When Governors Talk, and Act, Like CEOs

They face dangers and rewards when they try to apply innovative business strategies to the tasks of government

AMERICA'S governors are talking like corporate chief executives. They are looking at corporate restructuring as a model for making their governments work. They use words like downsizing, right-sizing, customer service, performance measures, business cycles, and accountability. Yet a review of major speeches delivered by the governors thus far in 1995 reveals that many also may be headed toward the same disasters that befell the corporate leaders who tried to restructure in the mid- to late 1980s.

We have analyzed the inaugural, state of the state, or budget addresses of 43 governors. We found a lot of innovative ideas. Governors are focusing on making government work for citizens. They are talking about things like a money-back guarantee on permit applications, a limited warranty on a high school education, and driver's license renewal booths in shopping malls. They are also looking to change the incentives in government, so that quality and creativity are rewarded. And they are investing in technology. These innovations could make a real difference in how government works and how citizens view their government.

But we also found a worrisome trend. In the rush to show voters that they were paying attention last election day, downsizing efforts are taking on a ''Let's prove our seriousness to the voters'' quality. Many, such as Brereton Jones (D) of Kentucky, boast of cutting specific numbers -- 1,600 positions in his case. Minnesota's Arne Carlson (R) is pledging to combine 250 children's programs from 15 different agencies into a new department of children and education services. Others are attacking boards and commissions.

All of these downsizing efforts may prove to be well-thought-out plans that help government work better. But downsizing could become slash and burn. Then all of the governors' good ideas about service to citizens, accountability, and market incentives will make little difference.

If the governors fail to study the lessons provided by corporations, they may end up with smaller governments that do even worse serving the public.

Scott Fosler, the president of the National Academy of Public Administration, points out that many of the efforts to restructure major corporations took a similar course. First was denial: Many corporate executives refused to see major problems. Then there was tinkering at the margins, which left these corporations on the verge of disaster. The next step was crisis-mentality downsizing -- slashing and burning done with little or no strategic relationship between work force reductions and market demands. Finally, successful executives essentially said ''Oops!'' and took to the tough task of strategically restructuring companies.

To avoid their own ''Oops!'' the governors need to speak more about ''strategic restructuring'' than downsizing. They need to keep their eyes on the purpose of government reinvention: to address the issues that citizens care about in a competent way at a reasonable price. They need to ensure that each of their reinvention strategies ties together to help achieve that purpose. They need to avoid making decisions based on popular but often inaccurate conceptions about how government ought to operate. For example, ''contracting out is cheaper'' often becomes an article of faith that doesn't bear out in practice.

Strategic restructuring involves asking questions that can be answered only if governors enter into a dialogue with citizens about what is important to them. Such questions include:

*Are there tasks that the state is taking on that it shouldn't be? If there are, don't do them anymore. The governors should take a lesson from the first phase of the Clinton administration's National Performance Review (NPR). An important criticism of the NPR was that it focused mostly on making the government better at doing what it's been doing for decades. It didn't address what the government should be doing.

*Are there tasks that serve a public interest but do not have to be delivered by the government? If so, bring the marketplace to government services: privatize, contract out, or put services up for competitive bidding.

Eleven of the 43 governors in our sample are promising to privatize some government services. Arkansas Gov. Jim Guy Tucker (D) proposed the leasing of transportation right of ways to private companies and private ownership of some roads. Gov. Pete Wilson (R) of California is proposing a constitutional amendment to encourage privatization. Other proposals include selling off the state liquor business and privatizing child-support enforcement and juvenile incarceration.

Eight governors are pledging to bring market-oriented practices into government services. Gov. George Pataki (R) of New York, for example, announced plans in his state of the state address to use competitive bidding between public and private sectors on a large scale. Experience shows that when government agencies and private companies are forced to compete for a contract -- for example, picking up garbage -- government agencies often find ways to do the job better and for less money than the private sector.

*What are the tasks that only government can do? What steps can be taken to improve the efficiency of service delivery?

The final and obvious step in strategic restructuring is to make your systems work well. Once governors decide on what government ought to do, they can apply the strategies that have worked well in corporations. Where systems can be changed to allow fewer people to do the same work, personnel cuts can and should be made.

The governors are struggling with personnel systems that are at least as unwieldy as those of the federal government. Many are working to introduce merit and accountability. They are ending tenure for teachers, tying raises to performance, and making it easier to get rid of deadwood. Some of their efforts are unique, such as the commitment of Gov. Christine Todd Whitman's (R) of New Jersey to meet with union representatives during development of the budget. Or the plan of Gov. Bill Graves (R) of Kansas to allow agencies to keep half of the money they save through efficiency programs and use it for employee-incentive payments.

This class of governors is proving to be a creative group. You usually don't hear governors talk about such things as driver's license renewal, hunting license application, or permit processes in major addresses. But the speeches given by governors this year are peppered with such references. It's good politics: If you want people to feel good about government, make sure you fix the places where citizens have direct contact with government.

In one of the first times in this country that government has offered a money-back guarantee, Governor Whitman has directed agencies to develop timetables for making permit decisions and, whenever a deadline is missed, to refund the application fee and continue the process free of charge. Along the same lines, Gov. Zell Miller (D) of Georgia is looking to give a two-year limited warranty with every high school education. If employers find that a high school graduate does not have a guaranteed basic skills level, the state will pay for additional employee training.

Colorado's Roy Romer (D) is promising express driver's license renewal in shopping malls. Like a number of governors, he's investing in technology to help with customer services; he's planning to use the state lottery's computer network to expedite services such as granting driver's, hunting, and fishing licenses.

Without a doubt, the governors are onto something important: Satisfy citizens and change the incentives within government to spur quality and innovation. But they better recognize that doing the political equivalent of marching through the city streets with the heads of state employees on a staff makes good press but bad government. Downsizing arbitrarily could be the undoing of this class of governors.

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