The public sector is commonly perceived to be stuffed with overstaffed bureaucracies and far too many tiers of administration, and therefore it is usually concluded by external commentators that private companies produce far better leaders.
It is probably true that the public sector cannot generally match the agility and risk taking capabilities of business entrepreneurs. On the other hand, most right thinking people expect public servants to preserve the public good and act in their long term best interest and this is not a recipe for entrepreneurial behaviour.
“Research shows the differences between public and private sector leadership are not as great as some people might think”
Generally speaking, a hospital cannot afford to fail. It has to be there for its patients. Hence the reason why various unsuccessful attempts have been made to create a failure regime that works for the NHS.
When you look at the research, the differences between public and private sector leadership and management are not as great as some people might think. Public sector organisations are usually just as complex as those in the private sector and there is little difference in the respective quality of decision making or in the ability to lead and motivate teams. However, there are a number of areas of contrast.
In the private sector, leaders have a tendency to go for short-term results, take more risks and have a greater tendency to be optimistic about outcomes. Public sector leaders tend to be more focused on creating long term strategy and opt for a risk averse approach to solving problems. Evidently, these differences arise from the context within which these leaders operate. Leaders in the private sector are under constant pressure from the stock market to improve results, whereas their public sector counterparts are constantly involved in supporting political initiatives and government authorities in policy implementation.
Public sector leaders generally operate in more structured environments and various regulations dictate a focus on monitoring and compliance with rules. As a result there can often be less emphasis by public sector leaders to guide and inspire their teams. In the private sector, leadership styles tend to lean more towards wielding influence and there is less dependency on position, power and authority.
Rewarding high performers
McKinsey’s research Management in Healthcare, jointly published with the London School of Economics, asserts that competition is the key and that heightening patient choice, encouraging new market entrants and enabling hospitals to grow in size and scope will make for improved performance and better patient outcomes - ring any bells?
One of their main findings is that, on average, private providers are better managed. They observe that one of the most important reasons for this is the gap between the public and private sector in relation to talent management. They note that the best performing organisations had the following characteristics in relation to their approach to talent management:
- a well defined rewards system based on performance;
- moving poor performers on as soon as weaknesses are identified;
- active development and promotion of top performers;
- holding people to account for developing the talent pool;
- doing whatever it takes to retain talented people.
The research sets out that private hospitals predominately do better than their public counterparts, because there is more flexibility in the recruitment of people and in rewarding high performers financially.
Creating an environment for talent to blossom is much easier in a system that is not dominated by national rules and regulations that govern pay and terms and conditions. Of course, it is also much easier to do if organisations are operating in a political and media environment that does not polarise opinion about the relative merits of public and private sector management.
The main message from the report is that a large variation in management quality is just as prevalent in the publicly dominated healthcare sector as it is in the privately dominated manufacturing sector. They conclude that a greater diversity of public and private healthcare providers would drive improved leadership and management performance.
The reality is that both sectors need inspirational leadership and strong management and there are good and bad examples to be found on either side of the divide. The corporate governance debate of recent years has been founded on business scandals and more recently the banks have hardly covered themselves in glory. As in most things, there is a balance.