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Private vs. Public Management: Trends, arguments, responses Discussion 16 July 2006 Five Little Words “We’re looking at Private Management.” After the Shock Understand the political context Analyze what the public owner wants to achieve Adapt … adapt … adapt Public vs Private Management Realities “Public and private management are fundamentally alike in all unimportant aspects.” Wallace Sayre Convention Centres: Public or Private Business? Rationale for Public Involvement To generate tourism business To support tourism industry To stimulate redevelopment To promote regional exports To promote foreign trade Public & Private Realities Drivers Public Private Political Authority Profit Public good Market Share Budgets Competitive position Balancing diverse Customers values/needs Operating Environment “Fishbowl” public scrutiny Autonomous Entrepreneurship is suspect Entrepreneurial Red tape/Rules, policies Flexible The Political Climate 1. Fundamental pressures for change: • Global economy • Dissatisfied citizens • Fiscal crisis 2. Public Mood • Pressure to increase effectiveness • Tax burden a major issue • Non-government groups competing to provide traditional government services High customer expectations Private sector values pervasive Supportive of privatization Business increasingly influential • • • • The Political Climate 3. Common Public Perceptions • Are responsible for inefficiency and waste • Are ineffective an non-functional • • • 4. Goal is to maintain status quo for types, standards of service Process more important than results Administrators, not managers Government Responses • Downsizing public service • Examining what should/should not do or pay for (essential services) • • • Cost effective service delivery Customer focus Benchmarking and performance measurement The Political Climate 5. Operating Practices of Governments • Direct control / management • Independent authorities or public benefit corporations • Contracting out (privatization) It’s a New World “It’s all so simple, Anjin-San,” the confused captain in Shogun, shipwrecked in a strange land, is told by his Japanese lover. “Just change your concept of the world.” Today in Convention Centres 1. Forces Driving 2. New tools of trade: • Efficiency • Innovation • Partnership Forces Driving Private Management in Convention Centres Growth in supply—steady over past two decades Increased competition Downward pressure on pricing Increased operating deficits Reduced government resources More competition for limited resources Benefits being questioned Transition for Convention Centres Objectives: Economic Impact Revenue gains Protect Public assets Market share Provide community service Reduced or zero subsidies Why Private Management? Creates distance from: bureaucracy/government constraints Allows facility to be managed as a business • Less public resistance to use of competitive business concepts and practices Goals are: • Reduced expenses • Increased revenues • Lower operating deficits What Private Management Companies Offer: Efficient staffing More customer focus (user friendly) Corporate support (e.g. HR, marketing) Value-added services National service contracts for suppliers (bulk buying) Revenue maximization—yield management In-depth industry knowledge Negotiation strength Specialized management expertise Benchmarking Expansion and Building Services Private Management is a Trend Rapid growth for two decades Current growth with new projects In existing centres: to improve performance Example of Private Management Growth (SMG) (North American public assembly facilities) 200 180 160 140 120 100 80 60 40 20 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Arguments Against Private Management Community needs not balanced with bottom line approach Aggressive performance forecasts sometimes not achieved Limited competition among management companies Can Public Managers Achieve the Same Results? Professional management not unique to private sector Management mindset must adapt to new realities Political constraints must be loosened Public trust must be gained Final Thoughts Publicly owned organizations remain public Public will must be clear regarding goals Public must understand costs of any decision Some Questions Is the current trend toward privatization of management healthy? Can public managers adapt to a private management style? How do we know if a public agency is doing a good job? Can the bottom line be clearly defined? Can political authorities give public managers the latitude to act like private managers? “Many activities are in the public sector precisely because of measurement problems: If everything was so crystal clear and every benefit so easily attributable, those activities would have been in the private sector long ago.” Henry Mintzberg