Thursday, 11 February 2010

Accountability in the Public Sector

I have worked in the public sector for nearly three years, and have previously written an article comparing the different career structures between them. In this follow up article, I'd like to compare them in terms of their different levels of accountability and risk appetite.

Accountability and risk appetite are very much related. Your level of accountability will correspond to a high degree with your level of risk appetite. As an example of this, you only need to look to the investment bankers who have wrought global financial crisis. With little accountability for their actions, they were free to take greater risks, and thus plunge the rest of us into recession.

The higher the level of accountability, the lower the level of risk appetite.

Local government is a public body that serves its community and citizens. It is paid for in part through the generation of revenue streams from council tax (paid for by the tax payer), and in part from central government subsidies.

Local government is therefore accountable to the tax payer, as they largely pay for it. This accountability affects the level of risk that any local government body is able to take. There would be a public outcry if a local authority or public body invested heavily in a new service, system or project, only for it to fail.

This is a scenario that has happened frequently in central government IT projects, so experience shows us the level of public dis-satisfaction when such projects become derailed.

When a new project is proposed, the risks are assessed very carefully. If the risk is too great, then the project is stopped immediately. It is far better to work on projects that have a higher degree of success, and will deliver tangible benefits to the tax payer (who pays for them remember), than to risk wasting investment on projects that carry a higher degree of risk, where there is the possibility that little or no benefit will be delivered.

In the private sector, accountability stops at the board room with the share holders. Any investment is privately funded, and so does not come from the public purse. Therefore, there is a far lesser degree of accountability, and reciprocally a higher degree of risk appetite.

In short, the private sector has a higher degree of risk appetite compared to the public sector.

Apart form the differences in public vs private funding, public sector bodies do not compete with one another. One local authority has no need to compete with another local authority. The complete reverse is found in the private sector, where businesses operating in the same market space will compete for customers and business. One way of gaining new business is to offer a product or service that your competitors don't. To do this requires investment in new technologies, skills and tools in an attempt to gain a competitive advantage. This competitive model simply doesn't exist in the public sector.

The different levels of accountability and risk taking dramatically change the landscape of how projects are initiated within each of the different sectors. In the private sector, using private investment, and with the carrot of possibly gained new business and therefore increasing your revenue streams, far higher levels of risk taking can be found. In the public sector, with public investment and no competition, much lower levels of risk taking are found.

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