How to reform the public sector?

Dave Pollard continues his reflections on democratic governance, and here discusses ways to reform the public sector.

Dave Pollard:

“I want to explain what many governments are doing to try to make themselves more efficient. They are dismantling (slowly) large departments and replacing them with a combination of three types of small, semi-autonomous public organizations:

• Directorates (policy-makers who set standards for both the public and private sector),

• Auditors (who monitor and enforce compliance with laws, standards and regulations), and

• Agencies (with focused, specialized objectives who actually do the work that the private sector is either incompetent or unwilling to do — given the lack of profit).

Many of these new Directorates, Auditors and Agencies are still muddled about what they should do, or how to do it, but they’re learning, and the model itself is a pretty good one — mainly because the resultant entities are small and focused on doing one or two things very well.

So the challenge then becomes How can we best organize, staff and measure the performance of Directorates, Auditors and Agencies?

There are two opposing principles underlying the concept of ‘value for money’. The first is the idea of ‘critical mass’ — it requires achieving sufficient scale that people can focus on what they do best instead of having to do everything, and that there is enough expertise in the organization to be able to do everything it must essentially do competently without having to outsource.

The second is the idea of ‘diseconomies of scale’ — the ‘small is beautiful’ principle that says that beyond a certain size the amount of bureaucracy, support and lost information increases exponentially as the size, budget and numbers of staff and locations increase linearly. Anyone who has worked for a large organization knows this point is reached quite soon after the point of critical mass.

So there is a sweet spot between the critical mass point and the point of growing diseconomies, which represents the optimal ‘value for money’ on any human collective endeavour, whether in the public or private sector. That’s the spot we want to find in the Directorates, Auditors and Agencies (and probably in Natural Enterprises too).

That’s the horizontal axis — the amount of budget and resources we want to ‘invest’ in any organization. How about the vertical axis? In traditional corporations it’s profit. In Natural Enterprise it’s achievement of the set of agreed-upon objectives of the partners of the enterprise, the ones that attain their collective well-being as they’ve identified it. For Agencies the vertical axis could be, analogously, achievement of the collective well-being objectives of the Agency (the well-being of the Agency’s public beneficiaries). For example, in a university or school this well-being could include the learning and employment or self-employment success of the students. In a hospital or public health agency it could include an improvement in health outcomes (fewer illnesses, shorter wait times, faster and more complete recovery). In a police or security force it could include crime and war prevention, success at keeping the peace, and dealing quickly and effectively with crimes and hostilities when they do occur.

Likewise for Auditors: For environmental Auditors this well-being could include reduction in pollution levels. For corporate Auditors it could include reductions in fraud. For hospital Auditors it could include improvements in health outcomes. In the chart above I’ve called these objectives Collective Well-Being Outcomes.

How about policy-making Directorates? Because politicians are usually focused on what’s popular rather than what’s practical, they rely on government policy-makers to actually draft the standards and regulations (and sometimes even the laws) to reflect the political intent of the government of the day. I’m not sure we need such entities anymore. I recently suggested an Open Source government model that would take the place of such policy-making and regulation drafting, and open it up to public imagination and scrutiny. This model could essentially take over the role of determining, with each Agency and Auditor, what the specific standards of operation for these entities would be, and what Collective Well-Being Outcomes they should be striving for.

We the people would then have a say not only in the laws of the land, but in how the Agencies and Auditors that carry out public service work and ensure compliance with those laws do their jobs. They might even help these public organizations assess what the sweet spot in the diagram above is for each organization, and hence what resources it needs to best do its job.
The final challenge then becomes how to staff and how to evaluate performance of those staff. If these organizations are small, they should be able to self-manage just as Natural Enterprises do, and collectively select the best group of people, given the resources available at the ‘sweet spot’, to achieve their Collective Well-Being Outcomes. They should be given enough time to achieve those Outcomes — Rome wasn’t built in a day — but with continuous monitoring it may become apparent that even with time they are not going to be able to achieve those Outcomes. Then you send in the Auditor-General organization to figure out the problem: Are the Outcomes that have been set too onerous, or is the group just not the right group to achieve them? If it’s the latter, then the foundering Agency or Regulator should be allowed to fail exactly as a Natural Enterprise does when it repeatedly fails to meet its Collective Well-Being Outcomes — it should be dissolved, and tenders invited for a new group to try. The Auditor-General that pulled the plug would have the authority to select the winning tender. But as an Auditor, it, too, would have its own set of Collective Well-Being Outcomes set for it through the Open Source government model: Its success as an evaluator of tenders would determine whether it, too, was doing its job effectively enough to continue as Auditor-General.
Conservatives won’t like this model, because it assumes that most people want to do a good job and can be largely trusted to self-manage. Liberals may not like it because it makes government entrepreneurial. But the existing corporatist model (deregulate and privatize government) has only led to a crippling of public services, an out-of-control, dysfunctional and unsustainable corpocracy, and the disengagement of many who might believe in and excel at a life of public service.”

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