How to deal with gov’t deficit?Use principles, tools of business

“The Price of Government”
By David Osborne & Peter Hutchinson
Basic Books, 2004


The government is one gargantuan bureaucracy. And it remains such a huge challenge to make it efficient that “government efficiency” has sounded like an oxymoron!

In some elections here and in America, some politicians ran on a platform to “run government like a business enterprise.” Ross Perot did, but later dropped out of the U.S. Presidential race, and thus kept Americans wondering what a Perot presidency could have done to improve the nation’s finances.

Not known to many, former New York City Mayor Rudy Giuliani (more renowned for his “crisis leadership” in the 9/11 aftermath) introduced efficiency in the country’s largest city – dramatically solved crime, streamlined the bureaucracy, and improved public service.

Close to home, Lito Osmena, who once ran Cebu City as Mayor, used business principles to transform the Queen City of the South into a bustling metropolis, earning a much deserved name “Ce-boom.” Current Quezon City Mayor Sonny Belmonte applied political will to install sound management and fiscal systems may yet reap the fruits of his managerial resolve, but had so far chalked up the achievement of realizing revenues in the billion peso range.

In the past, even in a graduate business school I attended, a professor once said that one cannot compare the performance of government with that of private business – “because they are driven by a different logic.” For example, he said, a governor cannot downsize because he must promote employment for his constituents. And realistically speaking, the government cannot compete with the private sector precisely because its costs are higher (translated: it is unavoidably inefficient).

Will citizens now resign to the fact that government, by its very nature, cannot be efficient in the same way businesses are called, not only to be efficient, but to be profitable? Given the mounting deficit piling on the national government and the hidden costs of local government units, shouldn’t there be method and strategy to dismount a white huge elephant?

The good news is, there is a book, “The Price of Government,” that discusses principle and process that would liberate government from the yearly classic dilemma: How can you deal with a growing deficit, on one hand, and mounting resistance against new taxes, on the other? These and other major issues are confronted by this new book written by David Osborne and Peter Hutchinson.

The authors underscore this predicament thus: “Elected officials are always looking for ways to demonstrate their fiscal prudence while also supporting their favorite programs.” Is it possible to have the best of both worlds?

Osborne and Hutchinson want to see the budgeting process based on “desired outcomes” – and not on previous figures. “Last year’s numbers are not an entitlement” – or these budget numbers should be challenged.

Actually, more than three decades ago, the zero budgeting process was already at work in the world of private business. Osborne’s prescriptions seem to be a take-off from policies and strategies that have already made businesses not only profitable but leading-edge winners.

And yet to apply it to a huge bureaucracy and sharing a wealth of lessons learned and successes scored are remarkable feats by themselves, considering the Herculean task of virtually cleaning up the mythical Augean stables. The authors have written a piece that has both governing principles, details of execution and success stories that will make this book a valuable manual not only for planners and budget chiefs, but more so the state’s chief executive or local governors to get real results.

The book would like to see the day when budget officer’s job “shifts from padding the base to being essential players in steering the organization toward results.”

This book is not only about budgeting, though, tackling “rightsizing,” based on the principle of “the right work, the right way with the right staff.” It, however, has a word of caution: “If done wrong, downsizing can cripple performance, leading to crises of another sort: failing police departments, rising crime rates, dirtier cities, longer wait for service and deteriorating road, rails and buses.”

The book recommends something radical: “You can change almost everything, except the values.”

The authors also have a revolutionary thought about government welcoming competition. Citing an example – a water or sewer utility -- they point out: “Unless the service is a natural monopoly, the customers purchase the service wherever they choose. If it is a natural monopoly, give it a customer board and regulate its prices.”

What about performance bonuses for government officials and employees? The book calls that “gainsharing,” a profit-sharing plan for the public sector. This is largely unheard of in government!

The book, 370 pages in all, is a tour de force for authors – and readers like you and me – but there is one supreme benefit from reading it: You come away with a stronger conviction that a government that is efficient, responsive and useful to its “customers” – the citizens – is in the realm of the possible. Its call is compelling, quoting a native American saying: “When you’re riding a dead horse, the best strategy is to dismount.” Stretching the metaphor, they consider the old budgeting and planning process a “dead horse” – and thus declare an imperative: Find a new horse – “then saddle up and ride.”