I published this video this evening. In it, I argue that it's often claimed that business is efficient in a way government never can be. If that were true, many fewer would fail. The reality is that both are only as good as the people who work for them—and their skill sets are likely to be remarkably similar.
The audio version of this video is here:
The transcript is:
Businesses aren't efficient.
Now, most politicians, of most apparent persuasions in the UK think themselves utterly beholden to the business efficiency of markets to deliver the plans that they have for the people of this country. And that's a mistaken hope on their part.
How do I know that businesses aren't efficient?
Well, firstly, because I've run quite a lot. And I've also seen many businesses - ones that I've usually been invited into to sort out the mess – who, frankly, are far from efficient. There are hordes of them, run by people who don't really know what they're doing.
They're called human beings.
Most of the time, most of us don't know what we're really doing, and there's no reason why somebody, when they walk through the door of the office which has the word ‘Manager' on it, should suddenly become omnipotent, all knowing, god-like, efficient, certain, etc. They don't.
They remain confused human beings, wondering what the heck to do with their day, and how they might get through it, and do the best that they can within the constraints that exist, including the fact that half the time they're completely in the dark as to what they should be up to because the information on which they would like to make decisions is not available or they haven't got the training to make that decision in the first place.
Second, I know that businesses are inefficient because 650,000 of them were struck off the Register of Companies in the UK last year. 650,000 companies that had been created to deliver some form of commercial activity ceased to exist. In other words, the belief that the people who created those companies had, that they had a bright idea that could do something of benefit from which they would profit, did not exist. turned out to be mistaken.
And that's a pretty significant number. It's well over 10 per cent of all the companies registered in the UK during the course of the last year that ceased to exist because the people who had placed their faith in that company had lost it because what they thought was a good idea wasn't.
And that's a pretty good measure of inefficiency.
But there's another basic measure of inefficiency and we just need to look at large companies. Sometimes they're really good at losing money because they simply don't know what they're meant to be doing. And if that's the case, then we should also take into account the fact that this is an honest appraisal of their ability. Sometimes they don't know what they're doing.
But if that's true, let me go back to my start point. And that was that around this country, politicians of all political perspectives seem to place their faith in businesses as the answer to all our problems.
Whenever something is required, they will partner with the private sector.
If a new project is to be created, it will be delivered by a private-public partnership, with the emphasis being on the private sector company who's going to do the work.
This is mistaken. Business is inefficient.
I know government is as well, because it is also populated by people who really sometimes do not know what they're meant to be doing. That's because they too are real life human beings.
But the pretence that the private sector knows, and the government doesn't is what is deeply damaging.
The private sector is no better or worse than the government at getting things right or wrong. They all make mistakes.
That reality is the one that politicians must embrace, including of course the reality that they too will make mistakes, which is something that every single politician is loathe to admit.
So, what we need to make sure that government works well when it cooperates with the private sector is that we have a frank admission that all of these sectors are inefficient but are doing the best that they can.
And doing the best that they can is something that the government can help with.
They could deliver more training.
They could deliver more relevant information.
They could ensure that companies could compete on a level playing field, which would, for example, mean that they ensured that every company paid tax when it was meant to, and that some didn't get an unfair advantage by not doing so.
They could make sure that the staff who are available for companies to hire have been suitably trained for the jobs that they might do. They could ensure that therefore, they could therefore ensure that the skills that are required by our economy are the ones that are delivered by our education system.
All of those things could be done, and if they were done, then the government would be more efficient, and so too would the private sector. But it's likely that they would improve their efficiency in tandem.
There is no truth in the idea that the private sector is, because it is motivated by profit, more efficient than the government. None whatsoever. All of them are staffed by real, live, warm-blooded human beings, every one of whom will sometimes wonder what the heck they're doing, and every one of whom will sometimes make a mistake. In between which events, they will sometimes do something really miraculous, which is deliver something fantastic for the public good, whether they're motivated by profit or not.
So it's time to drop this pretence that there's private good, public bad. The truth is, we're just people trying to get things done.
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Spot On. Really important point.
This blind faith in the private sector being efficient is just that….blind faith.
Thanks
“This blind faith in the private sector being efficient is just that….blind faith.”
No matter how efficient the private sector may be on a particular project a certain amount of the budget always goes to private sector profit which could possibly be better spent on expanding the original public project if the government could and/or would functioned as the “General Contractor”. A good example of this is the design & construction of New Delhi 1911-1932.
The assumption that persons motivated by profit are automatically more efficient at delivering services and products is indeed spurious.
It is about as fantastic a concept as the invisible hand guiding all those economic men to market utopia..
There are also a certain number of companies registered of that 650,000 – or maybe additional to that number, which have been dormant and are being re-vivified, or are being setup for some scam or other.
It is not unusual for cowboy builders to have several registrations going, perhaps one awaiting being struck off, one dormant etc.
Companies House is barely fit for purpose.
“It is not unusual for cowboy builders to have several registrations going, perhaps one awaiting being struck off, one dormant etc.”
