May 27,1998

Shop for public services

By Cliff Slater


It is the voters who are ultimately in charge of our poorly managed government services such as education, garbage collection and buses. But we voters generally have only a vague idea of the role and value of management. Consequently, we don’t value that ability in legislators.

For example, consider how we voters manage the Dept. of Education (DOE).

We elect the three major influences governing the DOE—the Governor, the Legislature and the Board of Education—without a thought for their experience as managers. As a consequence, there is no one in the House or Senate or Administration with any experience managing large companies.

Yet these elected officials appoint, or influence the appointment of, a Superintendent—the chief executive officer for the DOE. Since our elected officials have little understanding of management they will typically settle for the most senior education bureaucrat around. Typically, someone who came up through the Hawaii school system.

He/she will have no experience of real financial management since we have no school-based accounting systems, let alone any that are activity-based. Without timely financial and management reports, managers fly blind. Real managers will tell you they need detailed monthly financial statements and make changes monthly based on what they reveal.

The present Superintendent displayed his lack of understanding of management when he said recently that, "preparing detailed quarterly reports is impractical … current annual reports are good enough." (1)

Remember that the DOE is a billion-dollar enterprise with 17,000 employees operating in 240 locations with 190,000 customers. It is a bigger enterprise than were Hawaii’s eight largest companies all merged into one. A real management team would have a financial staff poring over monthly financials searching out every opportunity to spend each nickel more wisely.

Independent business is managed differently. Fundamentally, stakeholders in a business—shareholders, employees or consumers—judge it by results. Those results come from how well managers balance the disparate requirements of their employees, customers, and bankers/investors.

Employees, naturally, want better pay and working conditions than they can get elsewhere—or they’ll leave. Customers, naturally, want lower prices and better quality—or they’ll shop elsewhere. Bankers/investors, naturally, want a good return or they’ll take their money somewhere else.

Managers must constantly juggle these stakeholders’ interests to keep them all in reasonable balance while at the same time fending off competitors who are trying to steal their employees, customers and designs.

But we voters do not have to worry about whether they are competent managers. We merely have to judge the outcomes: whether the products or the investment are satisfactory to us or not.

We must recognize that we voters are great shoppers and consumers while knowing little about management. That is why we must privatize government services—so that we can do what we are competent at—shop. Unlike government provided services if we do not like the price or quality of what we are getting we can always go somewhere else.


(1) Honolulu Advertiser 3/30/98. p. A1.