The context & uncertainties of Government

One of the things that irritates me is the attempt to apply industrial models of practice and measurement to Government. I was recently asked to write a brief paper on the applicability of EVA™, (a type of net present value measure) to Government. As a part of that I produced a summary of the reasons why I think Government is different from Industry, and by implication why models designed for Industry are unlikely to work in Government.

Apologies by the way for the absence of blogs this week. I have been at KM World in San Jose and working dawn to dusk.

One of the main drivers for Government over the next 15 years is to do far more with far less. They will also have to do this in the face of increasing political uncertainty and possible catastrophic shifts in the various eco-systems of the world. This means that:

• Governments are going to face growing problems in the allocation of scarce resource. This includes cash, but also issues of focus and attention. However there are natural limits to how efficient and organisation can be made before it (i) becomes over optimized for a specific context and sacrifices resilience and adaptive capacity

• While efficiency will remain important and in some areas will be the main focus, governments will have to find new ways to provide services through engagement of citizens in complex networks. This means an increasing focus on effectiveness which in turn requires acceptance of a requisite level of inefficiency in order to provide the system with adaptive capacity under conditions of uncertainty and context shift. Networked government does not simply mean linking citizens and governments through the web, although to do so is a hygiene requirement. It means stimulating the formation of nodal network structures that can provide increasing levels of self-organisation, within an overall control framework. The example of the Grameen Bank illustrates this but does not define it.

• Governments are going to have find new methods for measurement that are appropriate to those challenges. Linked to that is the need to find appropriate ways to target performance, not just for government but also the NGO and voluntary sectors and networked based combinations of these with citizen groups. In addition regulatory frameworks for industry add an additional level of complexity, with international issues of competitiveness providing significant and increasing restrictions on government. In this respect, Goodhart’s Law comes into play: if a statistical instrument is used for policy it looses its value or to simplify: if a measure becomes a target it ceases to be a measure.

On the basis of the above Governments face a far more significant set of issues and problems than those faced by industry, and they face them over longer periods of time without the option of bankruptcy. Citizens cannot buy their services from another government, if their own fails. Neither can they insure against the consequences of a catastrophic failure of their state, they have to live with it.

In addition Governments, to a greater extent than industry have to consider multiple interactions and interdependencies between initiatives and actions. Considering decisions in isolation can have major downstream costs. For example in the UK the decision to outsource hospital cleaning is at least one of the causes of the current crisis in hospital hygiene, to quote from the Observer

THE TRUE scale of Britain’s hospital superbug problems emerged yesterday as a leading hospital trust admitted that a ‘hypervirulent’ infection had claimed the lives of at least 49 patients – and possibly as many as 78 people – in the space of nine months.

A focus on efficiency failed to recognise that hygiene is a part of the total health care provision. Laxity in an office cleaning contract rarely has fatal consequences and a failure to meet standards can be satisfactorily handled by penalty clauses in contracts. Now this was not the only cause. Excessive use of chemicals and antibiotics has bred a generation of super bugs, and increasingly levels of hygiene in the day to day lives of citizens has reduced natural immunities. In effect we have provided an evolutionary advantage to the enemy! The point here is to illustrate in respect of government in comparison with industry

1. the level of magnitude and the consequences of government action in comparison with Industry

1. the fact that government de facto provides it’s own regulatory framework, while providing those frameworks to industry

1. as an entity it carries a burden of responsibility for failure, while industry is constructed on the basis of failure as a market mechanism.

1. Government operates as a unit of one, industry has many units within each market