Fragile Working | Why the public sector coped with Covid better than the private sector

The Government has made a massive mess of it’s response to Coronavirus.

An unmitigated disaster.

Boris Johnson and his team prioritised managing the news cycle over managing the virus; too many eye catching announcements without any actual thought about whether they would work. With so many gaffes it’s hard to pick a low point, but announcing that Formula 1 motor racing teams would be building ventilators was totally inane.

But despite this shambles public services have performed well. The NHS has been heroic, and even the bureaucratic black holes of DWP and HMRC have found an extra gear. Public Sector organisations transformed themselves in a way that I never thought possible, under conditions which tested them to the limit.

In contrast the private sector has done badly, specifically big corporations.

Small business like mine pivoted rapidly to change their business models, like our move into hand sanitiser. Big companies have struggled to deal with customers and employees, service has declined horribly, reputations have been trashed. Dealing with a large private company has become horribly painful, even worse than their public sector equivalents.

Over the last few decades working for a large private sector organisation has seemed almost indistinguishable from working for a big public sector organisations. Decades of deregulation and stuff about free markets hasn’t created a lean dynamic private sector – it has created slow moving bureaucracies, inward looking and risk adverse. As big companies have become more indebted they have become dominated by assurance, compliance, and risk management, reducing highly paid managers to administrators. Fear of litigation has given lawyers and HR advisors the power to shape corporate policy, making it even more timid.

So if all big Bureaucracies are the same why did the public sector do better?

The answer? Efficiency.

Businesses have spent decades pursuing a limited managerial view of efficiency and cost. They have cut out anything that isn’t directly profitable, and outsourced any part of the supply chain that can be switched to low labour cost countries. They have added debt to company balance sheets to boost performance metrics, and used that debt to buy back shares, boosting their performance artificially to trigger bonuses.

It wasn’t just big business who followed this line. Economists have obsessed over the UKs declining productivity, in particular the “long tail” of small businesses, who are much less efficient and productive than their big brothers.

The long tail of unproductive businesses, FT

I have long felt this is a mistake. I run a very inefficient business. It is expensive and highly labour intensive to make craft spirits the way we do. Big companies like Gordons and Greenalls are much more efficient than mine. Anyone who runs a craft brewery, or bakery, is equally inefficient. We are the economists long tail of inefficient businesses.

But people want that. They don’t want high volume, low cost, homogenised products. They want labour intensive, craft products, differentiated. We are switching from raw material intensive consumption to labour intensive production, and reducing our environmental footprint in the process.

The same is true of healthcare. As a patient I value contact time with a healthcare professional. A management change that allows a Doctor to see more patients looks like an increase in efficiency, but if it reduces the time that a patient gets to spend with the Doctor it is a reduction in quality not an increase in productivity. Privae sector managerial definitions of efficiency don’t work with healthcare just as they don’t work with hairdressers – I want my hairdresser to be inefficient, and spend time asking me about my holiday plans while expensively ruffling my hair.

We value human beings, and we want our customer experience to have human contact. I first wrote about this over 3 years ago:

Ambulance crews and Ocado drivers both have to cope with swings in demand. But the consequences of failing to meet spikes in demand are radically different. Being unable to book an Ocado delivery for weeks is a hardship. Being unable to get a blue light Ambulance is far more serious. A private sector manager will work to an average level of demand, and will work to eliminate any down time. This works well with delivery drivers, although it puts huge stress on staff at busy times because there is no leeway. But if you apply the same metric to an Ambulance crew you end up with too few crews to deal with emergencies or even routine surges in demand.

It turns out that private sector definitions of efficiency and productivity were at the expense of resilience, they lost the ability to react to rapid changes, and lost the capacity to deal with the unexpected. Not all big corporations suffered like this, but too many did, and still are. For every Amazon there are dozens of big companies like UPS and APC who fell apart under the challenge.

But this drive for efficiency also hit customers (who experienced worse and worse service) and their employees (who saw their working conditions and pay eroded). The most efficient companies are the ones I would avoid the most as a customer.

Super efficient big business spent decades lecturing the public sector and small businesses about efficiency, only to be massively out performed in a crisis. This however won’t stop them from spending the next 10 years giving the same lectures, or discourage

Sadly the Government are determined to learn the wrong lessons from this.

Instead of allowing clinical leaders to build and organise successful teams, and empowering successful leaders more autonomy to create high preforming organisations, they are centralising power and control, taking away freedom to act. Decisions will revolve around Ministers and Special Political Advisors rather than patients or clinicians. Politicians with little or no work experience will use private sector comparisons as an excuse for another ill thought out re-organisation

Big business will learn the wrong lesson too. The disruption of Covid will encourage big companies to try and further reduce their headcount, in the hope of reducing the impact of future lockdowns. Some will do this through investing at last in new technology, but for lots of them it will be a repeat of the same failed strategies.

This all matters because the shock to come from Brexit is going to be a magnitude larger than the shock from Covid. it will hit all industry sectors, with some, like food supply, in danger of very severe disruption. Talking to large food and drink sectors the best they are hoping for now is significant disruption. The worst case is a lot worse than the empty shelves and panic buying we saw at the start of lockdown.

One business sector that failed the worst over the last few months has been warehousing and distribution. Supermarkets and Amazon have driven down the prices they pay for these services over decades, and created an industry with a chronic lack of investment, terrible working conditions and wages below the legal limit.

From big household names to small local suppliers this sector came close to collapse during Covid. I can offer no assurance that they can survive the shock of Brexit without huge and prolonged disruption, affecting all businesses and households across the UK. Incredibly the Government has only just launched a consultation on future arrangements for moving goods around the UK.

I can mitigate these risks for my family by stockpiling grown rice, lentils and flour. You should do the same. As a business I have fewer options other than buying a van and driving Gin around the UK myself.

The worst times are ahead of us, not behind us.

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