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Why We Should Deregulate the Government

To be effective, a government needs the same thing as a business: good management.

(originally published by Booz & Company)

One of the most important recent articles on management, “Tension and Flaws Before Health Website Crash,” appeared in the New York Times on Nov. 22, 2013. Although it’s about the U.S. government’s problems in implementing the Affordable Care Act (ACA) and launching, it’s relevant to public- and private-sector executives anywhere. Read the online comments as well as the article and you get a picture of problems that business veterans have long observed in large, complex projects. These include inflexible goals, decisions intended to make executives look good rather than to produce results, overly optimistic assumptions about technology, bureaucratic infighting, shifting parameters and requirements, uncertain lines of authority, authority without legitimacy, and legitimacy without accountability. The article makes it clear that while all the problems with the national rollout would not be resolved before the deadlines, they are not related to the parameters of the law itself. They all have the same root cause: entrenched ignorance of quality management.

The example of the ACA and its website problems raises three fundamental sets of questions that (I hope) will be debated for a long time—questions that, ideology aside, are critically important to the health and well-being of a complicated and interconnected society.

• Is execution a crucial component of strategy? Should enterprises take on only those projects that they are equipped to deliver?

• Do the flaws in the ACA rollout represent an inherent problem of all governments? Are they a problem with this government? Or just a problem with the way this project was managed?

• How can we (the citizens, the customers, the shareholders) put our trust in large institutions when episodes like this are possible?

Clearly, the answer to the first set of questions is yes: The quality of execution determines the potential for realizing the strategy. The ACA is just one of many examples where executives have apparently felt that once they decide on a strategy, they can assign the execution and it will be done as expected. Even such a destructive misadventure as the second Iraq war might look better in hindsight if it had been brilliantly executed. Arguably, in many cases, the decisions about how to do something are just as significant as the decisions about what to do.

In many cases, the decisions about how to do something are just as significant as the decisions about what to do.

That might suggest that organizations should only do the things they can do brilliantly, but experience suggests otherwise. It took 30 years and many circuitous or failed moves—including the Lisa, the firing of Steve Jobs, the open-architecture Mac licensed to Motorola, the Newton, the various iPhone launch delays, the problems with Chinese factory conditions, and so on—for Apple to become the success it is today. Like all of us, the company became more proficient because it learned (often painfully) from its mistakes. Any organization can do the same, and we should expect the same of our governments.

That’s what makes the second set of questions so important. Many commentators, such as Seeing Like a State author James C. Scott, have argued compellingly that government is inherently incapable of executing well because its leaders are bound by the demands of their constituents, corrupted by their power, or blinded by their own organizational culture and elitism. Because Big Government and Big Finance have the world in a stranglehold, this argument goes, absolute power will corrupt absolutely, and the abuses and failures of government—Vietnam, Ruby Ridge, Iraq, the response to Katrina, the current NSA scandal, the overreach or underreach of regulations, and so on—are inevitable. The best we can hope for from government is that it does no harm as harmlessly as it can. (Even those who support activist government in principle, like former LBJ library head Betty Sue Flowers, have recognized this problem.)

But there are two fallacies to this perspective. First, management experience suggests that big, complex problems with multiple constituents can be managed. We even know what it takes: a perception that execution is important, and the combination of factors—autonomy, accountability, and alignment around a common purpose—that allows a large institution to execute. I can imagine a plausible scenario in which the outrage over the ACA implementation translates into popular sentiment—not to shut the government down, but rather to demand a government that would operate more competently.

Second, there are real-world counterexamples of well-managed government agencies. The late conservative writer James Q. Wilson wrote about them in a brilliant book called Bureaucracy: What Government Agencies Do and Why They Do It (Basic Books, 1989). He found several examples of government enterprises that executed their missions effectively, including a school in Georgia, a prison system in Texas, and the U.S. Forest Service. He then tracked the factors that differentiated them from other government agencies that were stultified bureaucracies. And he ended up with an answer for the third question on our list.

Why did these agencies reach their goals? Because they were focused, were accountable for results, and were managed with relative autonomy. This allowed them, for example, to procure goods and services with cost and quality as the first consideration, not the need to please particular political constituents. Wilson summed up his thesis in one sentence: “To do better we have to deregulate the government.”

Some businesspeople don’t want to deregulate the government because they think it will put the government in competition with them. They would rather privatize. But I think that is shortsighted. History is full of stories of businesses that have profited more when the government works effectively as a complement to their activities. You could even argue that great businesses need great governments to thrive.

Those who believe that large government, by its nature, is inherently irredeemable are in a frustrating position. Public-sector organizations can’t be ignored or eliminated. If we want them to learn, and to be reasonably accountable, we must treat them as enterprises that can be reformed, and we must discover how to reform them. The ACA and its national exchange website are a test case for this: If they fail because of poor management, it will greatly discourage government reform efforts for some time to come. But if—after a fair amount of trial and error—they become a viable, living system, it will show that there is a possibility for fixing even the most hidebound system through a focus on effective management.

Art Kleiner

Art Kleiner was formerly editor-in-chief of strategy+business.

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