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The "Government Should Run Like A Business" Mantra: Julia Beckett University of Akron
The "Government Should Run Like A Business" Mantra: Julia Beckett University of Akron
Beckett GOVERNMENT
2000 SHOULD RUN LIKE A BUSINESS
JULIA BECKETT
University of Akron
The common phrase, government should run like a business evokes powerful ideas: It is a mantra.
This article considers the layers of connotation contained in this mantra, noting first that compari-
sons between government and business is a classic and constant theme in public administration. In
recent literature, the theme and focus of business-government comparisons has shifted to modeling
government after the market ideas of business. This article adds to this discussion by considering
formal constitutive factors present in three basic business forms—the sole proprietor, the partner-
ship, and the corporation. The article further asks whether any of these business forms provides use-
ful models for government. A fundamental concern is conceptualizing government within the con-
text of America’s business mythology that echoes in the mantra, “government should run like a
business.”
—Calvin Coolidge
What others see, and we often do not, is that business has an unusually power-
ful influence on the behavior, the attitudes, the beliefs and the perceptions of all
Americans. Business is central to our lives. We have an extensive business
mythology: businesses, business people, the fortunes made from business fig-
ure largely in the stories we tell of American heroes and heroines. Business has
a central role in our interpretations of our national past.
In our age of sound bites and video clips, a well-turned familiar phrase can be
influential. Many American images and phrases reflect business influences, or,
as Robertson calls it, “business mythology” (1985, p. 4). Government should
run like a business is a phrase that evokes powerful images and ideas. Govern-
ment and business have long been compared, but it seems the current iteration is
a mantra. Although a common phrase can carry meaning that is open to interpre-
tation and extrapolation, it seems that the focus of the current government-
business comparison has shifted.
The mantra is now found in the popular press (Osborne & Gaebler, 1992) and
in politics (Gore, 1993, Marshall & Schram, 1993). It seems that if the mantra,
“government should run like a business,” is said often enough and sincerely
enough, then a transformation will occur. In discussions of market management,
business ideas are extracted, adopted, and applied to government. Concepts are
substituted; for example, owner replaces citizen and customer replaces client.
The idea of taxpayer is supplanted with the notion that government services are
exchanged for value. Governments are urged to be entrepreneurial or engage in
partnerships. What underlies many of these comparisons and writings is the
foundational government-business metaphor.
The mantra is associated with the widespread, enduring, new public manage-
ment (NPM) political reforms. These reforms, calling for managerial or
business-type approaches to government, are connected to origins in both the
Thatcher and Reagan administrations (Hood, 1991; Mascarenhas, 1993; Pollit,
1990). Some give 1979 as the start date of this political reform, which continues
to dramatically change governance, public administration, and public manage-
ment throughout many nations (Peters & Savoie, 1998).
The mantra has also entered the study of public administration theory and
practice, where it is most often connected to the NPM movement. This academic
movement is a broad approach to governance, based in part on a rejection of pub-
lic administration and bureaucracy and in part of finding better methods to man-
age practical problems of governance (Bozeman, 1993; Lynn, 1996). The public
management movement aspires to “‘making a difference’ in public affairs”
(McGregor, 1997, p. 153); this is true of the political reforms. Countries that
have instituted NPM reforms and techniques include Britain, New Zealand,
Australia (Hood, 1991), Canada (Aucoin, 1996), Israel (Galnoor, Rosenbloom, &
Yaroni, 1998), Finland, and Sweden (Pollit & Summa, 1997). Kettl (1997) calls
it a “global revolution in public management.”
The mantra has been used in the past to elicit reforms. During the municipal
reform movement era (1895-1910) and the Progressive era (1910-1920), the
phrase was also evoked. The purpose of the mantra in the Progressive era was to
increase community political action by encouraging citizens to consider them-
selves active owners of the municipal corporation (Schachter, 1997; Stillman,
1974). The mantra is associated anew with political reforms of the global
NPM—but perhaps modern viewpoints on the government-business compari-
son have changed its meaning.
“Government should run like a business” is both a phrase and a metaphor.
