Friday, July 23, 2010

Is business a good background for a public servant?

See if this sounds familiar. "We need to elect businessmen to congress because they're tough and efficient and know how to get things done on time and under budget."

It seems like every election cycle, some Ross Perot-wannabe brings up some variation of this argument. But while some businesspeople make great public servants, it is wrong to assume that a business background automatically qualifies a person for elected office.

Private businesses do not make money by producing goods and services on time and under budget. That's an ivory-tower view of business that's popular among right-wing intellectuals, but has no basis in reality.

The job of a businessman is to maximize profit. Period. And profit is the difference in total revenue and total cost. Businessmen become successful by convincing people to pay more for a good or service than it costs to produce. Efficiency and customer service are certainly tools in the businessman's toolbox, but they aren't the only ones. Businesses can use advertising to raise perceived value, they can choose to focus on under-served markets, they can trademark innovations to prevent competition, they can cut costs by laying off staff and making salaried employees work long hours, and the list sort of goes on like that for a long, long time.

On the other hand, the job of a public servant is to maximize value. They strive to ensure the greatest number of taxpayers receive the greatest amount of service for the lowest possible cost. Cutting necessary but unprofitable services, refusing to serve difficult markets, raising perceived value with branding - none of these are options for those who spend their life maximizing the value of taxpayer dollars.

There's nothing wrong with business. It's essential to the American way of life. And many businessmen, like John Hickenlooper, do become good public servants. But it's wrong to assume that people who can maximize profit are inherently suited to maximize value.

1 comment:

Anonymous said...

Accurately said. The score card of business success regardless if it's selling shoes or insurance is who is making the most money. Tune in any business channel to get the daily briefing on winners and losers. Making a better product, which can lead to making more money, is however secondary to making the most money. This from some one with over 40 years in business.