Running a government is not

Running a government is not exactly like running a business

Successful business leaders don't necessarily succeed in government. The President of the Council on Foreign Relations, Richard Haass, writes about this in Business Week:"The Wrong Reading List"

"Why do so many people coming out of business run into trouble? In business, success can be measured by profits. How does one measure the quality of a public service, like law enforcement? By the number of arrests? Of accidents? There are other key differences. Few businesses enjoy a monopoly, but many nonprofits do. There is one city hall. Businesses are also free to go out of business, while government is not. Every remote post office or obsolete military base has its local champion, and so they stay.

Above all, business people tend to operate in a more structured, less complex environment. Former Bendix Corp. chief and Treasury secretary W. Michael Blumenthal says that in a company, "you can control the process and tell group-executive A, 'You're not involved, stay out of it.' And he will, and he must. In government, that's simply unworkable. So you have to learn to become one of a large number of players in a floating crap game, rather than the leader of a well-organized casino that you're in charge of."...

In government you need to find ways to motivate people without dollars...

In fact, the lessons of public administration are increasingly important for businessmen:

"Government has other lessons to teach business. The common thread is this: what matters is not just the bottom line, but how it was arrived at. Process counts. The day of the all-powerful corporate manager is fast fading. Boards of directors, shareholders, the media, courts, workers and unions, regulatory agencies, activist attorneys general, consumer advocates, environmental and other citizens groups--all now exert growing sway. As a result, those in business would be wise to browse beyond the business books. Consulting the literature on politics, on history, may pay dividends. Those in business will succeed only if they come to appreciate that their world increasingly resembles the political arena that they so often ignore or disdain."

Former Treasury Secretary Robert Rubin was a co-senior partner with Goldman Sachs before becoming Secretary, and as a director of Citicorp afterwards. He is in a postion to know both sides. He writes in his memoir:

"This last statement didn't mean that the more top-down business model of business management could or should apply to government. To the contrary, I've developed a deep respect for the differences between the public and private sectors. In business, the single, over-riding purpose is to make a profit. Government, on the other hand, deals with a vast number of legitimate and often potentially competing objectives...This complexity of goals brings a corresponding complexity of process. Our constitutional system of checks and balances has multiple decision centers - Congress, the Executive Branch (with all its own internal complications), the courts, and state and local governments. [Ocean policy, for example, involves 55 Congressional committees, 20 federal agencies, and 140 federal statutes - Ben] Often the relationship among the participants is one of conflict, and, with respect to some issues, the balance of power is ambiguous. Moreover, many participants face electoral accountability. And finally, all important decisions - and even many less important ones - are made with an awareness of how they will be presented in the media.

In the corporate world, power is far more centralized...This simpler model might sometimes look appealing for the public sector. But in reality an immense complexity is inherent in the circumstances of a modern, democratic government. Making government more businesslike can improve efficiency...but the inherent complexity would remain..." (pages 147-148)

Rubin started at the White House as head of Clinton's new National Economic Council. Later he became Secretary of the Treasury.

"I continued to be struck by how different being at Treasury was from life in the White House. In many ways, heading a cabinet agency is like running a business, but someone who goes from the private sector to a cabinet position can easily be misled by the similarities and consequently fail to learn to deal with the differences. As a cabinet officer, you're the head of a large, hierarchically structured organization. As Bob Reich [Clinton Labor Secretary - Ben] told me when I moved to Treasury, you get to "run your own show," much as a private-sector CEO does. In both worlds, setting objectives, establishing effective accountability, and having capable people are crucially important.

But the two worlds are different enough that the analogy to corporate structure can prevent a former CEO from being effective in government. In a noticeable sense, you don't run your own show; the White House does. Goals, as I had already discovered, differ in government and the private sector. In business, the chief focus is on profitability. Government, by contrast, has no simple bottom line but rather a vast array of interests and priorities, many of which exist in a state of tension or conflict. For that reason, decision making in government is vastly more complex.

At Treasury, I also found a difference from business in terms of authority. Many former business executives feel great frustration when they discover the limits on their ability to act in government. I had not been accustomed to, nor did I expect, a corporate-style hierarchical structure. But even I was surprised at what limited power I had in my own building. The various bureaus and agencies that are part of the Treasury Department operate with considerable independence...Even with respect to the Treasury Department proper, many familiar management tools were not available. A private-sector CEO has the power to hire and fire based on performance, to pay top managers large bonuses, or promote capable people aggressively. At Treasury I had the power to hire and fire fewer than 100 political appointees among the 160,000 people who worked under me. Others could be dismissed for gross incompetence, but the practical obstacles to doing so made it seldom worth the effort...

Furthermore, most structural departmental reorganization couldn't be done on my own, but required legislation...

The biggest difference in both process and authority is the organizational complexity involved in making major Executive Branch policy decisions. In the private sector, A CEO has more or less free rein. In a presidential administration, everything revolves around the White House and almost every major policy decision is brought into the White House, often through an extensive interagency process..."(pages 177-178)

There are things the private sector could learn from the public:

"One area where I think business can gain from government is in interagency process - getting people from separate units and with different points of view together around a table to reach common ground on issues that cut across unit boundaries. Two others that can be closely related are managing in the kinds of crises that are becoming more common and often thrust companies into the public eye in unexpected ways, and dealing with the political and "message" dimensions of high-profile issues. Yet another is dealing directly with government itself.

After returning to New York in 1999, the area where I was most keenly aware that the private sector could gain from the experience of government was in managing the decision-making processes around complex issues with multiple internal stakeholders. In government, a chief of staff or a cabinet-level official spends a great deal of time trying to get groups of people from different units to work together in an effective way. This is an inherent need, because most major issues cross organizational lines and require coordination among different agencies, constituencies, and centers of authority to be resolved most effectively...

At big corporations with many different business units, the same kind of need exists. These units maximize their collective profits over time by working together effectively - and the private sector has the advantage of being able to use accounting and compensation to encourage people to work together, which the public sector for the most part cannot do. But the separate business units of a big company usually aren't as used to working through their differences and problems with one another to enhance the well-being of the whole as government is of necessity. They're more used to operating in separate "silos" and being held accountable for their own individual bottom lines. That issue often comes to the fore when companies seek to cross-sell - that is, to use the sales force of one unit to sell related products from other units - or to make product/geography matrices work. (Who runs a credit card business in South Korea - the person in charge of credit cards or the person in charge of South Korea?) People who have learned how to manage interagency processes in Washington have a crucial set of skills what are not likely to have been as well developed in business and can add much to a company if they are properly supported by the CEO."(pages 311-312)

Rubin follows the quoted text with a discussion of the importance to private companies of an understanding of the political dimensions of issues. The Rubin material comes from Rubin's memoir, In An Uncertain World, written with Jacob Weisberg (Random House, 2003).