Be more commercial they said – really?

This article was originally published in The Mandarin, March 2020.

 

The public sector is often exhorted to be more commercial in its behaviours. “In some ways it’s a bit of a nonsense”, says MD of Kiah Consulting, John Glenn. “Dogma, like any other dogma, doesn’t make sense. The public sector is about spending money to deliver a social good. There is nothing commercial in that, and they shouldn’t try.”

Certainly, in dealing with the private sector, the public sector needs to be more knowledgeable. You will get better outcomes if you understand the perspective of the other party. Glenn says that’s a two street, somewhat disillusioned at elements of the private sector who don’t take sufficient care in dealing with public sector issues and values.

“Commercial like” and “procurement” are also often conflated.  Certainly, procurement is a commercial activity, but the trade of value is done on a different basis in the public sector.  B2B is about improving each other’s bottom line – that’s the mismatch in communication between B2G – it’s not about the bottom line for one party but delivery of a social outcome. The concept of value is complicated, making “be commercial” just a bit too simplistic.

Nor do we want to shoehorn procurement, a surrogate for commercial-like, into social service commissioning.

“Follow the procurement rules, commission services like you are buying a product.” This the credo that is starting to surround commissioning. If you are buying a product that approach is fine, but commissioning social services is so much more.

Firstly, you are likely to be engaging “not-for profits” and “for purpose” organisations. They behave differently than “for profits” where their behaviour is driven by their interests – an outcome other than the bottom line. Engaging them around money in return for delivering on your agenda will almost certainly fail where neither money nor your agenda addresses tehri interests.  “behaving commercially’ will misalign rather than align interests – and aligned interests are the foundation of a good deal.

Secondly commissioning is about adaptability. Social delivery requires a range of organisations to contribute to an outcome, the effectiveness of that combined contribution measured, and the contributions adapted for better effectiveness. “You can’t contract outcomes, only outputs”, says Glenn, “It’s a mistake to think they are the same!”

Outcomes, like risk, remains with Departments, the buyer. Too much lazy thinking in this space. Outcome owners need to keep control, contracts need to be adaptable and traditional procurement processes might be useful but shouldn’t control commissioning.

It’s not to say that more commercial awareness and understanding isn’t valuable, it clearly is.  Purchasing of goods and transactional services is highly commercial like, the public sector should be knowledgeable. Procuring complex services, capabilities and outcomes requires commercial acumen but in fact is not really a commercial activity – it requires the integration of delivery into a value chain that is not about profit and the bottom line.

Process and policy are essential in every organisation – but they shouldn’t over-ride clear thinking and innovation – and they should not be an excuse for poor outcomes. Manta’s such as “be more commercial” are a hallmark of lazy thinking.  Doing it the way the everyone else has done it before simply delivers everyone else’s outcome – and that doesn’t seem to have worked very well.

To the contrary of the opening statement, the public sector shouldn’t be more commercial like, it should be more public sector like. Knowledgeable, experienced, inquiring – developing solutions and approaches that meet social delivery and public sector outcomes in a complex world of public and private sectors.

They should know their business, the public service imperative – applying commercial acumen in a public sector context.

Kiah’s Insights into Industry program quickly gives public servants greater appreciation of how their peers in a private firm approach a project. Join one of their free micro masterclass on Wednesday 25 March at Kiah Offices Canberra to gain a high-level insight into how industry works and why it’s important to understand.