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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Anna.Robak@opus.co Private sector principles to adopt & avoid