How is government a business?

July 7, 2009 3:33 PM

Do governments use business models? How can I learn more about how government conceives of itself and operates using business concepts and processes?

My apologies if this question doesn't make sense. It's just that I don't know how to ask it. I don't even know what to type into google to do my own research.

I'll try to restate the question again: I want to understand how government organizations operate, from a business perspective. Some google help, books, or even your own explanations would be much appreciated.

If it's not painfully clear already, I have no education in business.

posted by kitcat to law & government (11 comments total)

Generally speaking, government agencies don't use the kinds of processes which are common in business. Trying to apply business concepts and processes mentally to what government does will only steer you astray.
posted by Chocolate Pickle at 3:41 PM on July 7

"I want to understand how government organizations operate, from a business perspective."

The problem here is that this question doesn't make sense; it assumes that governments are businesses or have more than a superficial similarity to business. They are not and do not.

I think you will have better luck asking a question such as, "I want to understand how government organizations operate differently than businesses."
posted by dfriedman at 3:55 PM on July 7

Generally speaking, government agencies don't use the kinds of processes which are common in business.

That might have been true once, but hasn't been for a long time. Most models (although not those that are specifically profit centric) are used in some form or another in government, adapted as appropriate.

Any major commercial consulting firm that has a government practice (and that's most of them) do this type of work every single day.

kitcat, it is a broad question. Do you have any specific areas or issues you're particularly interested in, even if you don't know the names of models, etc? I do both commercial and government consulting, and can probably point you in the right direction.
posted by NotMyselfRightNow at 3:59 PM on July 7 [1 favorite]

Governments as a whole certainly use no kind of model that would pass by that name.

Individual government agencies use operational models like nobody's business -- indeed, the lack of a profit motive for the agency, and diminished financial motivation for individual executives and professions -- can lead to a mania for models and metrics, in the absence of the basic (and basically simple) measure of cash generated and earned.

In terms of doing research on this, no better place to start than the military. In service of a superficially simple goal (win wars) the military branches devote vast resources to business modeling and are essentially under a never-ending institution-wide reinvention process. Google: "quadrennial review" and "revolution in military affairs" to get the very beginnings of a taste for it, and then google H.R. McMaster to see how the institutions do (and don't) evolve their models under the strain of the real world.
posted by MattD at 4:28 PM on July 7 [1 favorite]

A government department gets a budget each year, and spends the budget. If the department makes its political masters happy, it continues to receive money. If the department is headed by a weak minister or secretary, it will receive less money. If the department provides services to a constituency (say, the energy sector) that is politically significant or brings in revenue, the department will receive money. If the constituency it represents is insignificant (welfare, social services), the department will receive less money.

The only real connection to business is measuring and monitoring cashflow using GAAP.

That's about it.
posted by KokuRyu at 4:46 PM on July 7

Here's what I can tell you, as an 8-year veteran of the public sector, the things that we do that mirror private sector operations:

Organization-wide, we do have a high level strategic plan, against which divisions & departments have to develop goals that accomplish the objectives of the plan. We have to give status on this twice a year. The plan is broken down into a "strategic map" so you can see where your small picture fits into the big picture. They include things like serving our customers, team building and managing our budgets, etc. Very generic, but similar to a business model in that we try and stick to it as much as possible, to minimize duplication of effort and squeeze the most value out of what we do.

If a particular initiative doesn't fit in with the grand scheme set out for us, it doesn't become a priority (unless you're very clever, and can word your pet projects in such a way that you can fool people otherwise...but I've said too much, and now they'll come and get me.)

In government there is an insane amount of tracking. You name it, it gets tracked. IMO a lot of this tracking is just to give certain unskilled persons a paycheck. Some of the tracking is to cover people's asses. And some if it is stuff that just makes sense to track.

I once spent the better part of one year helping to document our standard operating procedures for the dozens of things my department does, at the behest of the Big Boss. I suppose this had some value to someone, but I don't believe we've ever referred to these documents since. Perhaps they're in a titanium safe deep underground, in case we're wiped out by Swine Flu.

In one respect, however, you really can't compare the day to day practices of business and government. The inner workings of any one particular business aren't laid out in the local paper 7 days a week for all to see and chime in on. The CEO of a business has different personal priorities, ultimately, than an elected official. And governments will always have to spend money on things that will never see any return on their investments.
posted by contessa at 6:17 PM on July 7

Yes yes yes - I meant government agencies. And the mania for models and metrics is exactly what I might end up knee deep in. My company does IT consulting for government and I'm going to be learning business analysis and this is why I'm asking. So, NotMyselfRightNow - I hope that narrows things. I hear things about 'what's best for the business' and about 'the business unit' with reference to government, and I don't understand what it means. And I don't understand the preoccupation with strategic planning (whatever that means) and process improvement and yada yada seemingly business terms and concepts being applied to something that's not a business. But I want to know what this 'trend' is all about.
posted by kitcat at 6:48 PM on July 7

And I don't understand the preoccupation with strategic planning (whatever that means) and process improvement and yada yada seemingly business terms and concepts being applied to something that's not a business. But I want to know what this 'trend' is all about.

