Business has no Business Getting in the Business of Government

Government and business have different objectives, attitudes and styles and should not be mixed for either to be successful

Every time there is a rising tide of frustration with governmental inaction, inefficiency, bureaucracy and gridlock, (and when is that not the case?) there is a hue and cry that “government should act more like business.” People have this wishful illusion that the way to make government better is to turn it over to business leaders. That would be a terrible mistake to make!

A Sample Of Business Leaders as Politicians

There have been a number of individuals who have sought (and exposed their bloated ego) to parlay their business success into national political leadership. Until now, the most prominent business leader to do so was H. Ross Perot who suggested his business experience running Electronic Data Systems (EDS) qualified him to be President of the United States.

Frustrated by a languid government, waste and fraud, budget deficits and an expanding national debt, Perot received almost 20 percent of the votes in the 1992 presidential campaign. Perot expounded on his rationale for putting business in charge of government by saying, “Keep in mind our Constitution predates the Industrial Revolution. Our founders did not know about electricity, the train, telephones, radio, television, automobiles, rockets, nuclear weapons, satellites, or space exploration. There’s a lot they didn’t know about. It would be interesting to see what kind of document they’d draft today.”

His point – and one that still resonates today – was naively simple:  If one were successful selling computer services or making automobiles, they were then better qualified than mere “politicians” to run a modern government. Perot was so successful at touching this “business can do it better” national nerve that in June 1992 he actually led in the election polls over both George H.W. Bush and Bill Clinton. Only by Perot’s self-destructive, egocentric actions did he demonstrate to the electorate that he did not have the temperament to be a political leader and this tarnished his attraction and he became an irrelevant also-ran.

Although there are many who question Perot’s business tactics and activities, there is no doubt that he was exceptionally successful as a business leader. He founded and built EDS into one of the largest technology service companies. At the time of the 1992 election, all of Perot’s rants against the inefficiency, fraud and waste in government came with a fetid whiff of hypocrisy since EDS only achieved real success after it began to receive billions of tax dollars from the government to administer Medicare. (Today we have Michele Bachmann spouting the same duplicitous rants against government subsidies while simultaneously filling  her purse with hundreds of thousands of dollars in government subsidies for her family farm.)

In the current free-for-all effort to secure the 2012 Republican presidential nomination one candidate – Mitt Romney – is flaunting his credentials as a “successful businessman” (while running from his record as governor of Massachusetts) to suggest he is best qualified to “bring some business sense” to government. Romney makes the direct claim that his business experience means that as president he will be able to create 15 million new jobs. Romney’s departure from economic realities should be obvious: In the current recession businesses have clearly shown that their primary objective  is to make a profit, not save or create jobs.)

If the measure of Romney’s success in business is that he put hundreds of millions in his own pocket, then he has a right to crow. But take a good look at what created the former Massachusetts governor’s business success. Romney was the leader of a leveraged buy-out private equity firm that made millions on the backs of companies that ultimately collapsed, putting thousands of Americans out of work.

That track record raises serious issues about his ability to provide service and add value. The New York Post reported (Feb.2011) that at least five of the companies that Romney’s firm (Bain Capital) acquired and leveraged with debt ultimately filed for bankruptcy; while Romney and his partners pocketed $578 million in profit. Some success! The accomplishments of Perot and Romney and how they achieved business success is a minor but telling point in the discussion of the fallacy of business in government.

Business and government are different animals

There is a very real management difference between running a business and running a country.

Successful political leadership is overwhelmingly driven by learning the art of compromise to achieve the best result possible at the time. (One of the primary reasons our government is in a quagmire of deadlock is the lack of political leaders schooled in the art of compromise.)

Successful business leadership is preeminently driven by single-minded focus and an uncompromising conviction to achieve desired results.

This fundamental difference means that an individual can achieve remarkable success as a business leader but the same temperament and approach that triggered this success is a recipe for failure as a political leader. Likewise, success as a political leader rarely translates into success in business. (Except, maybe retained as a high-paid director.)

There is very good reason for this conundrum. The objective of government is altruistic: it brings order and security to society by providing the services that society needs and demands. The objective of business is mercenary since its primary objective is to create as much profit as possible for its shareholders; with little regard for others. This does not mean that government and business must be in congenital conflict, but just that their the objectives and processes of achieving them are different; and this requires different styles of leadership.

Sorting Through the Different Roles

Government has as much a duty to create an environment for successful business opportunity as it does to provide services and protect the interests of individuals. For instance, for business to thrive, government has the responsibility to establish a rule of law through enforceable contracts and respect private property. It must also create an objective judicial system to resolve legal disputes, and offer patent protection to promote innovation. It is also the duty of government to assure that there truly is a “free market” economy and that no one company can monopolize an industry or take actions that are counter to competition or the basic rights of consumers.

In essence, then, government should function to promote self-fulfillment, self-improvement and self-reliance to make room for entrepreneurs who are the driving force of the economy while providing services and protecting the rights of individuals. Herein lays the conflict with business leaders becoming political leaders. What makes an individual a successful business leader –rigid efficiency, laser focus on profits and the elimination of competition, rather than espousing it – are all traits that make for a bad candidate and political leader.

While it is true that numerous accomplished business leaders have served effectively in government, these have generally been in the executive branch as cabinet secretaries such as Treasury, Defense or Commerce.  As important as these posts may be, they require the implementation and administration of policy, rather than setting and gaining support for policy. On the other hand, the pedantic, collegial, compromise-filled legislative branch has always proven to be a graveyard of frustration for business leaders.

And the Moral of the Story …

Government and business are different animals, with different objectives and styles of leadership expertise needed to be effective. The purpose of government is to spend the money it collects to provide the services we need and want, not to make a profit. The purpose of business is to make a profit, while providing as few services and spending as little money as possible. Government leaders can rightfully be criticized for spending more money than is given to them or for failing to provide efficient services, but not for failing to make a profit. When profit is the motive, then fewer services is the objective.

Successful political leaders exhibit the ability to understand, sift through issues and work with divergent interest groups in order to arrive at the appropriate balance of resources and services provided; recognizing all the while that they do not have full control over the process. This requires patience, flexibility and willingness to compromise. These very traits are an anathema to the successful business leader who needs to be impatient for results, inflexible in the vision of what is to be achieved and is unwilling to compromise on the need to make a profit; and who also has the power of control. Governing a government is different than running a company.

So, the next time someone suggests that they are qualified to run a government because they have successfully run a company, think of it in the same terms as someone who has flown millions of passenger miles on airlines and thinks this qualifies them to be the pilot. The results in both cases would be disastrous.

 

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