Recently, the small band of Republicans in the Massachusetts Senate attempted unsuccessfully to tack an amendment repealing the so-called Pacheco law- the nation’s strongest anti-privatization law- onto a transportation bond bill. When moves like this are debated, the quality of managers, one of the most important reasons why governments need access to private-sector expertise, is almost never mentioned.
These days, privatization is usually defined as a process through which government contracts with private firms to deliver services traditionally delivered by public agencies. In theory, there is no reason why any government service could not be privatized. This extends all the way to sacred cows such as police and fire protection, elementary and secondary education, and even the armed forces.
Such presumably boundless potential may be why debates about how far privatization should go have become unnecessarily philosophical, involving stained-glass abstractions such as “public versus private goods,” “economic externalities,” “natural monopolies” and, of course, “the proper role of government.”
All of which ignore what may be a more pragmatic question: Has Americans’ growing mood of disenchantment with the apparent shortcomings of government increased their willingness to rely more on private companies to provide public services? ·
If it has, we ought to ask ourselves how profit-seeking, tax-paying private companies may be able to deliver better services for less than not-for-profit, tax-free public agencies. Privatization advocates cite a number of reasons such as operating efficiency, easier access to capital, better technology, the absence of conflicting goals and better management.
The role the latter plays in producing and delivering high-quality services with maximum efficiency is dangerously underrated. Efficiency requires managers who are bright, well-trained and highly motivated. The most obvious way to attract and hold on to such managers is to pay better than the competition.
But government agencies are at a serious disadvantage when it comes to attracting good managers. The salaries of elected officials tend to impose an artificial ceiling on how much public agency managers can be paid. This ceiling usually ignores the realities of the marketplace, but elected officials are reluctant to advocating higher salaries for themselves because they believe it looks bad to voters.
Since managers rarely earn more than their elected bosses, comparatively low pay means too many government agencies lack the management talent they need to deliver services efficiently.
Few professional managers are independently wealthy. Their choice of where to work reflects the financial realities of paying mortgages, supporting their families and providing for their children’s education. For the best managers, the public sector is rarely where they can earn the most.
Sadly, some recent newspaper reports have gone after the Massachusetts Convention Center Authority, one of the quasi-public authorities where managers can earn salaries that, though still not comparable, are at least closer to what professional managers can command in the private sector. One report criticized the increased compensation some MCCA employees earned thanks to performance-based incentives.
Perhaps it’s not a coincidence that the MCCA might be the best-managed public agency in Massachusetts. Executive Director James Rooney is an outstanding manager and knows that using performance-based incentives that link compensation to performance is a tool that can help him attract and maintain talent.
Given the uniquely American attitude toward government and civil servants, there is little likelihood that these salary constraints will ever disappear. So the only practical way to assure that public agencies are consistently well-managed may be to tum at least some of them over to private companies that are willing and able to pay top dollar for superior managers.
originally published: March 5, 2014