementation.  Thus, checks and balances  and the owner/customers having a voice can make for a sometimes chaotic, very lengthy decision timeline.

government leadership - 2nd row- top- listening, more listening
3.       Approach to risk: Businesses must be risk tolerant to succeed. The very essence of business decision making is risk and reward.  Business understands that not all investments will succeed. Business reconciles its setbacks and moves on. Government is risk averse. We are charged with taking the hard earned tax dollars of our owner/customers and making certain that every penny is spent well. Big, bold initiatives are therefore hard to justify. Government mistakes can affect every citizen, not just a “few owners.”  Good ideas that do not pan out are frequently viewed as ‘waste and fraud’. All of these issues foster a decision making culture that favors caution.

4.       Approach to investment:  The essence of investment is to get an expected return. Business can much more easily quantify the cost and return. In government, the returns are frequently “aspirational.” Leaders can seek a desired state of behavior or achievement that may take a very long time in coming. It is more difficult to quantify if and when success is achieved. In government, there are many more variables at play outside of the control of government that will ultimately determine success.

5.       Short term vs. long term thinking: Government leadership is very transitory. I am the fourth mayor in nine years.  With the exception of a few, all of the top managers of our government serve as “At Will” appointees of the mayor. Thus, with each new mayor you can anticipate a turnover of top managers. This makes it very difficult to create and sustain a long term investment view.

Likewise, some other noteworthy differences between government and business are the respective approaches to strategy development processes, customer feedback, suppliers and competitors, performance measurements, organizational development and employee motivation.  These subjects will be a story for another day.

By no means should these differences be viewed as excuses for lesser government performance. Business leadership principles do apply. But not directly.  At the core of both good business and good government is a commitment to goals, great customer service, efficient use of resources and effective implementation of thoughtful strategies. This is exactly what we are endeavoring to do in Lakewood city Government.