Why government does things inefficiently

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Let me start off by stating that I have no knock against government - I have a degree in public policy and was a hard-working employee of the City of New York for many years, so I have a lot of sympathy for institutions and the people trying to survive in them.  And yet, when I think of the huge deficits we’re running and the problems this is going to create, it does give me the chills.

One reason is that government functions simply do not take into account any notions of efficiency.  It isn’t that bureaucrats (well, most of them anyway) are evil, its that their structure of incentives has nothing to do with how efficient they are.  Further, public policies are always trying to achieve social goals (hire the disabled! Make sure that minority vendors get to bid!) by distorting business practices. When I was basically running technology for the City’s major purchasing function, I’ll never forget the day a senior executive from the Mayor’s Private Sector Task Force came to see me.  Yes, you heard it - every few years, we had these guys seconded from the private sector to tell the misbegotten public sector how to do things.  Anyway, his first question had to do with the costs of the things we bought.  I looked at him blankly and said I had no idea.  He was dumbfounded.  How could the head of technology for purchasing not have any idea how much things cost?  As it turns out, for government, it doesn’t matter.  What matters is whether all the process steps were properly conducted, whether the bids were awarded according to the rules, whether the backlog in requisitions was reasonable...all those things.  But cost?  Never even came up in our discussions.  My interlocutor slunk out of my office, shaking his head, not to be seen in my quarters henceforth.

I was reminded of this incident the other day when applying to get a “certificate of residency”.  Some countries, such as Spain, require you to present such a certificate to avoid backup withholding for taxes in their country.  Well, the process involves downloading, completing and faxing forms, paying $35 and indicating (individually) which countries the certificate is to be from.  Lo and behold, some weeks later, I received a letter from the head of the residency program in my district that I had missed an important component of the process - a letter from me indicating that I intended to be a US resident for the relevant tax year.  I couldn’t help but think of the dozens of people who must be employed in this office if it has an actual “head”.  I was also thinking that if I needed such a certification from Amazon, I probably could have filled everything out on the web, paid my fee with one click and been outta there in minutes. 

So we have a government that seems, at all levels, in an expansionary phase.  My concern is that without some incentive to operate more like Amazon and less like the Certificate of Residency Office we are simply going to be getting into ever-increasing debt, without even the fun of retail therapy to show for it. 

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The London Olympics - One for the “flops file?”

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One of my relatives, a UK-based small business owner, has argued for some time that the London Olympics would come to represent a ballooning cost burden for taxpayers and the reality of just what it will take to host the Games sets in.  “Add two zeroes to those estimates” he argued when the city won the initial bid.

Well, it sure is starting to look as though the events are going to be a lot more expensive than was originally planned.  According to one article I found on the topic, the costs admitted to so far look something like this:

2005: £2.4 billion later revised upward to £3.3 billion

2007: £9.3 billion, including a contingency fund of £2.7billion.

2009: £12.9 billion

Indeed, another highly critical article calls the financing story an “Olympic Sized Overspend”. 

It’s a familiar pattern—initial optimistic projections fail to survive contact with reality.  By the time more accurate information comes in, the spending decisions are made.  Some pundits have even suggested that the UK could be looking at a £20 billion price tag before the final reckoning has been done. 

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Growth back on the agenda!  From Davos

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George Colony (CEO of Forrester Research) noted the following on his post-Davos blog:

I always go to Davos with one question to ask all of the luminaries. This year’s question was: “Coming out of the recession, what is your number one priority?” Nearly every leader answered the question in a similar way: “Focus on growth.” As one executive said: “My organization has been hunkered down for two years—now is the time to get moving again.” I think that’s about as bullish a signal as I could have imagined coming out of Davos.

Can’t come fast enough as far as I’m concerned!

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How to foster innovation in a large organization:  Interview with Ron Pierantozzi

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In this interview in Enterprise Leadership, Ron Pierantozzi, the former Chief Innovation Officer at Air Products and Chemicals, Inc., explains how he and his team helped jump-start innovation led growth programs.

Ron has been a huge supporter of discovery-driven growth, and this interview does a nice job of walking through the steps he took to get his company on the right track, including finding the right tools and setting up the right structures.  I think you’ll find it interesting. 

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A great deal for my subscribers on my Columbia Executive Education Course:  Leading Strategic Growth

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Those of you who follow my blog are obviously interested in driving growth and managing to be strategic in high-uncertainty environments.  What you may not know is that myself, Ian MacMillan and a great group of faculty and practitioners are part of a one-week Columbia Executive Education Course Leading Strategic Growth and Change.  I direct the course and am there with its participants for the whole week that it runs, which will be next from April 18-23, at a beautiful conference center in Norwalk, Connecticut.

What can you expect if you were to attend?  Firstly, a fantastic group of international participants who are all wrestling with growth issues—particularly in this economy.  Recent classes have included participants from Wal-Mart, Berlitz, Siemens, Nokia, Start-ups, Emirates Bank Group, several banks in Nigeria and Boeing.  Each person in the program prepares and brings a ‘personal case’ involving a growth challenge, and we set aside good blocks of time for teams to work on taking each others’ cases forward.  In terms of content, we get in-depth on many of the tools and techniques you’ve told me have been helpful, including opportunity portfolio mapping, discovery driven planning, MarketBusting, leading major changes, handling politics, and a lot of other great ideas.  We also bring practitioners into the course to provide real-life examples of how firms have used the material.  Principals from design firm IDEO are going to be with us in April for that segment.  We’re also going to have a special lecture from one of our young Columbia superstars on social networking and social media.

Interested?  Well here’s the good news - I persuaded Columbia (very nicely, thank you!) to offer readers of my blog a 20% discount from the price of the course, which includes lodging, all meals, course materials and of course sessions with all those great faculty.  Here’s what you have to do if you are interested:  Register on-line and make sure to note “RGM blog” in the box that asks: What are your objectives in attending this program?”

Intrigued?  Want more information?  Email me at and I’m happy to answer questions.  It is a really magical week, and I hope that the discount might make it easier for some of you to join us. 

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