Many USA builders (cowboy and non-cowboy) practice the same thing. Each large project is basically an independent company. This is done so liability CANNOT and WILLNOT be cross-collagenized between different companies (projects) “owned” by the builder or parent company. I am involved with this on a daily basis.
It is commonplace in larger organisations too
In the late ’80s the Quality Circles concept became a “thing” and the psychiatric hospital I worked at was an early adopter – we ended up as trainers to other hospitals and occasionally to the private sector, we also became members of a Scottish association of organisations that were using QCs, mostly private sector and including some big names in Scottish industry at the time.
These were the early years of industry and business being regarded as inherently more efficient and innovative, than us public sector folk, and the companies we were meeting with were, by being QC adopters, supposedly cutting edge.
It was a bit of a shock to find the ones we were meeting with were incredibly conservative and rigid – so much so that they were unable to give their workers the wee bit of autonomy necessary for QCs to work effectively. The managers who came to the QC association meetings (and it was always managers, never workers) were constantly disappointed that their QCs weren’t solving problems or saving/making money. They were completely unable to get their heads around the fact that their workers were the experts on the processes they worked with or that workers didn’t need constant managerial control. They were completely unable to see workers as people deserving of any trust.
The upshot was that these ‘captains of industry’ (by whom Thatcher set so much store) consistently shot themselves in the foot by trying to control and steer their workers’ creativity to predetermined outcomes.
There was nothing we could say to induce them to change their view that, essentially, workers were a necessary evil and should never be unleashed.
I recognise a lot of that
I found a different but similar effect in the public sector.
People who started off in non-managerial posts and were promoted to managerial level posts soon forgot their more humble beginnings. Before long they adopted the whole persona of being a manager, quickly forgetting just how annoying and counter-productive they themselves found their work situation when being micro-managed and kept in the dark regarding how projects were developed and managed and their input ignored.
Now, I accept management is necessary, but too many of those who attain management positions seem to believe in management for management’s sake (suggestig too many managers if they’ve got nothing better to do).
As a country we price poor managements because those in power have far too much faith in hierarchy
Whether or not their skill sets are ‘remarkably similar’, surely a commitment to public service will usually be a better motivator than that of personal wealth.
I heard of a well-remunerated barrister who accepted the honour of being appointed a judge even though he knew the financial rewards would be lower.
In the Health Service, arguably time would be better spent diagnosing illness and treating patients rather than the costly process of calculating rewards and administering bills.
There is an interesting/entertaining/ scary book by Michael Lewis (author of the Big Short) called the Fifth Risk about the absolute incompetance of the Trump administration s assumption of power, its belief that government was useless, government workers were even more useless,etc. trumps peopleseemingly had no clue what the various departments did and were sure they did nothing important anyway having been brought up on the myth: business good/government bad…!It also uncovered many gov. workers who decided that the “great wealth” offered by Big Business wasn’t worth it, did not value the expertise they had and were happier using their expertise in the service of the country. A good read!!
I don’t know whether this is a relevant point because I’ve never run a business, but could it be that politicians mistake the significant amounts of money extracted from some businesses for efficiency? I ask because surely making a profit does not inevitably mean a company is efficient. It must sometimes mean that in order to pay sizeable dividends to its shareholders a Board will decide to cut corners, or lay off workers, or not invest in necessary improvements. Isn’t that what has happened with many of our privatised water companies? Or is that far too simplistic?
I have no idea whether or not I’m talking rot here. I’m certainly exhibiting my ignorance!
Be gentle in your responses. I’m doing my best.
I think you are right.
They associate high pay and the trappings of wealth with expertise and knowledge. They do not associate it with exploitation in many cases. Basic error on their part.
“…because the people who had placed their faith in that company had lost it because what they thought was a good idea wasn’t.”
Not necessarily so. It may have been a brilliant idea, but in line with the tenor of your whole post, it takes a lot of skills and a lot of determination to make a good idea flesh. That’s what ‘work’ is. Or should be. Not the drudgery and grind that has become synonymous with the word ‘work’.
Oscar Wilde was being deeply cynical when he said “Work is the curse of the drinking classes”: meaningful work, which most people don’t get to do, is what keeps a body sane and OFF the bottle.
I also take issue with: “…They [government] could make sure that the staff who are available for companies to hire have been suitably trained for the jobs that they might do.” It is not the job of government to train workers for the private sector. It is emphatically IMO the job of employers to train their own bloody staff to the work required of them. The notion that government should take on this responsibility is for the birds. This is what at bottom is where education goes adrift. Education is not job training: it produces minds susceptible to training (or it does nothing).
Am I being contentious here? Maybe it’s because I haven’t had my cocoa yet !
PS
I’ve never done anything I was ‘qualified’ to do. But I believe (from the feedback I’ve received) that I have done some good work. Never made any money doing it though. 🙁
Richard,
The obvious point surely is that the public and private sectors do very different things.
My late mother had a very small tax practice doing income tax returns mostly for old ladies. OK I suggest that she probably didnt make much money from it but clearly it was a business that presumably made her enough, both in terms of cash and mental stimulation to make it worth her while.