In a nutshell: It's because of the number of wisenheimers who proclaimed loudly and often that government would be better "if it worked more like a business." And, well, in government there's no stock price to worry about, or product lines to improve, or marketing budget. So the remnants of business that get adopted by the public sector are the strategic / process aspects. And a little of it makes sense (it's better than no plan at all, anyway) and some of it is just posturing, from what I've seen.
posted by contessa at 7:00 PM on July 7

I'll try to restate the question again: I want to understand how government organizations operate, from a business perspective.

One side note to consider is how the two entities differ wildly in terms of managing and mitigating risk. A good business performs risk assessments in various areas -- everything from financial (will we have enough money?), marketing (will someone else take our customers?) to security (are we backing up our servers?).

The National Park Service doesn't have to worry that Google's going to come along and build a better Yellowstone National Park and start hoovering up tourist dollars. The Grand Canyon doesn't have to advertise to get people to visit it.

On the other hand, the guys in charge of Yellowstone will compete with the guys from the Grand Canyon for a better share of the overall NPS budget.
posted by Cool Papa Bell at 8:44 PM on July 7

Based on your clarification, isn't it then all about how a new process or IT deployment will save money while enabling greater client satisfaction?
posted by KokuRyu at 3:00 PM on July 8

kitcat, one thing to keep in mind is that what is often referred to as "business models" are more properly "organizational models" that were simply adopted by businesses before governments. There are counter examples, too - ways of operating and organizing that were adopted by government and non-profits before being adopted elsewhere. This isn't a trend, really - as long as their have been organizations, those organizations have looked to other people and groups to find ways to improve and change.

To address a few of the concepts you brought up:

A "business unit" in government is usually just a part of an organization. One client I'm working with has business units such as "Information Technology," "Support Services," "Financial Management," etc.

I don't often hear "what's best for the business" when I'm in a government agency. Actually, I'm not sure I've ever heard it. That isn't to say that the idea isn't there - it wouldn't be uncommon to hear someone say something along the lines of, "spending our budget to hire a bunch of clowns to entertain us on Thursday morning wouldn't be what's best for the agency."

Here's a *really* simplified way to think about strategic planning:

1 - What's the mission of the agency?
2 - What does the agency have to do to accomplish that mission?
3 - How many people will the agency need to do that? How many offices? How many widgets and gizmos?
4 - When do we need to hire those people and buy those supplies?
5 - How much money will we need, in what years, to do that?

The above five steps start at the strategic level, and get into the operational details (more properly called operational planning at that level). It's how you organize and focus people to accomplish the mission of the organization. What I laid out is very simplified, but the framework would work for almost any organization: a government office, a non-profit, a business...

Process improvement is simply looking for ways to operate more efficiently. It's not about maximizing profit (as it often is when applied in a commercial environment), but about improving for other reasons. Are you the FBI? Process improvements might be designed to help catch bad guys faster. USAID? Get supplies to disaster zones faster. IRS? Make fewer errors while processing tax returns.

Thinking specifically about one of my clients, here is what we're currently working on with them, or recently worked on:

1 - Strategic planning and operational planning (mentioned above)
2 - Strategic communication planning (who are their stakeholders? What are the issues and concerns they have? How are we making sure we're addressing those topics?)
3 - Financial management (government agencies might work to make a profit, but they do have to properly manage their finances, or they risk going bankrupt)
4 - Annual report (someone - another government agency, tax payers - give money so this client can operate; they deserve to get a report on what they've accomplished)
5 - Balanced scorecard (if you're achieving your mission, but treating your people like crap in the process, you're not succeeding)
6 - Benchmarking reports (how do you compare to other agencies in certain areas? What are their best practices? Can those practices be adopted?)

That's fairly high level, and just off the top of my head, but you can see the list is pretty wide ranging. Governments and businesses are dealing with many of the same issues, just in different contexts.

The National Park Service doesn't have to worry that Google's going to come along and build a better Yellowstone National Park and start hoovering up tourist dollars. The Grand Canyon doesn't have to advertise to get people to visit it.

Actually, it does. NPS is competing against every other way that someone can spend their time and money. Do we go to the Grand Canyon, or Disney Land? Go camping, or stay in a hotel? They have to understand public opinion, what attracts people, and how to cater to those needs (in business speak: conduct market research, adapting marketing campaigns, etc.). You're right - no one is going to build another Grand Canyon, but they will build other vacation sites, tourist sites, and alternative vacation destinations.
posted by NotMyselfRightNow at 3:47 PM on July 8