Common phrases contain layers of connotations, and they tacitly include values
transmitted and received. The fact that a phrase evokes multiple ideas is part of
its power. Morgan (1997) has demonstrated how metaphor is intrinsic in our
understanding of organizations. Lakoff and Turner (1989) note how, in cognitive
linguistics, metaphors are essential to understanding but can also lead to misun-
derstanding. Further, in the political and social realm, there may be fundamental
misunderstandings of common images based on individuals’conservative or lib-
eral worldview (Lakoff, 1996). Metaphors, symbols, and phrases are both
abstractions and social convention (Yanow, 1996); therefore, it is worthwhile to
consider a phrase in common use.
The analysis of the mantra begins with breaking it into parts and focusing on
different meanings of government and business. Government includes federal,
state, and local government systems and structures. As a starting point, business
means a firm, company, or economic entity that produces or provides goods or
services for profit. But this definition of business seems to cover broad catego-
ries. There must be ways to refine and clarify. The word should is distinctive and
imperative; it is a directive. The simile should run like is not a simple compari-
son. Instead, it makes business an exemplar. There are a multitude of definitions
and imagery for run, including to go fast, to compete, to operate, or to have a cer-
tain form. The mantra makes business an exemplar for government, and this arti-
cle analyzes this business identity.
Government and business have been compared and contrasted throughout
public administration literature. To trace this connection would involve tracing
the history of public administration. This article suggests that variations exist in
what is meant by business in classic public administration literature. Current
public management writings also have variations on what business means, and
the critiques challenge whether the business comparison is appropriate. How-
ever, it appears that language in current writings reveals a shift in the compari-
son regarding business forms; this includes references to partnerships and entre-
preneurs. Accordingly, this article will explore the conceptual frame of business
forms, rather than production management or executive control, to discuss what
it means to run like a business. The three general types of business forms—the
sole proprietor, the partnership, and the corporation—will be analyzed. During
the discussion of these structural types of business, the expectations of business
will be compared to expectations of government.
are not evenly paired. Efficiency is a further comparison, but business or eco-
nomic firms ideally have net efficiency, and this is rare for government. Effi-
ciency in business is focused on maximizing profits or the bottom line, and effi-
ciency in government has focused on minimizing costs.
The “government should run like a business” mantra is associated with mar-
ket economics in both strands, the political reform and academic studies, of
NPM writings. Although the mantra seldom is advocated as such, it is worth
considering whether the meaning of the term business has shifted in this area.
Works clustered under the public management movement are varied and diffuse
(Bozeman, 1993; Lynn, 1996; Newland, 1994), but many of them adopt the view
that competition, business competition in the market, is the basis of comparison
between government and business (Behn, 1998; DiIulio, 1994). Within the
NPM, works connected to reforming the national government advocate govern-
ment change by reinventing, reengineering, and privatization (Hood, 1991;
Kaboolian, 1998). The initial point is often that the classic bureaucratic model
needs to be changed (Hood, 1991; Mascarenas, 1993). The fact that the classic
politics-administration dichotomy and classic Weberian bureaucracy have long
been challenged and discredited is often irrelevant.
Some interpret the mantra to mean that government should compete like busi-
ness. In this view, competition is viewed as a catalyst for business. Customers
are better served by competition. Innovations and improvements in services,
techniques, and products come from competition. Obsolete and inefficient prod-
ucts and services are disclosed and superseded through competition. In this
viewpoint, competition is a causal agent for progress; government should com-
pete like successful businesses and reap similar rewards. Although these are the
popular exhortations (Gore, 1993; Osborne & Gaebler, 1992), the more recent
works are more measured.
The need to change and improve government performance and results has
been considered essential; this is the message of the National Performance
Review. The 5th-year report card indicates that there are improvements but that
there is much to be done (Kettl, 1997). To achieve the change in performance and
results, the comparison again is government and business. Models and ideas for
the NPM have come from business and business literature, but rather that an idea
of business being a firm or a corporation, it is business practices and techniques
that are examined. Foremost is the elevation of the place of the market and the
idea of competition and exchange (Gore, 1993). Thus, the beginning point is less
the structure and interorganizational relation of business and more a considera-
tion of business as a seller and supplier in the marketplace. A critique of this
approach holds that it ignores the constitutional basis of our government (Moe,
1994).
The ideas of successful market exchange and competition are part of the
change in the view of business to which government is compared. NPM is based
on “enterprise economics” (Ross, 1993), which considers commercialism,
competition, and risk taking as beneficial. This focus in public management has
been called market-driven management (Terry, 1998). The NPM is bolder when
it posits that the current models and practices are outmoded (Barzelay, 1992;
Moore, 1996), and new models and new approaches are essential to adjust to
present and future demands. The questions of input, output, and measurement
are central in searches for efficient performance and results, but the measure and
emphasis should be on results.
