Sunday, July 01, 2007

Business leaders and politics

Chris Dillow asks why business leaders rarely make a successful transition to politics. He offers a few explanations. Firstly, that they just got lucky in their business career. This is counterintuitive and I'm not sure why we should believe it to be true across business although it is clearly credible in financial management. Secondly, that they need an absence of media scrutiny to do their jobs properly. I'm not sure this fits with the realities of modern business where a major position comes with a huge amount of media attention. Finally, the possibility that business success is based upon instincts which cannot be used in politics where you need to be able to explain why a decision is being taken more convincingly. This might be true for smaller businesses where it is more often possible for someone to create success through their will alone but in large corporations a leader will need to bring the staff with them.

I think the real explanation can be seen with another look at the Buffet quote Chris uses:

"When a management team with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact."

The economics of the businesses where corporate captains such as Archie Norman succeed are good. They are running organisations well suited to their task, or at least sufficiently well suited to create success. The economics of the big, politically managed state are bad. New leadership won't change things unless that leadership is willing to change the structure. One can question whether business leaders would be willing to change the structure of government in a way that career politicians have not been. However, the question is largely theoretical. Business leaders have never been given an oppotunity to fundamentally change the structure of government.


Anonymous said...

I largely agree. I think the problem is really very simple; in business people are rewarded for success and punished for failure, in government people are rewarded for failure and punished for success.

A business that does a bad job goes bust. A government department which does a bad job goes whining to the media and politicians for more money and usually gets it. Running a business that does a good job and makes a profit is hard, running a government department that does a bad job is easy; any monkey could do so.

I'm sure a business leader could make government work much better, but they would have to completely turn that motivation system around so that success is rewarded and failure punished. That won't happen, because no politician will let a government department go bust and close it down; big, bureaucratic government is simply broken by design.

Also I have to wonder whether we even want competent government. The incompetent government we have is bad enough, just imagine how bad it would be if they could competently enforce their insanely stupid policies.

Vino S said...

I think Chris Dillow makes a good point re publicity. Many of the worst government decisions are made when there is an attempt to chase headlines (e.g. the Dangerous Dogs Act). Businessmen generally avoid having to make their decisions in the full glare of publicity.

Additionally, of course, the success of a business under capitalism is easy to measure. It is how much profit it can make. However, for a government department, part of the difficulty is what metric to use to measure success. For example, for the Home Office, is the correct metric the crime rate. if so, there are all kinds of recording problems with it. For the Dept of Education, is the exam pass rate the right measure of it? If pass rates go up, though, then you get the usual chorus of complaints from the usual commentators that they are getting easier. So, what is the education system aiming at?

It is the difficulty in picking a clear metric to measure output in a non-commercial setting that, i think, must feel most wierd to businessmen entering politics.

James Higham said...

...Business leaders have never been given an oppotunity to fundamentally change the structure of government...

They're too busy running businesses.