This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Why the U.S. Government Can't Manage: Opinion

NEW YORK (TheStreet) --  For years, we've heard politicians denigrate CEOs as "Fat Cats" who "make money off the backs of working people" -- as if CEOs don't really work. To many politicians, and average Americans, management seems easy. Just bark an order and things get done.

The current administration accepted this paradigm. They employed many famous professors to create visions of how things should work. The rest, they feel, is easy -- just implement; leave the details to others.

But it seems that our politicians are being schooled on the reality of managing complex organizations. According to this week's Quinnipiac poll, only 43% of Americans feel the Obama administration has been competent in running the government. That is down from 73% in an April 2009 Gallup poll who said Obama was a strong and decisive leader. Perceptions and reality have collided.

Government mismanagement is nothing new. Both Republican and Democrat administrations have proven equally incompetent. For example, name a government-controlled organization that can legitimately compete with private sector peers. Last year, Amtrak asked Congress for $1.8 billion in subsidies while SkyWest Airlines (SKYW), America's largest regional carrier and Amtrak's largest competitor, had a gross profit of $1.8 billion.

The U.S. Postal Service lost $16 billion last year while UPS (UPS) and FedEx (FDX) produced gross profits of $40 billion and $28 billion, respectively.

Must Read: Fallen JFK Left Us Led by a Riderless Horse

But, what about a traditional government institution? The U.S. Department of Education budget increased 120% from 2009. But, SAT scores in 2009 were 1016; in 2013, they are 1010. Maybe SAT scores are not the right success measure. Then tell us, "What is the right success measure?"

Did they forget to create one, or is the government avoiding accountability for results?

Why can't the federal government manage?

There are three reasons:

Inexperienced managers. Many Americans assume that organization management is something that any smart person can do. Nancy Pelosi, who frequently opines about leadership, was asked by the media what should be done to fix the ACA Web site enrollment problems. She yelled, "Just fix it!" Just bark an order and things get done.

Managing organizations is far more complex. According to Spencer Stuart (2006), the median age of Fortune 500 CEOs is 56 years old, with more than 30 years of management experience. You may see an 18 year-old savant engineer at Google, but you will never see an 18 year-old vice president. It takes decades to build the skills needed to effectively manage a large organization.

However, during each election cycle, every candidate proclaims that he/she is a great "leader." Perhaps they are a great leader among politicians, but is their management experience great?

President Obama was a part-time university professor with a brief career as a state and U.S. Senator. He never led any organization. Now, he is CEO of one of the most complex organizations on earth.

Many in the media admire his intelligence, but has it translated into performance results? Washington is more dysfunctional than ever before. I predicted this in a 2010 column. Dysfunction did not just happen; it was created by an inexperienced manager.

Hillary Clinton ran for president in 2008. Her primary qualification was that she was the wife of a former president. Is Steve Job's wife qualified to be Apple's CEO?

Lack of organization management experience is acceptable, if Washington sticks to its constitutional role as policy makers. But it becomes problematic when the government expands its role into institution building.

Political expediency. Politicians act as board members of government institutions. But board members in the private sector are highly experienced managers and, for the most part, make decisions for the good of the company.

Contrast that with recent proposals by both parties to allow people to keep their current insurance plans. The economics of the ACA depend on healthy people exchanging current policies for more expensive ones. It will not work otherwise.

Insurance companies spent three years redesigning their financial models and ecosystems. Now, self-interested politicians are giving them weeks to rebuild it again. Their goal is not a better system for America; they just want to keep their jobs. Can any institution survive with such organizational whiplash?

At the Post Office, U.S. Postmaster General Patrick Donahoe is making a valiant effort to avoid insolvency. To do so, he needs to transform the Postal Service's business model. How many paper and pencil letters did you mail in the past month? But Congressional representatives, Republicans and Democrats alike, will not let him close post offices or change delivery schedules.

Can politicians effectively serve as "Board members" to government institutions?

Little concern for efficiency. Years ago, on the first day of my internship with the Army Corps of Engineers in New Orleans, I noticed party decorations throughout the building. My new manager proudly told me that at lunch time there would be a celebration of "the best year ever." I asked, "What was the measure of our success?" She proudly responded, "We spent more money than any previous year." The Army Corps' success measure? Overspend your budget.

Or, consider Healthcare.gov's 500 million lines of code vs. Facebook's 20 million lines of code to support 665 million daily users. That is what happens when design teams have too many cooks in the kitchen. The same problem happened when architecting the 2,700 page ACA law -- way, way too many cooks.

In his book, A Government Ill Executed, author Paul Light found that the average federal employee now receives policy and budgetary guidance through nearly 60 layers of formal and informal decision-makers. Decision making authority is one of the best indicators of organization efficiency.

Should efficiency matter?

Why can't the government manage? The first reason is that the profit motive of free enterprises focuses and sharpens organizations in a way that governments cannot.

The second reason is that designers must understand execution. Execution is the true test of leadership. It requires a deep understanding of increasingly complex ecosystems and the skills to align institutions and processes throughout the system.

Leadership by decree will never work in today's marketplace. The Web site is easy. Operating as a pseudo-insurance company will be exponentially more difficult.

If governments continue to expand their institutions, we will need to rethink the qualifications of our senior politicians. Next time, consider the election as a job interview. Ask yourself, "What results has this candidate accomplished that indicate he/she can truly manage?"

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
AAPL $109.27 0.00%
FB $88.26 0.00%
GOOG $600.70 0.00%
TSLA $241.93 0.00%
YHOO $31.58 0.00%

Markets

Chart of I:DJI
DOW 16,102.38 -272.38 -1.66%
S&P 500 1,921.22 -29.91 -1.53%
NASDAQ 4,683.9190 -49.5780 -1.05%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs