You'd never run a business like this! Taking the boot out of the public sector volume 2

This week, I continue my 'Taking the boot out of the public sector' series. It's too common to dunk on government, and when even the politicians get involved, I get grumpy.

Last week, we busted the myth that the private sector would do public sector work better or faster.

This week, we're talking about what happens when capitalism dominates the conversation and we try to apply a profit-oriented model to public services.

Spoiler alert: the shoe doesn't fit.

Myth 2: The public sector should operate more like the private sector

Private businesses exist to capture private value in the form of profit. This is the purpose of private sector activity, and it shapes the way all subsequent choices are made. Because businesses exist to capture private value in the form of profit, efficiency is king. Through direct transactions with consumers, businesses manage operations quickly and cheaply to capture the most private value possible and return it to shareholders. In business, autocracy makes sense.

In the public sector, government actors and agencies aim to generate public value - little of which is then returned to the actor who created it. For example, a Council running business support programmes creates local economic value. This value is captured by local business owners (profits), residents and visitors (goods, services, and employment) and other tiers of government (increased taxes). The Council receives no financial return or quantifiable benefit.

Because the public sector exists to generate public value, decisions are made differently. They're made in public, with public, or both. Collaboration, engagement, and transparency come before efficiency. Because the payoff period is longer and the payoffs are more nebulous, quantifying and attributing benefits is more complicated. Because of this, the marker of quality is how the decisions are made, as much as which decisions are made.

If you try to stick a private sector operating model - fast, cheap, quantifiable - onto a public sector agency, the agency will always lose. But when you do that, you're judging a fish by it's ability to climb a tree. Which isn't smart.

How can we tell if we're creating public value?

Just because it's hard to tell, doesn't mean we shouldn't try. Holding the government accountable for outcomes is important - as long as we look at the right stuff.

Creating public value is more complex than generating profit. It is driven by different factors, harder to measure in the short term, and more ambiguous to define. When in doubt, here are four factors to determine whether you’re creating public value:

1. Public value is a collective good. Everyone in the community benefits, and it is difficult to exclude individuals from that benefit.
2. Public value involves leveraged impact. The provision of a service or protection of a value is a force multiplier that enables others.
3. Public value has a sustained effect. There is an observable and lasting shift in society or the community. This shift might be a service outcome, physical change, or intangible value shift, but it should stick around.
4. Public value protects public values. Investing in or backing this service, outcome, or idea contributes to or represents the community’s shared values and is usually a ‘higher order’ value (such as safety, justice, or health).

Here are a few examples of public services that provide clear-cut public value:

• A public road is difficult to exclude people from using, facilitates economic and community activity, lasts for decades, and protects shared values: connection and mobility.
• A community event is a collective, non-excludable opportunity for people to unite. It protects shared values – belonging, unity, inclusion – and has leveraged effects beyond the event’s timeframe.

In summary: It's hard to measure, but it's both important and doable.

Hopefully this helps to clear things up. When you apply a private sector lens to public sector activity, the public sector comes off badly.

Good news, I made you a video about it

If you'd like a richer and more detailed explanation of this, I recorded an explainer video, which you might like to share with others, too.

When I sat down to write this piece, I realised I wanted to say a lot more than I could fit in this pithy piece, so I went live on LinkedIn to record you this video.

It's 20ish minutes long, but they're pretty dense minutes. You'll leave knowing how strategy works, how to be strategically effective regardless of where you work, and the core differences between private business and the public sector. Take a look.

Hit reply if you're enjoying this series, and let me know if you have specific topics or questions you'd like me to tackle. Week by week, we'll get the boot out of the public sector.

Til next week,

AM