Does Business Know Best?
You can’t run public agencies like private companies, but you can borrow ideas from them.
As part of his 30-year career in the private sector, Chris Liu had the opportunity to learn some important lessons from Sam Walton, the founder of Walmart. “He taught me that executives had to be accessible; you had to be a visible manager all the time to be successful,” says Liu. Walton and his team were famous for visiting and working in a lot of stores. Customers would often discover Walton himself, Liu says, “just walking down the aisle.”
Today, Liu is director of the Washington Department of Enterprise Services, which oversees, among other things, state printing operations as well as statewide master contracts for goods and services. Liu has brought with him the lessons he learned from Walton, including visiting stores, making sure that the CEO has a very visible presence and learning the issues that concern everyday front-line employees.
There’s been a great deal written about contrasts between the private sector and the public sector. Over time, we’ve written repeatedly in this space about a variety of reasons you can’t really run a state or local agency like you would a business. While we stand by that, it’s equally clear that the lessons men and women learn in the private sector can be applied -- successfully -- to their work in government.
One such lesson is the idea that asking questions and challenging the status quo can be a valuable attribute in state and local governments. Classically, such questions and challenges bring the response: It’s done this way because that’s how it has always been done. “One of the things that is good about bringing someone in from the private sector is that there isn’t anything they are afraid to question,” says Teri Takai, who worked at the Ford Motor Company for 30 years before becoming the chief information officer in Michigan, California and at the U.S. Department of Defense. “You may not be able to change the service system or the budgeting process,” she says. “But at least you are pushing the organizations to ask questions about why do things need to be the way they are.”
That sentiment is echoed by Mark Raymond, who became Connecticut’s CIO in 2011 after more than 20 years as a consultant with Accenture, a management firm. “In the public sector, you have experts who know how things have been done in the last 15 years, but they often don’t know why they were done that way. In the consulting world, people want to know what’s going to happen in the future. The primary element is to have the kind of intellectual curiosity that leads you to ask the ‘whys.’”
Another lesson that public organizations can -- and should -- learn from their corporate counterparts is the importance of customer service. Doug McCoy, who is director of administrative services in Yuba County, Calif., spent a number of years working in facilities and services for companies like Dow, Sears and IBM. “In the private sector,” he says, “there’s very little tolerance for crappy service. But I think people have lower expectations in the public sector.”
McCoy explains that this attitude is, in part, a function of the monopolistic nature of cities, counties and states, as opposed to most companies that have competition driving them to treat customers well.
A small excursion into reality is appropriate right about now. In the previous examples, we seem to be building the case that all private-sector companies are excellent at things like accessibility, questioning and customer service. This is not universally the case. Just last weekend, we stormed out of an eyeglass store when we were told that a pair of glasses, which the representative from the store admitted had been sold in defective condition, couldn’t be fixed or replaced. Take it from us, you’d go far to find a city or state that provides customer service that’s more inferior than that.
Similarly, the learning curve for émigrés from the private sector can be steep. Consider the newly hired, high-level public-sector official who recently indicated that he was shocked when he couldn’t preselect employees, but had to go through a rigorous process.
We’ll end with a point made by Doug Robinson, executive director of the National Association of State CIOs. “There’s a lot more negotiation in the private sector,” he says. “Often, when it comes to governmental relationships, there is no capacity to negotiate deals.”
One reason for this can be procurement practices that require highly rigorous competitive bidding processes that diminish the capacity to negotiate. Having held management jobs in both sectors, Liu has this observation about the core of the eternal difference: “Investors in business take a risk. But government is more cautious. We’re stewards of the taxpayers’ money.”
*CORRECTION: A previous version of this misidentified Mark Raymond as Mike Raymond.
*CORRECTION: A previous version of this mistakenly reported that the Washington Department of Enterprise Services oversees state-owned liquor stores.