Why is the public sector so hard to improve?

The challenge

The Australian government is spending around 26% of GDP. When you add services provided by government that we pay for, such as some utilities or transportation, the figure rises to well over 35%. In the light of calls for the country to become more productive, the sheer size of government makes it vital that the public sector plays it part or becomes detrimental for future generations.

The main action by governments over many years has been to outsource services to the private sector or to sell off whole tranches of government services, often in the face of widespread opposition among the voting public and the media.

Survival in an always-on business arena

There is one compelling reason why this is a good strategy. The reason is that businesses and services owned by the taxpayer cannot fail, and this absolute confidence in survival makes the difficult decisions private enterprise makes every day virtually impossible in the public sector. A common misunderstanding about what drives business is that it’s for profit. This is not strictly true. Survival is the real underlying drive and the driver for tough decisions such as discontinuing a service. Laying off staff is a sober recognition of the consequences if it is not done.

Having said all that, privatisation is not a silver bullet. Many government services are natural monopolies that will still not face the blowtorch of competition should they go private. Monopolies are usually not a good thing but if we have to have one, a public monopoly is probably better than a private one.

5 tips for improving your business in the public sector

1. Foster visionary leadership

   A public sector CEO who will take on the internal barriers to improve customer service and financial performance is a vital prerequisite. We must acknowledge that improving customer service is hard because it is risky. It is personally safer to let the status quo continue than try to improve services and fail. But there’s no escape from this leadership responsibility if the public sector is to improve. Managing the message but not really changing increases pressure on the economy and damages our future prosperity.

2. Create a flexible workforce

   Government services and their managers find it a lot easier to concede costly pay and conditions that must be funded by customers. This is a luxury the private sector does not generally have. A good relationship with the workforce goes a long way – but this should not be at the expense of frequent costly concessions. Workers’ representatives are rightly there to represent their members, so management must represent their stakeholders, including taxpayers and customers.

3. Simulate private enterprise in your business model

   Simulating private enterprise as much as possible is a smart and savvy approach to propelling your business forward. Flexible, customer-focused trading hours, user-friendly web services and lower prices are all things the private sector does well while staying profitable. Finding a way to move towards this balance points the way towards improvement in the public sector.

4. Implement transformation projects that actually transform

   I have lost count of the number of IT projects that cost tens of millions of dollars and are labelled "transformation", even though no one seems to be clear about what the transformed organisation will look like or what its capabilities will be. Calling modern IT programs "transformational" recognises that the shareholder is entitled to a benefit – in this case, a transformed organisation. If you are considering a transformation program, consider the business case again and satisfy yourself that all steps necessary are in place to actually achieve the benefit. If there are steps missing, have a hard discussion about the viability of the project.

5. Actively seek competition

   Competition is the lifeblood of an innovative, efficient and market-driven business community. In an environment of disruption and new market players, it can be difficult to carve out a competitive edge. However, the difficulty creates the challenge, and actually drives change and improvement within an organisation.