No matter how you view the results of the recent elections, you may be hoping for a reduction in government spending for 2011 and wishing you could teach Uncle Sam some of the business lessons you have learned. To be fair, a for-profit electrical contractor (EC) must run its business differently than the federal government, but we still can learn some valuable lessons from analyzing the steps Uncle Sam takes. Are you more business-minded than the federal government?
The federal government includes taxes, debt and sales of products and services in its definition of revenue. Taxes are levied through elected officials who may be influenced by their own interests and political views in addition to their taxpayers’ needs. A business owner’s concern is his or her profits and the customer’s needs. For the federal government, the customer is the taxpayer.
For ECs, business revenue comes solely from customers, not from loans, credit cards or levies on stakeholders. Your company acquires sales revenue only when customers voluntarily do business with you, and they will defect to a competitor if you fail to provide value.
Private-public partnerships have been successful in areas such as the financing of new highways and craft training. Recent discussions of privatized education and retirement funding may provoke a paradigm shift in thinking about the services government provides and how efficiently it does so. Wouldn’t you outsource products and services to vendors who could provide a better cost-to-value ratio?
Your company acquires and retains customers by promoting its ability to solve their problems and provide value for their expenditures. Similarly, the federal government develops programs to serve its customers, but these programs are sometimes retained after the need is filled. Some agricultural subsidies compensate conglomerates for restricting crop growth, and some grants fund redundant research studies with little practical value. In 1991, according to the website of Citizens Against Government Waste (www.cagw.org), $3.1 billion was allocated to fund 546 “pork barrel” projects. In 2010, despite the poor economy, $16.5 billion funded 9,129 such projects.
Ensure you are doing an efficient job of providing your core services and meeting the needs of your current customers.
Employee compensation vs. value
According to the Bureau of Economic Analysis, the average compensation per federal employee is roughly double the average for an employee in the private sector. This should indicate that government employees are more competent or better qualified to supply more value to society; however, it is still possible to find poor service and work ethic in some government employees.
You, as an employer, must pay a competitive wage in order to attract and retain qualified employees. They must serve your customers well and do their jobs efficiently, or they will be terminated. If you have ever dealt with federal government employees as a customer, you may have been frustrated by poor service and negative attitudes, suggesting higher compensation does not correlate with better service.
Would you keep these employees and hope to make a profit? Find a way to make your employees’ compensation match the value they bring to your business, and if you are paying top dollar, ensure you are attracting the top talent.
Throwing money at the problem
When you find a problem in your business, you analyze the contributing factors and find solutions, often by cutting expenditures. If political rhetoric bears any truth, the government simply throws more money at the problem—more money for education, more money for jobs, more stimulus money strewn about. You may be able to locate plenty of overlapping areas of spending and maximize the utility of the money already available to you.
Profit and survival
If you don’t run your operation efficiently, you go out of business. Government never does. In fact, there is continuous debate among legal scholars as to whether a government entity can actually declare bankruptcy or how government insolvency affects its future. You must earn your high credit rating and bonding capacity. Governments seem to survive despite poor bond ratings, and the vendors carry the burden of slow payment. The federal government not only survives with high debt and an unmanageable deficit, it can simply levy additional taxes to keep going. You can’t keep raising prices to balance your losses because your customers won’t stand for it.
Adding to the problem of repaying the national debt, approximately half of the population currently pays no federal taxes. Your business debt would also grow if you continued to spend, but your customer base and ability to repay that debt diminished. You would either have to stop borrowing or acquire more revenue.
Clearly, a government is not run like a for-profit electrical contracting company, but efficient and responsive operations will help restore customer confidence, the most influential factor in stimulating the economy.
NORBERG-JOHNSON is a former subcontractor and past president of two national construction associations. She may be reached at email@example.com.