Another view is that the grounding for NPM literature is eclectic, catholic,
and varied but still the predominant theoretical grounding coming from eco-
nomic or political economy paradigms (Behn, 1998). It emphasizes market
exchange language, measures, and mechanism, where ideas reflecting the senti-
ment that “government should compete or get out of the way” are studied under
categories of privatization (Finley, 1989; Kettl, 1993) and of deregulation within
government (DiIulio, 1994). It emphasizes new techniques invented or adapted
to fit the situation through reengineering (Thompson & Ingraham, 1996) or
innovation (Altshuler & Behn, 1997). As part of these discussions, business
entrepreneurships and partnerships are included as practices and techniques for
improvement. This inclusion of other business forms departs from, and perhaps
expands, the meanings of the business entity.
The nature of the comparisons between government and business and its
implications has also been questioned as a paradigm shift. Lan and Rosenbloom
(1992) have argued that a conservative political shift has led to the predomi-
nance of the economics-based approaches to governance in which business is
given supremacy. Reschenthaler and Thompson (1996) argue that this approach
is a new economics of organization, based more on technological advancement,
in which neither form of entity, business or government, have preeminence.
The new public managers reestablished a kinship with business management, not
because business was better than government, but because managers in both sec-
tors once again faced similar problems and opportunities and the business manage-
ment literature was full of interesting ideas that seemed relevant to meeting new
challenges. (p. 140)
This NPM literature has gathered serious attention and pointed criticism. Pri-
vatization is criticized for incomplete application of economic theory, often
emphasizing benefits without recognizing the cost (Thayer, 1991). One criti-
cism from Rosenblum (1998) relates to defining values: “The NPM [new public
management] would remake public administration in the image of business,
apparently without recognizing the degree to which the Constitution places sub-
stantive, procedural, and organizational constraints on government that simply
do not apply to private enterprise” (p. 1). Other critiques of these writings
involve government and public interest considerations—administrators’
responsibility to the public, their duty to enforce the laws, and the necessity to
work within the system to improve practices or provide redress.
Other public management writers analyze critically the general claims to
business predominance in certain situations. DiIulio (1994) begins his discus-
sion of deregulation with the following:
The nation’s federal, state, and local public service is in deep trouble. Many gov-
ernment agencies cannot attract and retain first-rate executives, managers, and line
staff. Most do not operate in a way that inspires public confidence. In reaction,
some observers say “privatize everything” others deny that serious problems exist,
and still others chant “run government like a business.” (p. 1)
But DiIulio’s next sentence is, “All three responses are misguided.” Behn cau-
tions, “In the United States it has become fashionable to worship the techniques
of business management and seek to implement them in government” (1997,
p. 3). Then, Behn analyzes innovation based on the purpose of improving gov-
ernment agencies’ performance, not just the innovation of anecdotal business
success. The NPM brings in different business ideas and practices than the clas-
sic comparisons; in addition to suggesting management techniques, additional
business forms—entrepreneurs and partners—are part of the discussions. This
public management literature also raises tensions about business.
Waterman, 1982). Current data paint broad pictures roughly indicating that for
each 2 business starts, 1 business fails; the ratio for 1994 was 1 failure per 2.63
starts, and the ratio for 1995 was 1 failure per 2.36 starts (Bureau of Census,
1998, Table 853). What is not clear is why these businesses fail. Many business
management books start with the premise that there is considerable room for
improvement in most businesses; Japanese management and Demming methods
promote the improvement of established business practices (Walton, 1986).
There are many prescriptions in the business management literature, but what is
common or acceptable business practice? Modeling government after individ-
ual examples may not translate well, the exhortations continue.
Whatever reasons there are behind the preeminence of business, government
is compared to it. But it is not clear what is meant by business. The term business
is used in a multitude of ways, shapes, and forms. Big business, or corporate
business, often is distinguished from farmers, small businesses, and entrepre-
neurs. The large corporations—in power and impact on the national econ-
omy—are commonly cited as evidence of the dominance of business (Berle &
Means, 1932; Kaysen, 1996).
In many discussions, not only are organizations generic but the “generic”
business type is assumed to be a large corporation. This presents problems.
