Virtually every local politician and community business leader promises two things: jobs and lower taxes.
This goal is used as a rationale for state and local funding, corporate tax breaks, economic stimulus packages, and capital investments on behalf of both elected officials and public-private entities. Unfortunately, it’s a mostly meaningless measure that underlines why government is unable to create enduring and expansive solutions.
Job growth is typically promised in terms of percentages and seats added over a designated number of years. They’re the benchmark used by companies to lobby for public funding and the proof point used by politicians to validate lofty rhetoric. The public needs and deserves a new measure of accountability and success when it comes to economic priorities: value creation.
In 2013, I suggested local government consider new organizational models to encourage greater collaboration and a stronger emphasis on long-term planning. While this approach would threaten the status quo of political parties and power-brokering insiders, it would also enable new levels of transparency and citizen engagement.
In the same year, McKinsey analysts published a study focused on practices used by private companies to identify sources of value creation and prioritize related resources. The study found businesses that relied on high-level averages to inform decisions too often lacked vital insights to address threats, risks, and potential areas of new value. The benefits of such value include the case for new business creation, strategic exit of less attractive markets, and more targeted investment in research and development.
Local governments’ emphasis on tax breaks and high-level percentages of unemployment are akin to private businesses’ use of high-level averages such as earnings per share and overall market share. These metrics lack the detail necessary to uncover underperforming segments and highlight exciting trends that may lead to new value.
Adoption of these practices by public officials may lead to better rationale for consolidation of government services or agencies, identification of new value-creating revenue opportunities, and reallocation of resources to underfunded programs that lead to the broad creation of value.
The most challenging aspects of this approach include threats to existing management structure as well as the amount of data required to analyze government effectiveness at a more granular level. Overcoming these barriers would require many elected officials to forgo a long-term career in politics since the short-term results of such exercises would not likely contribute toward an effective campaign platform.
Instead, the emphasis on value creation would transfer the resources of public office and government agencies toward deeper analysis and strategic investments at a much more granular level. As a result, leaders would likely be identified for experience and skills aligned to specific scenarios, similar to the practices of private equity firms; their tenure may only be as long as their services are needed. Transition of leadership would more regularly occur.
Unfortunately, this model would require a fierce reexamination of political parties, campaign finance, and community engagement before, during and after an administration’s election or appointment to office. The greatest sacrifices would come from those at the top. However, I am confident that the public, armed with more transparent leaders, and more access to granular data, would take a greater role in the creation of long-term value for their communities.
Over the next month, I will examine potential areas to apply this model and offer examples of other entities using value creation to transform their approach toward meaningful growth.