Composición de la leche materna

In North America, the accepted role of the private sector is to engage in commercial enterprise for profit5. Firms are generally free to engage or not engage, purchase inputs at the market price and abandon activities at will. Principally accountable to

5

While beyond the scope of this thesis, a third Not-for-Profit sector exists. Universities are one example.

their owners, business is held accountable by the market against several ‘hard’ indicators, especially profitability (Steward and Walsh, 1994). Although profit is considered a key financial test of performance (Drucker, 1968:236), even a cursory examination of profit data reveals the possibility for manipulation (Parker, 1979).

Drucker (1993) argues that one of the key purposes of government is to undertake activities in the areas where profit cannot be made, but the interests of society demand that the activities occur. National defence and safe street-lighting are common

examples (Box, 1999). Bozeman (2002) suggests that public policy has frequently been framed in the language, theory, and tools of economics and economic theory. A purely economic approach calls for public sector activity when the private sector fails to provide desired or desirable public goods. Such failures, economic theory

suggests, can be traced to non-rival goods (where one person’s consumption does not diminish its availability to others), steep transaction costs, information deficits and monopolies, and other competitive market gaps.

Similarly, English and Lindquist (1998) argued that certain activities are in the public or non-profit sector largely because of the complexity of assessing them. As

Weisbrod (1988:12) notes, “Because these activities are not easily monitored and therefore rewarded (the strength of the private sector), society turns to other sectors to carry them out.” Even examining areas where substantial overlaps with private value exists, most public sector enterprises have multiple objectives with no single ‘bottom- line’ (Kelly et al., 2002). The public sector’s lack of a financial focus or profitability reflects this reality (English and Lindquist, 1998).

Unlike the private sector which is free to disengage or cease to offer goods or

services, the moment government undertakes any activity, it becomes entrenched and permanent (Drucker, 1968:226). Public sector programmes must typically continue to operate however difficult the local environment, and regardless of the client’s ability to pay, while typically requiring nationally consistency in programme delivery, not just regionally (Smith, 1995). Economic arguments suggest that beneficiaries of government programmes, including suppliers, programme clients and even

bureaucrats tasked with organizing the programme will resist any attempts to abandon them, including arguments and appeals to the political level (Savoie, 2003).

Financial indicators and ratios are widely used in the private sector. These ratios allow most financial indicators to collapse to a simple denominator, permitting comparisons between choices and market accountability. Within the public sector, profit is an oxymoron (Johnson and Broms, 2000). In Canada, with the exception of the Special Operating Agencies (SOA) created during the 1990s, public sector executives perceive programme finances as a relatively stable input, rather than the key programme outcome (Kroeger and Heynen, 2003).

Two other key financial differences between the sectors are:

ƒ Assessing the value that the public sector produces must include the achievement of social purposes for which no revenue stream applies

ƒ Public sector revenue is received from multiple sources in addition to client user fees for products and services (Bozeman, 2002; Smith, 2004).

This being the case, financial indicators and ratios have limited application and receive effectively no executive attention within the federal government. A few exceptions were noted, principally programmes considering large capital investments, supported by the arrival of accrual accounting in Canada. In SOAs and other revenue generating programmes, cost recovery/user fees could be considered proxies for market accountability. However, the costs recovered rarely represent more than a portion of total costs and rarely incorporate capital depreciation costs.

Table 5 summarizes the key differences between the private and public sectors, based on a through review of key historic contributions from the literature, as well as selected current literature and personal discussions.

Table 5: Key Differences between the Private and Public Sectors

Issue Private Sector Public Sector

Overall Direction

ƒ Profit

ƒ Some attention on future profit

ƒ Government/Minister establish directions

ƒ Long term frequently limited to next election

ƒ Subject to contradictory pressures

ƒ Highly adversarial relations between political parties

ƒ Direction typically at policy not administrative level Legis-

lative and judicial

ƒ Minimum set of law constraining all business (tax, environmental, employment, etc)

ƒ Citizen ‘rights’

ƒ Government managers must conform to legislation regardless of costs

ƒ Generally subject to scrutiny by legislative oversight groups or even judicial orders

