Government institutions exist for a different purpose than businesses, and they should operate by a different set of rules.

Much of the recent political chatter has claimed that government is inefficient, inept, and wasteful, and the oft-cited remedy for such failures is to make government—including public education—act more like business. After all, isn’t it capitalism—the enterprising spirit, the competition, and the focus on the bottom line—that has made this country great?

As someone who studied economics and worked in business for 20 years, I am very much a capitalist, so on the surface this point of view has appeal. But even a cursory review will demonstrate that these arguments miss the point: Government institutions exist for a different purpose than businesses, and they should operate by a different set of rules. These distinctions are not trivial and are not just based on a mindset, but rather by specific design and for specific purposes. I have grouped these distinctions into four specific areas to consider when we evaluate the effectiveness of our governing institutions and our elected leaders. These areas are (a) mission and focus, (b) risk profile, (c) decision-making, and (d) measuring value.

Mission and focus

In business, the mission of the organization is to deliver return to shareholders (i.e., make money). Of course, “mission statements” are often presented as the way in which that organization will create value (e.g., Google’s mission is to “Organize the World’s Information”), but these mission statements are a means to an end—the end being to maximize shareholder value. This profit motive is the driving force behind capitalism and the catalyst for innovation, efficiency, and competition.

For more on school reform, see:

If education were a business…

Readers sound off on value-added model, district efficiency

Government agencies, on the other hand, are not motivated by profit, but rather by a “mission” in the more literal sense of the word, e.g. to educate children, to fight fires, etc. In this way, government agencies are more like nonprofits than for-profit corporations. This very purpose shapes the goals set by the organization, the types of people it hires, and the context in which those employees work.