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Getting Governments Back to Governing (Email sent 4/8/11)

Judith Sloan
University of Melbourne

Re: Don't try to run government as if it were a business, The Australian, 3/8/11

I should like to try to add value to your useful suggestion in the above article (which is outlined below) about problems in running governments as quasi ‘businesses’.

The problem is not only that governments can’t operate in the same way businesses can, but also that trying to make them business-like seriously erodes their ability to govern well. Concern is now widely expressed about ineptitude in Australia’s governments, and this is largely (though not only) a consequence of eroding the knowledge and organisational arrangements required for properly carrying out governments’ primary role (ie governing).

These points are developed further below.

John Craig

Outline of Article and Detailed Comments

My interpretation of your article: Targets can become obsessions with politicians, but never be met. This obsession is increasing (eg for reducing CO2 emissions and hospital waiting times). COAG has 51 national partnerships, 230 implementation plan and 27 intergovernmental agreements all replete with targets. While the electorate may not believe politically endorsed targets, it has become unfashionable to point to the limitations of government. Adopting targets is based on a false analogy with corporate behaviour, but has been accepted as part of best practice public policy implementation. In business it is reasonably said that ‘what gets measured gets managed’, but in government what gets measured gets manipulated, massaged and gamed. There are few similarities between how companies operate and public policy. Company managers can realistically be central planners – and set (mainly financial) targets. But this doesn’t apply to public policy where targets are usually arbitrary or based on suspect analysis. They provide no guidance on how to achieve those ends, or assess staff performance if they are not met. The percentage of students completing Year 12 (a COAG goal) illustrates this. OECD-itis refers to a tendency to base decisions on comparisons with other OECD countries. But policy should be based not on targets but on establishing appropriate incentives so that individuals can work out what is best for themselves. Australia’s obsession with government targets should end.

Your point in the above article about the futility of seeking to control the activities of governments through setting targets was well made. Similar comments on at-the-time trendy proposals in the mid 1990s to establish centralised planning processes within the Queensland Government based on defining outcomes and outputs are in Evaluation of Managing for Outcomes (1997). The latter includes reference to an article by a QUT academic which suggested why it is often impossible to specify desired outputs.

Trying to “run governments as if they were businesses” has undermined their effectiveness in many ways, not just by expecting that their activities can be realistically and usefully managed by defining targets.

Your article was on the right track in its emphasis on creating appropriate incentives for individuals to make decisions in their own interest, rather than on centrally determining targets. This gets very close to the reason that it is inappropriate to try to make governments business-like.

Government’s core role is governing (ie creating a framework in which others can do things). ‘Doing things’ themselves (ie providing public goods and services) is very much governments’ secondary role (eg because government regulation affects the functioning of about 2/3 of the economy, whereas public goods and services only amount to 1/3). Moreover the goods and services governments do provide tend to be complex (for the same reasons that those functions tend to be subjected to market failures). They are thus unable to be clearly defined or effectively undertaken through business-like methods, for reasons suggested in Governing is not Just Running a Large Business (which is a section in Decay of Australian Public Administration, 2002).

Attempts to use quasi-business like methods over the past 2-3 decades have severely eroded the ability of governments to undertake their core functions. The competencies required for governing effectively are knowledge of, and the ability to manage, complex relationships within society, the economy and public services. Under the systems Australia inherited, these competencies were traditionally developed and maintained through career service and collegiality in professional public services. These competencies were severely eroded by the managerialist assumptions (ie that management is a generalist task that does not require any depth of knowledge of the function being managed) that were the wedge used in displacing the competencies required for effective government by those required for a pseudo-business-like-approach (eg see De-skilling Government Administration). And the major thrust of efforts over the past two decades to promote a business-like approach in government (National Competition Policy) had unforseen side effects which undermined the effectiveness of governments, because there was no serious consideration of the real nature of what governments primarily have to do (see Neglected Side Effects).

The ineptitude that Australia’s governments are now demonstrating do not just have one cause (see Australia's Governance Crisis and the Need for Nation Building). However eroding the effectiveness of government by attempting to make it more business-like in the performance of its non-business-like functions has certainly been part of the problem.

Finally it is noted that the problem of induced ineptitude has not been confined to governments as similar problems, with serious consequences, have arisen partly from attempts to force universities also to be business-like (see A Case for Restoring Universities).