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The public sector needs more commercial nous, but this is not the same as becoming a business

Wednesday July 8th, 2015

When speaking to many friends and colleagues across the public sector (and indeed often to those in the social and charitable sectors), I am increasingly finding that the word ‘commercial’ creates some very strange and generally defensive reactions.

“We are not a business.” “We are not commercial.” “We are not about profit.” “That’s for the business sector – not for us.”

John Tizard

John Tizard

These and other similar responses ring out time and time again. And on some occasions, I even find them uttered by those in the procurement profession, and the finance or legal departments.

This kind of reaction is distinctly unhelpful. The truth is that the public sector and many charities too have absolutely no other option but to develop more commercial savvy and understanding as well as commercial skills if they are going to survive let alone thrive in the contemporary world and economic context.

Now, this is not to say that the public sector should cast aside its very important public service ethos and values. I remain as committed to the latter as I have ever been and the public sector should always protect this ethos and proudly promote it. The public sector should never pursue profits at the expense of public service and accountability or of genuine public value. However, my argument is that some ‘commercial’ attitudes and skills can ensure the sustainability of the public service ethos.

Therefore, I believe that every public sector leader and senior manager has to have the following attributes – in addition to her or his professional skills, commitment to public accountability and public service ethos:

  • a community/citizen/client/user/beneficiary orientation that places these stakeholders as the most powerful voice in shaping service delivery; public services and those of charities exist for the benefit of communities, citizens, users and/or beneficiaries
  • a strategic approach including an understanding of objective setting, strategic planning, business planning and options appraisal
  • an understanding of risk; how to evaluate and best to allocate it
  • a knowledge of the costs of every activity and the opportunity costs too
  • an understanding of the impact of all activities and expenditure on them; and the impact of reductions and/or increases in expenditure
  • an understanding of revenue-earning opportunities; and in trading businesses, an understanding of how to secure investment as well as the application of cash-flow management
  • the ability and desire to improve productivity to secure best outcomes
  • negotiating and contracting skills which are essential for partnership working as much as for outsourcing and the purchase of goods and supply
  • pragmatic and outcome driven procurement expertise – as opposed to cheapest is best
  • confidence to deal with others including business sector partners, suppliers  and contractors

 

I regard these as core ‘commercial’ attributes. All public sector bodies require some internal commercial expertise and capacity but all public sector leaders and managers benefit from appreciating the discipline of commercial thinking and its application. The public sector and thus the public, whose money funds such services, are therefore disadvantaged and short-served if these skills and approaches are missing and/or weak.

To be clear, this is not a call in support of outsourcing. However, in order to wish to outsource as a service delivery option, I contend that you need to apply a commercial approach to identify the reasons why you are not going to outsource, and to evaluate the alternative options such as viable ‘in-house’ provision or ‘spin-outs’ or redesign and process re-engineering. Whether to outsource or not should be a political decision informed by strategic, operational and commercial considerations.

With ever diminishing resources, the modern public sector has to make every pound of expenditure maximise its contribution to public well-being. This requires a public sector that has the right skills and mindset. Commercial acumen is one of these skills and needs to be an important element of the contemporary mindset.

Of course commercial staff no more than accountants or even economists should dominate the public sector. They should, however, add to it strength and resilience by supporting and advising professional and political leaders and senior managers. In turn, the latter need to recognise the value of greater commercial expertise whilst at the same time holding true to the interests of customers, citizens, service users, beneficiaries and communities, as well as their public service values.

Having more commercial nous, skills and capacity can enhance the public service ethos – it should never be an excuse for undermining this ethos.

 

John Tizard
Online: www.johntizard.com
Twitter: @johntizard
Linked In: John Tizard

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