Focusing on project schedules and cost blow outs, and disappointing delivery outcomes, is spending too much time on the symptom and not the cause. Better planning and harsher contracts won’t fix the problem, says Kiah Managing Director John Glenn, “they are simply stronger splints and are bound to fail eventually”.
As a consulting firm, working on large scale, complex, government projects, Kiah Consulting has witnessed this result many times.
“Both sides – the public sector and the private sector – lack the experience and skills to understand how the other thinks, or don’t sufficiently value other perspectives, says Kiah Managing Director John Glenn.
“That invariably leads to blowouts in project costs and timelines, and disputes.”
The public-private sector boundary presents a cross cultural challenge as profound as any international agreement. Within the private sector, business values are commercial – they are based around money and the bottom line. Of course, this is as it should be – it is the underpinning philosophy of a capitalist society.
In contrast, the public sector concept of ‘value for money’ doesn’t generally revolve around money – but rather social outcomes, the capability being acquired, the public good. It is also complicated by value around other needs such political acceptability and low risk.
This makes the concept of ‘value for money’ difficult to measure, so the argument often comes back to price not value. We know costs don’t vary much so a price reduction is inevitable. From the private sector point of view, a price reduction will be defenced as it is the core of business value.
Attacks on margin will be defended, creating an argument and a fight, resulting in a deteriorating relationship with less collaboration. We see a focus on, and competition between, value and margin rather than a focus on where it should be – cooperation between two values.
Can we do anything about this – or is it just an inevitable part of the process?
Yes! There is one thing we can do to address the fundamental cause: improve the public sector understanding of the private sector. Why only look at the public sector? Because this side is seeking the ‘value’. By improving public sector understanding you can move to create the environment to get what you want – not to have the righteous attitude of ‘I’m the buyer’.
On the private sector side, it is fair to say that many more people move from public to private, compared to movement from private to public. This means that private sector understanding of the public sector is generally higher.
Though, to be fair, sometimes you wonder as they often don’t talk in the language of their customer. A conversation for another day. The constant demand for strategic partnerships, for example is actually a claim for favourable positioning. I get it as a sales move, but if you really want a strategic partnership, show strategic leadership and go beyond self-interest to enlightened self-interest. Do you not think, if industry stepped beyond competition, we could have a better health record system for everyone’s benefit?
For the public sector, if you understand the other party’s perspective your perspective changes. You can create better agreements, better working relationships, better avoid losses, negotiate over-runs and cost blowouts. What can the public sector do to be better informed?
An oft called for panacea is greater mobility between the public and private sectors. But its caveated: how to do this while maintaining superannuation, recognition of seniority and guaranteed return to role. It misses the point entirely. Private sector behaviours stem from individual responsibility and accountability for performance, with consequences. The assumption of personal responsibility and risk is the foundation of private sector behaviour. If you avoid all those obligations, then you are not actually gaining private sector experience, you are simply observing the private sector from, the safety of an embedded public sector seat. To be clear, your DNA and view of the world changes if you are responsible for a P&L
If we want valuable mobility, then we need to value mobility. We need to make private sector experience a highly valuable attribute in public sector job applications. A lack of experience across both the public and private sectors ought to be a negative. Experience of only one sector limits the ability to bring alternate experiences and perspectives. Moving from Department of Finance to Treasury isn’t really a new job, it’s a new role in an old job.
If ersatz mobility isn’t really a valuable experience, perhaps education is an alternative. For example, the Kiah Insight into Industry program immerses a public sector manager in a private sector three-day experience. It’s not living the experience, but it does force alternate thinking – and a level of discomfort. That insight is valuable as it allows project and procurement managers a glimpse of the issues driving the other side. Address their issues in a way that delivers your outcomes – now you have insight into how to structure the most valuable and positive ways forward without conflict.
Kiah’s Insights into Industry program quickly gives public servants greater appreciation of how their peers in a private firm approach a project. Join the free micro masterclass on Wednesday 25 March at Kiah Offices Canberra to gain a high-level insight into how industry works and why it’s important to understand.