Echevarria: Efficient Government Echoes Private Sector

Posted September 21, 2011 at 5:34pm

The next hope for solving the federal government’s debt crisis is seen as the Joint Committee on Deficit Reduction. It’s true that breaking the deadlock over the big policy questions on spending and revenues is crucial, but it’s not the whole story.

Regardless of how the political choices come out, the struggle to achieve fiscal order ultimately will be won or lost based on the extent to which departments and agencies improve their performance to fit the new constraints facing the federal government.

Fortunately, there are methods for enhancing the federal government’s ability to achieve intended results. Many of them originated in the private sector, but they can be adapted to government’s requirements. Some are already in use throughout the federal, state and local levels. What these methods share is a disciplined, fact-based approach to decision-making and performance.

For example, many businesses plan five, 10 or more years into the future, which allows them to think strategically about their needs and analyze what revenues and borrowing are required. Some states budget two years in advance, which offers more perspective than the federal government’s year-by-year method. Extending Washington’s fiscal horizon could help promote a more balanced and responsible approach to budgeting.

Similarly, businesses often plan with specific targets and objectives in mind. That provides a reference point for shaping an initiative and measuring whether it is ultimately successful.

The Bipartisan Policy Center’s debt reduction task force took this approach last year when preparing its fiscal reform proposal, defining its objective as holding debt at 60 percent of gross domestic product. People can differ on whether that’s the right number, but having a target encourages effective financial management. The super committee should begin its work by defining such a standard to guide its own deliberations.

When weighing decisions about what businesses or product lines to maintain, grow or divest, companies use decision-analysis techniques that indicate the value and growth each decision will generate in the long run. Applying the same kind of analysis to government decisions makes it possible to compare and analyze the potential payback from things that might seem like apples and oranges — such as spending on transportation infrastructure, scientific research or law-enforcement training.

Rooting out fraud and abuse is an important aspect of improving government performance. The private sector has found tools that can further strengthen the effectiveness of such efforts. Many companies maintain databases of thousands of fraud indicators. Government can use these methods to reduce the billions lost in Medicare and tax fraud each year.

As the largest employer in the nation,with a workforce 2 million strong, the federal government could apply private-sector best practices when assessing and investing in its talent pool. As many companies have done for years, it will need to make objective decisions about right-sizing its workforce.

But equally important will be investing in the workforce it retains, including providing the benefits, incentives and training structures businesses use to keep up with new technology and attract the best and brightest talent.

Federal departments and agencies can adapt many of these private-sector methods and techniques to improve their performance, and many already are doing so. The process could be accelerated through a more formal and focused partnership between the public and private sectors.

Such collaboration would not be unprecedented. After World War II, public-private cooperation led to the Marshall Plan for rebuilding Europe and the Hoover Commission for a massive restructuring of the federal government. More recently, the Bipartisan Policy Center’s debt reduction task force formulated its plan by drawing on the expertise of individuals with backgrounds in business, government, law and other disciplines.

Now, as the super committee works to end the political deadlock over the budget, its efforts could be supplemented by a bipartisan commission on improving government performance, with representatives from the public and private sectors.

Its charge would be to identify opportunities to apply best practices from the private sector and from various branches and levels of government. Recommendations from such a group would fill the gap between grand strategy and the operational innovations required to equip the federal government to perform more effectively in the 21st century.

Private enterprise doesn’t have all the answers, and not every corporate technique will translate seamlessly to the public sector. But by thinking and acting more like a company that needs to respond to the concerns of investors both here and abroad, Washington can make progress toward fiscal responsibility and better government for the future.

Joe Echevarria is CEO of Deloitte LLP.