THE GAFFE
Governor Rick Perry of Texas made a gaffe of epic proportions in Wednesday night's Republican presidential debate when he forgot one of the three government departments he would eliminate upon entering the White House.
Well, he needn't worry about what he'll do upon becoming president any longer. The likelihood of the Texas governor being elected in 2012 is somewhere between slim and none. See Perry Defends 'Oops' Moment, Vows to Stay in Race.
Besides, the appropriate way to address government's organization, its work and related spending isn't to ask how many departments and positions should be eliminated. We shouldn't start with where we are--the status quo.
ZERO BASING IS A BETTER APPROACH
How many departments and positions we need to have for the work we want government to do is by far the better question to ask and answer.
To answer that one, we should proceed with a zero based budgeting approach.
Only after deciding what needs to be done or overseen by government can we answer how many workers we will need as part of an effective and efficient operation.
In other words, what policy and administrative work we want performed by government is the threshold issue to be addressed. Only after deciding that can we determine how to best organize efforts to accomplish the required work in an effective, customer friendly and cost efficient manner.
Adopting a zero based approach to government budgeting, sizing and organizing is long overdue. Maybe we'll decide that we don't need any government departments at all, or if we do, only a very few. And that those few will be of small size at that. And maybe we'll decide to outsource much of the work to private companies, should that be determined to be the best cost and highest quality choice available.
To repeat, the initial question to be asked is what we choose for government bureaucrats to do. Run the Post Office and Amtrak? Grant Student Loans? Pick companies in which to invest taxpayer money? Loan those companies money? Set educational standards? Administer medicare, social security and medicaid programs? Give that and other administrative work to the states instead? Consolidate areas of the military? And so on.
OUTSOURCING ALTERNATIVE
For the work that appropriately needs to be performed under the direction of the public sector, government employees don't have to perform the actual work. That work can be contracted out to the private sector instead, assuming it can't be eliminated.
And for the work that is outsourced or contracted out, government can insist on regular productivity improvements and cost decreases from those companies who are awarded the contracts.
METRICS
Here are a few relevant questions for our government officials. What are the metrics for productivity improvements within government? What have been the results? The rate of improvement? How does government productivity stack up against comparable private sector work and industry best practices? I have never heard any of these questions asked or answered.
In the private sector, sales or production per employee is one common productivity metric. If that were the case in public education, for example, we would be making an effort to enhance teacher productivity by increasing the number of students taught and quality of student outcomes by each teacher, perhaps by using digital or other modernized approaches.
Or in the alternative, to get better student outcomes, we'd be reducing administrative costs and putting more teachers in the classroom. And we'd be incentivizing high performing teachers by paying for performance based on the number of students taught and the academic progress made by students.
We'd also probably be either eliminating the postal service and Amtrak organizations or figuring out how to eliminate non-value added costs in order for them to become viable. In the end, we'd probably do a lot of work eliminating or outsourcing to FedEx, UPS, private sector railroads or even local independent contractors. And if we did outsource, we'd insist on meaningful contractual productivity improvements and cost reductions each year.
We'd also consider contracting out the administration of medicare, medicaid and social security to private sector companies as well. And we would require selected companies to meet performance objectives and standards, deliver ongoing cost reductions and make productivity gains each year, too.
THE PROFIT MOTIVE AND PRODUCTIVITY
The profit motive is a strong motivator for management within the private sector. If there is no profit to be shared with investors, there will be no business for management to manage, because there will be no investors.
In addition to excellent customer service, a company's profit (aka the cost of staying in business) greatly depends on continuing productivity gains throughout its extended supply chain.
Productivity improvements result from the hard work and innovative efforts of employees and other people throughout the extended supply chain. In simple terms, innovation is essential to productivity gains, which in turn are achieved by people constantly seeking a better and lower cost way to get the job done. And that job to get done results in customer and shareholder satisfaction, pure and simple.
A BETTER ANSWER FOR GOVERNOR PERRY
So Governor Perry addressed the wrong question in the presidential debate. That he couldn't think of one of the three government departments he'd eliminate isn't surprising. How many are there anyway?
In my view, a much better answer would have been, "I'd eliminate all of them, zero base the budget, figure out what work needs to be done,what work can be eliminated, then organize the remaining work in such a way as to achieve the lowest cost possible for the taxpayer in relation to the level of quality output desired. To make sure that happened, I'd properly incentivize the involved people to get the work done in the best way possible--either inside or outside the government bureaucracy."
Of course, had he said those things, he wouldn't have secured the nomination for president, let alone been elected in 2012. But he would have caused his opponents as well as millions of viewers to sit up and take notice.
Rather than him making the GAFFE of the election season, he would have delivered a great public service to the American people. Oh well, such is life.
THE BUREAUCRACY MUST NOT STIFLE PRODUCTIVITY
We have far too much bureaucracy and far too many bureaucrats for the work which needs to be done within government. We can't afford to continue to allow public employee unions to block improvements in the way work is performed, and we can't afford higher than optimal costs throughout the public sector. Government workers can and need to be as productive as those workers in the private sector.
A 'work-out' program is definitely needed in the public sector. Work-out is driven by employees and simply means that unnecessary departments, work and positions should be eliminated wherever and whenever possible. If the work, position or department can be eliminated, we don't have to address how to improve the performance of unnecessary or non-value added work. That work simply goes away at the direction of the employees involved in the work-out program.
PRODUCTIVITY
That said, if the work done is found to be still necessary and can't be eliminated, the way it is done can and should continuously and habitually be improved. Adopting new and improved ways of doing work will result in productivity gains, and costs will decrease. That program of continuous improvement needs to be driven by the people performing the actual work.
People can always find new ways to do old things better. That's innovation. And people will often find better things to do, thereby replacing the old things that no longer need to be done. That's innovation as well.
Productivity is the simple relation of output to input. Gains in productivity result from getting more done in the same amount of time or by getting the same work done in less time. It's not a complicated concept, but it has profoundly beneficial consequences.
In the private sector, ongoing productivity gains and innovation are essential to staying competitive and remaining a profitable entity. Management guru Peter Drucker once said that profit is the cost of staying in business. He was absolutely correct.
In the private sector, people innovate, customers are pleased and productivity results, thus enabling the private company to compete effectively, earn acceptable profits and remain in business.
That's the way markets work. Joseph Schumpeter labeled this habit of innovation and improvement 'creative destruction', and it's an essential aspect of competition.
SUMMING UP
Politicians and populists don't want to hear the message of the dire need for productivity gains in the public sector. Neither do union officials.
They don't want to conduct operations in a businesslike manner. But they very much need to do just that.
Government is too complicated and too costly as well. Its costs and outcomes alike need to be challenged to be competitive with those found in private industry. Work is work and bureaucracy is bureaucracy.
Competition is competition and customers deserve to be treated as such.
Taxpayers are customers of government and owners as well. They need to be given great service at the lowest possible cost. That's only right.
Thanks. Bob.
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