In my job I talk to welfare rights workers, often dealing with the same sort of client group that my mother dealt with only at the other end of the economic scale. They are looking at maximising peoples income and sorting out their debt. Unlike a business there is no financial ‘bottom line’ for them, there is I suggest however a ‘bottom line’ for Society. People have enough money to eat and stay warm, they don’t lose their homes, etc etc. But its not something you can really put a finger on in a direct way.
Its important that we realise that they do things differently and ‘public sector’ output is often hard if not impossible to measure. There are strengths and weaknesses across both public and private organisations, The challenge is to try and find what is good and spread it and what is bad and change it
There is definitely more risk taking and cutting corners in the private sector – in property development for sure.
The amount of s.106 acquisitions and and package deal properties we have to refuse because the private builder has not done some form of due diligence somewhere – well, I have a list as long as BOTH arms.
But on the Council side, it’s like being on an effing cruise liner in a calm sea. Process seems to be everything and project plans turn into dissertations. There’s an obsession with ‘public money’.
At a quality management board I went to, I was asked how the quality process drove the project.
I said it didn’t. ‘Need’ drove the project I said. We need affordable homes. The process was just bureaucracy which had its own uses.
My answer went down like shit sandwich.
In their world, it seemed to me that we did project to do process, not to achieve strategic objectives or meet need.
Why can’t we just get the balance right between paradigms of too much and too little I don’ know.
That could be said of universities
Education and research are decidedly secondary to box ticking – which is not what management is
So the water companies have given ~£70 billion to their shareholders and now say they need £90 billion to correct for the lack of infrastructure investment. How does that make sense? Even a badly managed government department doesn’t have to shell out to shareholders.
At Matthew T Hoare. “How does that make sense?” Because scammer politicians let them!
Hmmmm……………………
Since Covid, in the public sector, there has been an increase in working from home.
Of course, there are lots of benefits to working from home – for the worker and the environment.
But there are downsides too. Working from home, you are using YOUR energy at home on a wage that has lost 25% of its value in the face of rising energy costs. My early morning train to work was well used before Covid; now, sometimes it is carrying hardly anyone – hardly good for the sustainability of such a service.
Because of low wages in the public sector, working from home (WFH) is now included as part of the ‘incentives to work’.
I am not against working from home but the problem is, is that I see too much of it. For some it has become the norm and especially for higher management.
Work is a kinetic environment where we (did) feed off each other’s energy and got things done. It also enabled us to communicate more effectively.
I just do not see this anymore where I work.
Email takes longer to sort things out; senior management are so out of touch with the work they are responsible for sitting at home and not managing by walking about and seeing stuff; they do not see the results of their decisions. Project management is more difficult.
I am also seeing problems with the pedagogical tradition of learning beside each other, passing on skills and developing new people. Change is harder to manage and complete.
You know, I fear for the world of work. I really do. WFH might well help the advance of AI. Are we sleep-walking into something here?
The new norm at the moment – this ponderous slowness – is the death-knell of work for me.
I don’t want to sound like the new owner of Manchester United; I am not into presentee-ism – if I’m sick, off I go.
I just don’t like what I have seen so far. It’s got me worried.
Much to agree with
Efficiency is an ideal mooted by people who have ulterior motives: profit.
“Efficiency” is an excuse to cut wages, pollute the environment, ignore health and safety, etc.
“Efficiency” always has a trade-off, and we should ask “who benefits?” and consequently, “Who loses out?”
When Thatcher was first elected in 1979 the narrative that the UK was being held back by intransigent and obstructive unions became central to her government’s reforms. At the time I had just joined a chemical factory as a junior manager. There was a sense of relief among the senior management, because, with Thatcher’s reforms to employment law, they felt that there was progress towards the ‘restoration of the right to manage’. This was really the right to order people about and dismiss them at will in an exercise of pure power. What they could never see was that this approach was how we ended up with unions in the first place!
In all the discussion about private versus public, I agree, neither one is better at the job of management and leadership than the other. In both there is a massive problem with management and leadership. There is a lot of good research and proven management practice that really works, but most managers don’t know about it, and are stuck in the same old command and control rut. Is this a role for government to take on? Only if those in government can sign up to improving their own management and leadership practice. Not much sign of that – the last government was hopelessly incompetent and the current one concerns me with talk of target setting and yet more command and control. If I hear yet more ministers talk of ‘ratcheting up’ performance, or ‘holding people’s feet to the fire’, I will conclude that nothing substantive will change for the better.
Alas, might promotion and “success” in an enterprise be more to do with being faithful to the dominant attitude and thought structures or to an ascending attitudes and thought structure, rather than the attitudes and skills for analysis, relevant lateral thinking., careful questioning of the status quo etc?
“All too often, the attributes which result in promotion and being a leader, are not the ones which result in the good leadership of the enterprise.” (J. B. Gillies)
Agreed – organisation culture plays a massive role in perpetuating management myths. As a junior and middle manager I had to conform or be seen as a misfit. However, even when a leader has the opportunity to alter the culture, it is difficult to make sure this lasts beyond their tenure, unless the board or governing body is 100% committed as well.