A Strategic Framework for Devolving Responsibility and Functions from Government to the Private Sector

A new element has found its way into government decision making in the United States as public officials are asked to justify government funding of services and direct government provision of services. Whether a job belongs within or outside government is a very broad policy issue that relates to personal values and views concerning the relationship between the individual and the state. Without trying to answer that question here, this article begins from the premise that a particular function has been judged by the political process to be the responsibility of government. The article seeks to develop an approach for deciding how the function should be carried out--directly by government, or indirectly through the use of a non-governmental organization. This is a decision that government managers must make every day. The first part of this article examines what might be termed the "functional-matching" approach to privatization. It begins by delineating the distinguishing characteristics of government, nonprofit, and private organizations, and then assesses the degree to which those characteristics impede or facilitate the performance of a carefully defined set of typical public functions. The second portion of this article seeks to put the theory into practice by beginning the process of developing a framework and a method for making such decisions. The functional-matching process outlined here requires strategic thinking. It is not a straightforward, formulaic set of tasks: It requires decision makers to ask a number of critical questions and then to use their judgment and experience in framing a decision. Approaches to Privatization The modern impulse toward privatization is motivated by various perceived problems that it seeks to solve. The first is the supposed inefficiency of public enterprises due to the absence of the profit motive. The resources obtained by managers in the government sector may not be related to the revenues they generate, but to the importance of the service they deliver. The justification of costs is more important than the potential for revenues. In the private sector, operating resources and capital investments tend to be based on the potential for payout. By removing the relationship of revenues to expenditures, it is difficult to impose a downward pressure on costs, and therefore efficiency is not always rewarded. The second is the problem of over-formality--too many rules governing hiring, purchasing, budgeting, and the scope of activities that may be undertaken by an organization. The third is political influence in the process of managing activities. A fourth problem, more common outside the United States, is state ownership and financial losses from enterprises that do not perform traditional governmental functions (airlines, steel mills, shipyards, railroads, auto factories, phone companies, etc.). Most scholars of public administration assert that efficiency, organizational informality, and apolitical management are not the only values that organizations should be designed to pursue. Taken to extremes, efficiency, informality, and depoliticization of management would be opposed by advocates of privatization as well. Consider the following extreme examples: * Efficient law enforcement might execute presumed murderers on the spot to save the costs of legal processes and incarceration. * An organization without rules and structure would probably not have an accounting system and might simply disperse funds from a big box of cash in a drawer. They might hire staff and promote them on the basis of race or gender. * An organization implementing a program without political concerns would feel no pressure to be accountable for decisions and might be free to use impoverished elementary school children as a labor force. In a complex, interconnected society and economy there are, in fact, no purely private organizations. …