The private and public sectors have long been considered chalk and cheese. With one prizing profit and the other service, they seem unlikely bedfellows. But is there still a gaping ideological chasm between the two or is the divide closing in interesting and heartening ways? Claire Finlayson takes a look.
Disparaging remarks lobbed at the public sector by the private sector are nothing new. At their harshest, they sound something like those made by Newstalk ZB host Kate Hawkesby in 2021. Critical of the way Ashley Bloomfield (then Director-General of Health) had led New Zealand’s COVID-19 response, Hawkesby said: “Isn’t it interesting how much lower the bar is for bureaucrats than the private sector.”
Referring to what she perceived as Bloomfield’s shortcomings, she said: “If this were the private sector, we’d score KPIs, canvas high and lowlights, and grade performance. The only conclusion we could draw would result in a small chat with HR in which Bloomfield be invited to bring a support person, followed by a press release about spending more time with his family, and, if he’s lucky, a small pay-out.” She concluded: “In the private sector, he’d be toast.”
Hawkesby’s rancorous comments caused much annoyance. Public Service Commissioner Peter Hughes smarted at her attack on Bloomfield. “We don’t do it that way in the public service,” he said, referring to the employee-as-toast scenario. “When things go wrong, I expect public service chief executives to own it, fix it, and learn from it. Public service chief executives are expected to face the music, not cut and run, as Hawkesby is suggesting happens in the private sector.”
Ian Harvey of Collective Intelligence (a leadership development ecosystem) was similarly vexed and penned a blog post titled “Public vs private sector: Let’s co-create rather than alienate”. He pondered why the private sector likes to take a smack at public servants, saying he’d long heard the argument about the private sector working harder, smarter, and longer. He also admitted that he, too, had once been guilty of thinking bureaucrats were numpties.
Harvey’s a reformed man on that front now. He sings the praises of the public sector: “When viewed from the outside, you have little to no idea just how complex the work-world of public servants is. Add to that the public scrutiny they come under, and the pressure they face can be extraordinary. The other aspect is that when they do their job well, nobody notices. But when there’s a cock-up, all hell breaks loose, often when the mistake is not even theirs.”
Not so simple
That pesky “us and them” narrative around the two sectors still persists and obscures a whole world of nuance – one that Richard Tait has observed for the last twenty-four years. A director at public-sector-focused consulting firm MartinJenkins, Tait says it’s worth noting the underlying complexity that prevents a simple definition of the two sectors.
“Talking about public and private sectors in binary terms hides a lot of similarities and differences. The private sector isn’t a homogenous thing. It comprises everything from an individual with a big idea and limited business skills to a large and sophisticated publicly listed company, and everything in between. By virtue of size and complexity, Inland Revenue probably has a lot more in common with Spark than either of them has in common with a one-person tradie business.”
Agility against sluggishness
Probably the most popular historical narrative around the sectors is that the private is agile and the public sector is lumbering. Tait says the diversity within both sectors makes it hard to generalise. “Large bureaucracies can be inefficient no matter who they are. You could argue that an inefficient company will be more likely to go out of business than an inefficient public sector organisation, which is true. But equally, a company with a significant revenue stream (because of its market position) can be highly profitable and also inefficient, which lessens the focus on eking out efficiency gains.”
While a focus on profit and growth does keep the private sector motivated towards efficiency, Tait says there’s no hard and fast rule. “Sometimes agility is more a function of size and complexity than private or public – large bureaucracies tend to behave similarly irrespective of who they are, compared with a small start-up. Private sector agility is also a function of the market a business is in. A company in a highly competitive and fast-moving tech market is a lot more likely to be agile than one in a mature, stable duopoly market.”
Taking the long view
These qualifications aside, the perception of public sector sluggishness owes much to the different timeframe it often works to. Although it has to deal with short electoral cycles, it doesn’t have to generate a financial return to shareholders. This allows it to take the long view and invest in complex problems that the market can’t or won’t deal with. The breadth and duration of these long-term projects can result in a lag between vision, execution, and results. It’s this that rankles many in the private sector.
Brent Chalmers, Head of Public Sector at Westpac, acknowledges the layers of complexity that face the public sector, but he adds, “I think there can sometimes be a lack of capability in terms of executing on whatever the policy of the day is. The public sector seems to struggle at times with quality execution. If you look at some of the apparent failures, it seems like accountability gets dispersed. There’s no one person who’s solely accountable for execution on some of these complex policies, and they get lost.”
He thinks the public sector could spend less time and money developing business cases to ensure they’re investing in the right projects. “I feel there’s a better approach to risk mitigation than spending such a long time analysing. By the time they get the answer, it’s out of date.” He’d like to see a more private-sector-ish approach to prioritising. “It’s about portfolio management really – culling the things that aren’t delivering sufficient value in your portfolio. I think there’s opportunity for the public sector to be more agile in terms of responding to what’s working and what’s not.”
Tim Clarke is well placed to comment on the chafing between sectors. He leads the Public Law and Policy team at Russell McVeagh and works at the interface between the public and private sectors. He says it often feels like he’s providing a translation service between two very different cultures. “Those cultures have different drivers, which is why there can be incomprehension at the operation of the other.”
