Today I want to cover a topic that I have not discussed previously. I have often thought about posting on it but it wasn’t until I had a discussion on another thread that I realised how important the topic might be for others.
The catch cry of the public is “why does the government waste so much money”. The simple answer is that “there is no mechanism within the governments internal systems that requires and/or rewards financial efficiency”.
To a person who has never worked for a government bureaucracy these words may seem like blasphemy, but to those who have they will probably ring true. Let me explain.
Firstly there is a broad underlying conflict with the government’s mandate towards the public in terms of economic credentials. On one hand you have an underlying bias of the public to complain about overall government spending such as this piece from Gittins! . This however is in direct conflict to the public’s other bias which is to demand increase spending to them individually. This is well understood in the aisles of government and plays a big part in shaping policy decisions. It also plays a big part in the PR spin around economic management.
That however is not the biggest issue. There are far greater problems.
The public seem to have a misguided misconception that the minister of a government portfolio has in-depth knowledge of it. This is in fact very rarely the case. The minister for roads is rarely a civil engineer, the minister for human services a social worker, the minister for innovation and software specialist. This is sometimes not the case in business either, but the difference is that business leaders who may not have the content knowledge are usually selected for their previous history in running enterprises successfully. Government ministers on the other hand are selected from a pool of people who got their jobs in a popularity contest.
This lack of content/operation experience means that in most cases the person who is supposed to be at the helm of the ship doesn’t even know what a ship is. There is an expectation from the public that this person is “in charge” but the reality is most ministers don’t have a clue about their portfolios above a basic level, and due to this lack of operational experience they flounder badly when trying to deliver long term outcomes. Most don’t bother and simply defer to their bureaucracies in expectation of postive outcomes which in their minds is “good news” in the newspapers.
Government departments are run in the most part by long term public servants. Many have worked their way through the system and have little private enterprise experience, however that is not the real issue. The biggest issue is that the reward structures within the government and private industry are very different because the goals are not the same. In private industry the goal is higher profits, in government it is good public relations. If you think about any project/program within a private company, with the exception of compliance, the underlying premise is that it will in someway improve the profitability of the company. If it does not then it will probably not get past “concept” stage as the business case will not stand up to any rigorous debate.
However within the government money is not a mechanism of reward, therefore decisions made by the government very rarely list economic efficiency as a required outcome. The ultimate positive outcome for a government department is a happy minister which means delivering them two things; whatever they want to hear and good press. So the bureaucracy as a whole isn’t rewarded for economic efficiency or for that matter actually delivering a good service. The department is rewarded for making sure nothing bad is said about the minister in the newspaper and that the minister themselves believes the department is trying to deliver a good service to the public. Within any department there are huge numbers of people whose only job is to determine what makes the minister happy and making sure he/she stays that way at all costs.
So now you can see the problem. The public thinks the minister is running the show, the minister is pretending that they are, but are really deferring to the bureaucracy whose only real job is to make sure that the minister’s name only appears in the media as part of a “good news” story. You will notice that absolutely none of these things have anything to do with money, in fact the departments themselves have a vested interest in delivering a service that is “just good enough” because there is no reward for any higher level of service.
This paradigm is prevalent at all levels of the public service which itself has no built-in financial reward mechanism for working harder or smarter or more efficiently. I believe this stems from the fact that the government does not want to be seen to being financially corruptible, but what is actually does is creates a wage structure that rewards the guy who does nothing the same as the work-aholic. In many cases the person who is actually good at their job is held back while the inefficient are promoted upwards, because once again nothing in the system supports financially motivated reward. Public servants cannot be rewarded with money, or anything that comes close to being like money, they therefore have little incentive to worker harder or smarter than a minimum standard. The bureaucratic structure is made worse by rewarding higher level public servants with salaries based on the number of staff that report to them not how efficiently or effectively they perform their duties.
It all sounds crazy, because it is. In my dealings with the public sector I have seen many knowledgeable technical people ( engineers, accountants , project managers ) literally have mental breakdowns trying to navigate the system in an attempt to deliver what they believe to be a rational outcome which ultimately fails. The simple reason being that they were trying to deliver an outcome based on economic efficiency to a system that can see no value in such as thing.
The public service will pay lip service to private sector ideals; each business area will do a business plan, program areas will do program plans, there will be strategic plans and operational plans etc etc. But in my almost 20 year dealing with the public service I have never seen one implemented and I certainly have never seen one where financial efficiency gains were a perform measure.
This is the same for the government’s external dealings with service providers. Non-government organisations are funded to provide services on behalf of the government. This is done in the name of “efficiency” but it has little to do with it. The real reason is that by shipping the service provision to an NGO the government has some separation between itself and the risks associated with actually delivering a service.It also gives the associated minister the opportunity to get lots of media time with a multi-million dollar announcement for the private sector. Most government departments claim to use “output based funding” models, however the reality is that they actually have no internal systems to record and/or report on such things and in many cases there are legislative restrictions on their capacity to do so once they have outsourced a service.
With the ministers having little idea about actual service delivery and the department being rewarded for providing “just good enough” services the system regularly breaks down. As soon as the media runs a story about a government bungle you get a true display of how the system actually works. The minister quickly announces an inquiry which ultimately he/she has no ability to perform because they have no operational knowledge of what their department actually does. The department goes into damage control with internal investigations which take hundreds of public servants to document whatever they are directed to report happened. Ultimately the same minster, who has no idea how to actually deliver what they are promising the public, rewards the department with more funding so that is can return to providing the same level of “just good enough” service, this time with even more public servants and more funding. It isn’t difficult to find examples of what I am talking about , just search google for “government failure enquiry additional funding”
Ultimately anyone who thinks the government is capable of providing an effective and efficient service will be disappointed. Anyone who is relying on it to is in real trouble. As I explained above the government is incapable of delivering such an outcome because it has no internal reward mechanisms that gives it the ability to do so. The best outcome that can be expected from the current system is the “bare minimum” with constant lapses into complete failure.
Surprisingly there are some winners in this. They are the companies who understand how the government actually functions and are able to exploit it for their own financial gain. The most profitable enterprises are those who are lucky enough to catch the government coming out of a crisis with the money cannon ready to fire. In these cases the government will quite literally promise anything to the public, so any company who can convince the government that they can deliver on that promise will be rewarded.
I have seen a number of large firms paid hundreds of millions of dollars by government departments because they said they could deliver on what the minister promised the public coming out of a crisis. Do you think they delivered on time and on budget ? Nope. Do you think they actually delivered on the promise ? Nope… Did they make lots of money? Obviously. How hard is it to be profitable when the acceptable outcome is “just good enough”?