Authority ƒ Authority is generally invested in one CEO

ƒ Can operate in any sector or market

ƒ Authority is shared between senior mandarins and political party in power

ƒ No authority to expand/contract “sphere of operations” – mandate explicit and limited Overall Goal ƒ Profit ƒ Standardized indicators Returns on Capital Invested (ROIC) and Shareholder / Economic Value Added (EVA)

ƒ Create and sustain citizen satisfaction

ƒ Overall infrastructure, economic and physical

ƒ Value for Money

ƒ Measured as the level of benefits net of costs

ƒ Must incorporate public sector values and ethics

ƒ Equity, Probity

ƒ “Red tape” greatly reduces reaction time for emerging opportunities/events General Culture ƒ Profit based ƒ Entrepreneurial ƒ Managerial style ƒ Values based

ƒ Bureaucratic, although attempting to move from ‘Command and Control’ to a Managerial style

Issue Private Sector Public Sector matches business needs ƒ Innovative ƒ Quicker decision making ƒ Risk adverse

ƒ Citizen expectations can greatly exceed private sector Account- Ability ƒ Objectives much clearer ƒ Owners, shareholders ƒ Legal reporting requirement only ƒ Few horizontal considerations

ƒ Central Agencies, Parliament/ politicians, citizen

ƒ Information generally ‘acquirable’ (public sector – Access to Information laws)

ƒ Role of media

ƒ Horizontal (inter and intra-departmental) considerations Equity and Efficient ƒ Greatest stress on efficiency and competitive performance

ƒ Greatest stress on equity, probity

ƒ General failure to disengage from activities which are not meeting current goals

Primary stake- holder

ƒ Shareholder is dominant stakeholder

ƒ Conflicting stakeholder interests

ƒ Shifting stakeholder dominance

ƒ Potential to conflict on overall govt policy

ƒ One critical aspect is horizontal coordination between departments in achieving societal goals

ƒ Public media opinions influence decision making Role of

inform- ation

ƒ Most held internally and remains

confidential

ƒ Exposure to intense public scrutiny – “managing in a fishbowl”

ƒ Access to Information Act - managers must, and do, consider every memo, letter, briefing note,

presentation and e-mail a public document.

ƒ Public perception and the potential for political embarrassment always considered, even for logical and sensible decisions

Budgets ƒ Flexible, expected Profit, ROI, EVA

ƒ Budgets subject to significant changes

ƒ Relatively fixed, stable budgets

ƒ Frequently budget based on previous year plus inflationary adjustment Invest- ment ƒ Decision driven by appropriate measures (projected) ROI / EVA and other financial ratios

ƒ Driven by politics, legislation and policies, generally funds not raised in capital market

ƒ No dividends are payable

ƒ Public sector managers only rarely accountable for ROI, or outcomes from capital expenditures

Source: various including (Rainey et al., 1976; Dunlop, 1979; Allison, 1997; Box, 1999; Larson, 2002; Kroeger and Heynen, 2003)

Kelly et al. (2002) argue that public sector activity is also distinguished by other key non-financial differences, including:

ƒ Citizens placing a strong value on ‘public’ issues such as distributional equity and due process. Interestingly, the fact that Canadian public sector

programmes are available and support all (eligible) Canadians in a fair and impartial manner is itself valued by Canadians

ƒ Lacking the direct communication methods such as price mechanisms, and noting the limited frequency of electoral feedback, it is often difficult for citizens, individually or collectively, to register preferences on a particular public issue

ƒ Public sector outcomes are frequently the result of a collaboration between citizens and state (for example, public health, education, and community safety)

ƒ The existence of a broad range of different perspectives on the optimum level of public sector involvement and the corresponding public value created. Private sector shareholders may have differences on some issues (e.g. on the time horizon for returns) but these generally do not extend into ethical disagreements (e.g. the nature of social justice)

ƒ Government’s stewardship role to protect future generations far exceeds private firms’ obligations to future shareholders. Firm’s legal responsibility is limited to their current shareholders only (while acknowledging the

requirement to protect the future value of their equity) (Kelly et al., 2002:8).

One final difference between the sectors lies in the power of government to compel citizens to act, or not act, in certain ways, through the state’s unique ability to create law. The use of legislative power rests in a different process, collective decision- making as expressed in democratic procedure and institutions (Chapman, 2003).

Having examined the evidence, it could be concluded that significant differences between the public and private sectors do exist. This research now considers the literature that discusses the impact of these inherent differences on public and private sector executive functions.