Earlier, the large corporation was described as the characteristic institution of our
market economy. So it is, but it is hardly the representative one: the typical busi-
ness is not organized as a corporation, but rather as an individual proprietorship or
a partnership. In 1990, the latest year for which statistics are published, a total of
20.0 million nonfarm businesses reported to the tax authorities: 16.3 million pro-
prietorships and partnerships, 3.7 million corporations. The corporations
accounted for 90 percent of the sales and receipts reported by all business firms.
The were some seven thousand corporations with assets of $250 million or more,
the largest class demarcated. These accounted for more than half (51 percent) of
the total sales and receipts of all businesses. Large corporations were most domi-
nant in manufacturing (2,602 with 74 percent of sales), utilities and transportation
(716 with 76 percent of sales), and finance and real estate (1,503 with 71 percent of
sales). (Kaysen, 1996, p. 5, footnote omitted)
Sole Proprietorship
The first and simplest business form is the sole proprietorship (Haynsworth,
1985; Kostant, 1996). From 1980 to 1994, it was the most common business
form in the United States (Bureau of the Census, 1998, Tables 833 and 834). The
business plans, decisions, and information are in one person. That individual
invested the capital, owns the assets, and receives the income and profits. That
individual is responsible for the obligations, debts, and risks. The individual
maintains secret and discrete business information.
A sole proprietorship is considered old-fashioned and basic. There are no
particular founding requirements, so if someone wants to start a solely owned
business and holds himself out to the public as being in business, then the state
and the courts recognize this (Kostant, 1996). There is a certain romanticism
about sole proprietors—consider the neighborhood shoe repair shop or the
TABLE 1
Downloaded from arp.sagepub.com at UNIV OF SOUTH DAKOTA on April 8, 2015
Partnership Two or more Shared by Shared by Shared by partners and personal Either or both persons can make decisions that bind.
persons partners partners Can be based on verbal or written documentation.
Corporation Multiple persons Contributed by Dispersed and To the entity. The risks of the By the entity. Decisions and operations are governed
or entities formula of distributed business are borne by the by formal articles of incorporation and must be
shares by shares corporate entity. There is limited filed with the state. Separation of normal decision
liability and risk to owners making from ownership. Operations are in control
of shares. of an elected board and appointed executives.
Control is based on a vote per share at meetings
on general policy and directions.
Beckett / GOVERNMENT SHOULD RUN LIKE A BUSINESS 195
sculptor who has her own studio. We attach ideas of creativity, craftsmanship,
and personal effort to these businesses. They are often small and local and have
the allure of the entrepreneur.
The sole power, assets, and control are equated with the ability to act quickly,
decisively, and efficiently. Entrepreneurial spirit also denotes a big stakes
approach with possible high rewards with attendant high risks of failure. Sole
proprietor businesses may grow and expand to have many employees and
hierarchies, but there is one ultimate authority that resides in a living, breathing
human being. As the business becomes more complex the sole proprietor form is
discouraged; often the tax and legal advice is to incorporate for to shield assets
from risk and liability and to reap tax benefits (Haynsworth, 1985). The unitary
nature and the high risk go against type for government, which is expected to be
collective, inclusive, prudent, and conservative.What are the empirical data and
sources that consider these three business forms? This section considers
established legal doctrine relating to defining factors for the major business
forms. The definitions and criteria were developed over decades of practice,
much of the doctrine are extrapolated from case analysis of how judges analyze
and trace decisions within the common law framework. Analysis of business
through form, including ownership, investment, profits, risks, and decision
structures is common in legal doctrine; in law, business entities have rights,
obligations, and powers.
Government and sole proprietorships share links to American individualism.
The paradox is that we often associate organizational actions with an individual
as if that person has sole power and authority. We link administrative actions to a
president, a manager, or an administrator with an executive title. The indepen-
dent business owner does not translate well. Consider an example: The owner of
the coffee shop down the street opens his store on an irregular schedule. Most
weekday mornings, he opens sometime after 9:00 a.m.; on some weekdays, he
does not open it at all. His arbitrary hours suit him. He may lose some customers,
but his regulars understand and appreciate this idiosyncratic approach. This uni-
tary power expected in business violates both the republican structure and the
democratic ideals of American government.