Pace is a big bone of contention between the two. Clarke says public sector clients may be unaware of the commercial imperatives that prompt private sector urgency. Then there’s the flipside. “In the private sector, they cannot understand why decision making takes so long in the public sector,” says Clarke. “That’s because they don’t pause to consider that decisions need to accord with a statute or a regulation, be checked for compliance with the principles of Te Tiriti o Waitangi, and be consistent with prior government decisions. They may also need input from a range of government agencies.
“The public sector is sometimes viewed as foreign territory to the private sector,” says Clarke. “There’s that fundamental disconnect between the purpose and the role of public sector decision making and what the private sector expects. The frustrations that the private sector experience aren’t the result of incompetence or a lack of quality or rigour – rather, they’re to do with the complex multi-factorial set of things that a public servant is grappling with.”
Innovation and risk
One of the charges often laid against the public sector is that it’s less innovative than its private counterpart. Tait says this is due to risk-aversion and has a number of causes: the high level of public scrutiny its workers are subjected to (which is often characterised as whether an action would stand up to the “DomPost test”); the generally perceived low tolerance for failure; the fact that public money is at stake; and the reality that many highly entrepreneurial people don’t tend to be attracted to a public service career.
The private sector, meanwhile, generally embraces risk taking – and its necessary occasional cousin: failure. Of the latter, Tait says, “It’s somewhat expected (with the key being to fail fast and in a least costly way). Successful innovators anywhere tend to place smaller bets, fail fast, learn, and adapt. This approach helps mitigate risk and may be key to the public sector managing and operating within a wider environment that isn’t particularly tolerant of risk.”
Clarke sees risk aversion as the key issue for the public sector. A more risk-permissive environment would need to be created from the top down. He says ministers long to operate within a culture of safe risk taking and innovation, but as soon as anything goes wrong, they tend to blame the official. “To have that mature debate and discourse in a public domain is politically very challenging, and therefore the public sector itself becomes risk-averse – much to their own frustration.”
He says that public servants aim to be more effective. “That’s why they go into public service, but the system grinds them down. Innovation is possible, but it requires the right climate and political support. That for me is the single biggest factor facing the public sector. It’s an institutional challenge – it’s not so much a human capacity or human resources challenge.”
Now for the good news. There seems to be a growing appetite for collaboration between the two sectors – for more of an overlap on the Venn diagram. In his blog, Harvey called for public and private entities to co-create new initiatives. He pointed to the co-designed New Zealand Food Network. In conjunction with the Ministry of Social Development, it spans the private, social, and government sectors to redirect quality surplus and donated goods from food businesses to communities in need. Harvey says, “The initiative is a total success, and neither party could have created it without the other. There was enough focus here to combine the might of the public sector with the savvy of the private.”
The private sector is getting much better at countenancing public good. Tait says, “Increasingly, private organisations are considering their purpose and impact beyond the bottom line. This has emerged in various ways over several decades, through things like Corporate Social Responsibility (CSR) frameworks, sustainable business practices, and B Corp Certifications.”
He says this tends to happen when a company is committed to goals beyond maximising profit (and is able to do so while meeting shareholder expectations). Or, where the focus on wider public good (like sustainability) is viewed by companies as a value-adding measure that might attract more customers.
Clarke has witnessed this within his own law firm. “It’s exponential in the way our understanding of ESG [Environmental, Social, and Governance] is developing and evolving. The public sector used to be miles ahead of the private sector around cultural, gender, and diversity issues. That transformation is starting to be seen more broadly in the private sector.”
Chalmers says that CSR efforts in the private sector used to be quite tokenistic but are now richer and more authentic. Like Clarke, he’s clocked that change in his own workplace – with Westpac’s abiding concern with financial inclusion. “For example, we now work with the Department of Corrections on helping released prisoners get bank accounts so they can better reintegrate into society. We also have policies that allow victims of domestic violence to access banking services that they otherwise couldn’t.”
It’s not an easy balance to strike, though. Getting the private and public sector to hold hands is not without its difficulties. Clarke explains: “It’s challenging because, at one end, the public sector opens itself up to the allegation that it’s been captured by the private sector. And at the other end, if there isn’t that engagement, you get legislation and regulation that bears no relation to what’s happening in the real world and is counterproductive to business and New Zealand interests.”
There are plenty more column inches to be had on the purview of the two sectors. Chalmers says, “You could probably spend a lot of time comparing the two and arguing the toss about how different or not they are, but from my perspective, the point is that there’s a missed opportunity. There’s this growing alignment in terms of where the private sector is going and where the public sector already is in terms of thinking about a much broader stakeholder base and considering the impact on society. That brings opportunity for the public sector to reimagine how it works with the private sector and get better outcomes for everyone.”
More alignment between the two sectors sounds like a hopeful, divide-conquering scenario; the sort of place where the word “toast” might only be used to describe a bureaucrat’s lunch.
This article was published in the Public Sector Journal - April 2023, Issue 46.1.