Do business executives make good governors or mayors? | Invest & Innovate | Steve Levy | Mountain View Online |

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By Steve Levy

Do business executives make good governors or mayors?

Uploaded: Oct 11, 2010

Well, it depends. A business executive can have valuable organizational and managerial experience. Executives come from an environment where there is an emphasis on efficiency and that can carry over to their public sector duties.

But I see two big potential qualifications. One is about attitude and one is about the crucial difference between private and public sector organizations.

To be successful in public service a business executive needs to respect the a state's or city's public sector service obligations and public sector employees. So you have to want to make the public sector better, not different. Mayor Bloomberg is an example. He brought efficiencies to the delivery of services while respecting the role that public services play in New York.

If you want to run on a "businesses are great, governments are incompetent and spendthrifts" agenda that is about politics, not offering your business experience to the public sector. We want a business executive's skills and experience, not a government-bashing attitude. That just confuses a political position with business experience and, in addition, has little if any record of success anywhere, especially in California.

There, is, moreover, a crucial difference between private and public sector organizations. When private sector managers make layoffs, they are mainly driven by declines in customers/sales and profits or reorganizations as part of mergers and consolidations. These are completely appropriate responses to what the market is telling managers.

However, the number of public sector "customers" almost always increases. Population growth does not stop in recessions and some public programs see an increase in demand in bad economic times.

The state's budget challenge -- like that in Palo Alto -- results from a drop in revenues WITHOUT a drop in customers.

That is a dilemma with which business leaders have little or no experience. It doesn't mean they can't learn to deal with declining revenues and growing customer demands but their business experience will often give the wrong signals for this situation.

Public budgets, priorities and choices do not follow the rules of profit maximization.

And the "live within your means" rant is also a political statement. It is not "obvious" as a business principle that staff and service cuts are the only answer to short-term public-sector budget challenges. These are choices to be debated by residents who might prefer to pay more in taxes temporarily to maintain services.

To pass this off as a "business principle" is disingenuous. It is a legitimate political position, nothing more or less. The "means" we have to spend is our total income and if residents want to spend more on public services and less on private consumption, that is their right also.

Unfortunately both residents and elected officials usually maintain services without maintaining revenues and adopt pretend budgets. But that is another story in which many parties are complicit.

One challenge facing the new governor is that California's state and local governments have very low levels of staffing relative to the nation and most states.

In 2009 California had the fourth lowest ratio of state government employees to population, the sixth lowest ratio of state and local employees to population and the third lowest ratio of K-12 education employees to population among all 50 states—in each case well below the national average.

There is no evidence that the state's public sector is overstaffed. Moreover, these data are for March 2009 and since then the state has seen the loss of 55,000 state and local government jobs while adding more than 600,000 residents. The next jobs report will likely add thousands to the job losses while we strive to maintain high quality education and public services.

So the experience of private-sector executives can be valuable. But if it is their experience that we want, not their politics, they need to come supporting the public sector they are running to lead.