Partnership
In a partnership, at least two individuals form the business; they own the capi-
tal and they split the income and profits. The partnership is a cooperative,
profit-motivated effort of living, breathing people. The framework of relation-
ships, rights, and expectations is well established (Kleinberger, 1995, p. 201;
Mayers, 1969, p. 2). Partnership business, with attendant legal rights and liabili-
ties, dates back to ancient Rome (Mayers, 1969); Britain had a partnership stat-
ute in 1890. In 1914, American lawyers promulgated the Uniform Partnership
Act to standardize the rights and obligations of business partnerships.
Rights and obligations of partners reflect the combined and ongoing effort of
individuals (Kleinberger, 1995, pp. 201-202). One partner can bind all the other
partners to a deal, and this makes each partner responsible for the results of any
partner’s actions or debts. This requires cooperation and collaboration between
individual partners, and it also demands vigilance and oversight regarding part-
nership actions. Partnership decisions and information are controlled within the
firm and are not disclosed to the public.
Partnerships can be established with a handshake; no formative written docu-
ments are needed. If two or more individuals hold themselves out to the public as
being in business, then the state and the courts recognize the partnership. Part-
nership form is frequent when individual business owners’ identities, skills,
abilities, reputations, and efforts are connected with providing services. The
type of business activities where parterships occur are in trade, finance, insur-
ance, and general service businesses (Haynsworth, 1985: Kleinberger, 1995).
However, for the years 1980 to 1994, the partnership is the least common busi-
ness type behind both proprietorships and corporations (Bureau of the Census,
1998, Tables 833-834).
Partnerships can be enormous and bureaucratic. For instance, accounting and
law firms sometimes have from dozens to more than a hundred partners. Again,
the standard advice for large partnerships is the transformation into corporations
based on consideration of taxes, liabilities, and control issues (Haynsworth,
1985).
The variety of uses of the term partnership in public administration literature
is not consistent. Partnership is used as a euphemism for dispersing or shifting
responsibility, a type of agency relationship, and a technique. Partnering is a
management strategy for achieving goals (Berman, 1998) or for reducing the
size of government (DiIulio, 1994). Other public partnership discussions relate
to contractual relationships or agreements regarding service delivery, such as
trash collection (Kettl, 1993). The analogy of the partnership in public admini-
stration and government often means shared interests in common goals, and as
such, it only partially meshes with the business partnership form.
Corporation
The third business type, the modern corporation, dominates American busi-
ness (Berle & Means, 1932; Blair, 1995; Kaysen, 1996; Kostant, 1996). The
business corporation is (a) established by founders, (b) has an identity, (c) has
existence independent of the people who own it, and (d) has an indefinite exis-
tence. The corporation’s founders determine the powers, duties, and responsi-
bilities in the formative documents, particularly the articles of incorporation,
that must be filed with the state. Unlike a sole proprietorship or partnership, the
corporation is not an entity until a state recognizes it, and then the corporation is
considered a distinctive legal person independent of human individuals who
own or operate it.
shares. Citizenship rights are, and should be, broader than shareholder rights
regarding participation in decision making. Stivers’s (1991) model for an active
and responsive citizenry asserts that citizen participation provides great value in
the quality of governance. People are citizens and residents. They do not have a
cash value or an exchangeable property right in their citizenship; instead, citi-
zenship imposes obligation onto the public.
This analysis shows numerous difficulties in business as a model for govern-
ment. Monolithic control of the proprietor and small group rewards of the part-
nership do not translate well to the social and community aspects essential to
democratic government. Fragmented ownership, wealth-based voting power,
and the preference for secrecy are the three reasons that the corporate business
form is a flawed exemplar for government. Business, in each of the three major
types, serves better as a foil to government based on the expectations, traditions,
and criteria applied to each.
CONCLUSION
[Some] use the word paradigm in the Kuhnian sense, to mean something akin to a
religious conviction that organizes one’s perception of the world. Paradigms are no
more interchangeable or ephemeral than convictions of other sorts. They are
“ways of seeing” or weltanschauungen (world views), conditioned by family and
community backgrounds, education, training, experience and so forth—but that
cannot be removed or replaced like a pair of eyeglasses. (p. 31)
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Julia Beckett is an assistant professor of public administration and urban studies at the Univer-
sity of Akron, where she teaches in the M.P.A. and urban affairs Ph.D. programs. Her research
interests include government formation, public finance, public law, local government debt man-
agement, and developer districts.