Peter Altschuler in Business Head of Marketing and Creative Strategy • Wordsworth & Company LLC Mar 17, 2017 · 2 min read · +300

If You Ran Your Business Like the Government

The equal and opposite reactions of revenue, spending, and borrowing

This is either the perfect operation or else it’s a massive scam.

The organization in question keeps lowering its prices, but it also reduces the number of services it offers. Yet, to pay for things it wants to provide that nobody actually wants to buy, it raises its borrowing to cover the cost. That, of course, increases its operating expenses, but the executives never factor that in.

It trims the amount it spends on labor by laying people off, then it cuts the departmental budget because there’s insufficient staff and no automation to replace them. This is in spite of vocal marketplace demand. Yet for some of the organization’s operations, the money that’s not being spent in one place gets shifted to another. Unfortunately, the department receiving those funds provides a product that consumers can’t purchase. It’s strictly B2B.

A market of none

However, the biggest market for that product is other companies which, as luck would have it, are in countries that can’t or won’t buy from this organization. And the organization won’t even provide its product (or any of its services) in countries whose practices it doesn’t like. It’s a setup that defies the laws of business and logic.

To please suppliers, the organization thinks the best approach is to focus on the suppliers’ leaders and shareholders, even when such deals can put consumers at distinct disadvantages.

Meanwhile, buyers are left with fewer choices, and the things they can obtain from other sources are a lot more expensive. The reasoning now gets really convoluted. It’s posited that the lower cost of services from the organization in question will allow people to afford them from others. With less competition, though, the other providers can keep their prices high while reducing the quality and/or quantity of what they deliver.

Welcome to America. It’s an organization that runs with no grasp of financial or market realities.

If You Ran Your Business Like the GovernmentThe so-called business of government

No business can profit when its revenue can’t cover the cost of production. That’s as true for high tech startups that rely on venture capital as it is for a government. It’s difficult to justify cutting income (from taxes) to please voters but then claim it can’t afford to provide the services those voters expect. Like schools. Or job training. Or road repairs. Or clean air and water. Or courts that aren’t backed up for years.

Then, when it’s time to pay back all those people who loaned you many trillions of dollars, there’s nothing to retire (or even service) that debt. But because we are too big to fail, Congress always seems to conclude that it’s OK to borrow money to pay for borrowed money. It’s surprising Bernie Madoff never held elective office or served on the banking or commerce committees.

Yet governments are not meant to profit. They’re meant to make things work. And work in ways that help others work and prosper and contribute to society and culture. When that prosperity occurs, it feeds the government coffers to allow it to continue to improve the lives of citizens. Then, when possible, it can help the less fortunate at home and abroad.

Reputation and success

Ford makes cars, but the Ford Foundation which, for years, was the world’s largest philanthropy, focused on making lives better for people around the world. The Microsoft fortune funds the Bill and Melinda Gates Foundation, which takes aim at improving human health, eliminating poverty, and providing educational opportunity. Each was intended to supplement what the government did while burnishing the reputations and brands of their affiliated companies. And the U.S. was renowned around the world for its generous foreign aid which, in a very real sense, enhanced America’s brand.

Now, however, as the philanthropies continue to attract admiration, America seems tarnished. Some of it may be that its board – the members of Congress – don’t have the best interests of shareholders (the voters) at heart. Some of it may be that Mark Twain was right when he said, “Suppose you were an idiot, and suppose you were a member of Congress, but I repeat myself.” And some of it may be that there was truth in Will Rogers’ statement that “We have the best Congress money can buy.”

Yet with a businessman in the White House, the “organization in question” is still being run as “a house divided.” Instead of a coordinated operation that’s the hallmark of every successful organization – those that, whenever possible, balance the greatest good for the greatest number with revenue-sensitive budgets and sufficient oversight to ensure an appropriate ROI – we seem to be “full of sound and fury, signifying nothing.”

Any business that ran its operations that way would be in bankruptcy, in play for a takeover, or in liquidation. For better or worse, though, a government isn’t, by definition, a business. But it’s employees need to perform as if it were. And if the executives can’t make the improvements, the shareholders should… at the ballot box.

Peter Altschuler Mar 28, 2017 · #2

#1 Business and government aren't interchangeable (or compatible). Washington seems oblivious to this.

POTUS wants his son-in-law put in charge of making government run like business. This could be disastrous if Mr Kushner uses his father-in-law's methods: don't honor contracts, refuse to pay contractors, send work overseas and, in a pinch, file for bankruptcy.

That's not good business, but it seems to have worked in a world that buys the power of ego, the shell game of blame shifting, and the notion that the end excuses ethically-challenged means. As Lincoln said, you can fool some of the people all of the time. Yet there could be a two-sided remedy.

Government services run on available revenue. That's why public works projects stop when a budget allocation is late. If funding had to be in place before a project begins, progress would be lightning fast.

Then there must be project managers who drive work forward, inspire workers, minimize downtime, avoid unnecessary costs, and stay on schedule. When Los Angeles was "down" after the 1994 quake, Mayor Richard Riordan understood the economic cost and provided an incentive: for every day contractors finished early, they got a bonus. LA was functioning in weeks. By contrast, the Bay Area took 10 years to rebuild after its 1989 quake.

The second side is voters. If voters don't demand that representatives do what they were hired to do -- present the best case for constituents' expectations and negotiate with opponents to achieve the best compromise -- and if voters don't re-elect them when they aren't doing their jobs, government will always be a cesspit of influence peddling.

When politicians are intransigent, nothing gets done. If voters insist on getting their own way, they should be punished for not understanding the lyrics of rock songs: "you can't always get what you want, but if you try, sometimes, you get what you need".

+1 +1
Devesh 🐝 Bhatt Mar 17, 2017 · #1

Comlanies define expenditure based on income.

Governments define income based on expenditures which are never well spent.

The citizens are always deflected from the non negotiables and the money is pumped into projects which are designed to fail.

This happens everywhere with the British Laws and American systems cosmetically copied with muchh greater loopholes as this way of poor governance gets perfected.

I must thank you for this wonderful article.