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Governing by Network

By: Stephen Goldsmith , William D. Eggers

Privatization is a debate in need of reform, write the authors of Governing by Network: The New Shape of the Public Sector. It's not about whether privatization or outsourcing is good or bad anymore. Private contractors are already embedded in everything the government does. In fact, the government has come to rely far more on networks of public, private and non-profit organizations, but has yet to figure out how to manage them.

Authors Stephen Goldsmith and William D. Eggers have long supported more private-sector partnerships in government, but believe that the left vs. right debate is outdated and irrevalent. Goldsmith and Eggers served as government reform advisers to President George W. Bush during his 2000 campaign for the White House. Goldsmith directs the Innovations in American Government Program at Harvard's Kennedy School of Government and is the former mayor of Indianapolis, and Eggers is a director at Deloitte Research and senior fellow at the Manhattan Institute for Policy Research. Both say it is not about whether government employees should perform all public services versus privatizing everything. The government already conducts business in increasingly complex ways.

This change is not new, but its scope, frequency and complexity is dramatically growing. Consider these facts:

• Uncle Sam now spends about $100 billion more annually for outside contracts than it does for employee salaries.
• Both NASA and the Department of Energy are de facto contract management agencies, since nearly 80 percent of their budgets go to contracts.
• When the United States invaded Iraq in 2003, the government deployed one contractor for every ten soliders.
• Private companies not only manage nearly 70 percent of waste tonnage generated in the United States, but they actually own more than 53 percent of its solid waste facilities.
• Private contractors now run all of the welfare-to-work programs in Milwaukee and the entire child welfare system in Kansas.

If the government has become ever more reliant on its network-based partnerships, then public officials need to figure out how best to make them work. In Governing by Network, Goldsmith and Eggers expound three central points: First, government can't solve complex horizontal problems with vertical solutions. Second, the role of government is being transformed from direct service provider to generator of public value. And finally, public officials won't get the results taxpayers deserve until they figure out how to better manage a government that does less itself and more through third parties.

The biggest insight Goldsmith and Eggers offer is that the traditional bureaucracy is not only expensive and confusing, but is not set up to work with outside organizations. The habit of viewing agencies as systems in which top officials direct workers to accomplish missions needs to stop. The heyday of top-down bureaucracy has faded and government by network has emerged. As a result, the solutions to the country's most important problems can't be solved inside a bureaucracy. Goldsmith and Eggers call this problem vertical thinking to solve horizontal problems.

"We need to look at paring down bureaucracy while paying top people more," Eggers says, "and setting up more training because people don't have the skills to implement these networks."

In other words, a different kind of government employee is needed. The transition to government by network, argue Goldsmith and Eggers, will have far-reaching effects on the makeup of the public workforce. That means agencies need to recruit a cadre of managers who perform traditional duties--planing, budgeting and deploying staff--but also are skilled in contract negotiations, contract management and risk analysis and have the ability to tackle unconventional problems.

These skills are not common in the public sector today, and the trend toward governing by network is accelerating. President Bush's second term alone will create more public-private partnerships than ever before. Social Security privatization, Medicare reform, faith-based initiatives and environmental public-private partnerships at the Department of Interior and the Environmental Protection Agency reflect the administration's movement toward governing by network.

Ultimately, there are huge advantages to the government's reliance on these networks of private contractors. They give the government far more flexibility and the ability to generate public value through services tailored to satisfy citizens. But Goldsmith and Eggers acknowledge it won't be easy to get it right. Government by network faces several challenges, such as sharing risk, tying disparate organizations together, curbing corruption and ensuring accountability. Once those challenges are met, Goldsmith and Eggers predict, a community of innovators will transform government as we know it.
 


About the Author

Stephen Goldsmith

Stephen Goldsmith Stephen Goldsmith is a Professor of Government at the Harvard Kennedy School (on leave). He is currently the deputy mayor of operations for New York City.


About the Author

William D. Eggers

William D. Eggers William Eggers is global director of public sector research at Deloitte, and coined the term "Government 2.0." His new book is "If We Can Put a Man on the Moon: Getting Big Things Done in Government."


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