Tuesday, November 10, 2009

Success in business is not success in politics

Michael Bloomberg has done it, but Jon Corzine failed miserably. Both Carly Fiorina and Meg Whitman hope to do it: translate business success into political success.

Michael Skapinker of the FT has a provocative column this morning about why this often fails — a column that says more about the failings of the political system than of the leaders.

He saved the best for the final three paragraphs:

The real difference between business and government is that government does not go out of business. When a company boss announces a strategy, the implicit message is “we need to do this to survive”. Employees may think the strategy misguided but they realise that their jobs depend on their leaders getting things right.

Civil servants know that, unless their activity is privatised, their departments will still be around years from now. Some may lose their jobs from time to time but seldom on the scale of the private sector and not without a far bigger public fuss.

I recall talking to a neighbour who had moved from corporate life to a government-owned organisation. He was seething at his new charges’ unwillingness to accept that they had to change. What, I asked him, would happen to them if they didn’t? Not much, he admitted. That is what makes life so hard for the corporate executive who wants to sort out the country.
It’s hard to imagine a more telling indictment of the failure of government. “Public servants” are paid with taxpayer funds, but instead they assume they can outwait leaders pushing change. This brings an utter lack of accountability — or worse.

Based on years of research into government corruption, economist Robert Klitgaard developed a simple formula:
monopoly power + discretion - accountability = corruption
So a government agency that doesn’t face consequences for failure — whether an administrative agency or my pension fund — is one that is (or will become) at some level corrupt, working for the benefit of the employees and not society who pays them.

No organization or organizational unit in society should think that it will (or deserves to) exist forever. Even the Catholic church — perhaps the oldest continuously operating human institution — is closing branches and having to remake itself in order to continue to attract resources. Certainly my own employer (like so much of public higher education) is scrambling to find ways to become more effective and efficient as politicians allocate ever-decreasing amounts of tax revenues.

Rather than give up, I hope this means we will get more experienced business leaders seeking political careers — pushing for deeper and lasting reforms to make government work better. (Someone like a Fortune 500 CEO rather than a movie star). I think that’s change everyone can believe in, except of course those bureaucrats who rightfully fear losing their lifetime sinecure.

Of course, these executives would first have to get elected. (Most) public employee unions will fight hard to block election of any real reformer. However, arrogant ex-CEOs often shoot themselves in the foot, as when Al Checci (of Northwestern Airlines) lost in the 1998 Democrat primary for California governor. If he’d won, we might have had real reform for the dysfunctional mess in Sacramento and no opening for the governator — or we could have ended up with just another Jon Corzine.

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